Could the ANC bribery scandal happen to anyone?

Yes, say some of our experts

The bribery and kickback scandal involving an executive from an Alaska Native Corporation may have less to do with problems with the ANC program and more to do with poor contract management.

“This is a story about bad guys getting caught. It’s not related to the company’s ANC status,” said Stan Soloway, president and CEO of the Professional Services Council. Soloway also is a Washington Technology columnist.

With the news of the indictment, supporters of ANCs moved quickly to distance themselves from scandal. But pressure on the set-aside program likely will increase.

Related stories:

Eyak fires indicted exec; more pressure likely on ANC firms

Obama builds up controls against Alaska Native Corporations

The Justice Department officials announced on Oct. 4 they indicted Harold Babb, director of contracts at Eyak Technology LLC, an ANC-owned small business based in Dulles, Va., on allegations of fraud and bribery.

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.

Rod Worl, CEO of The Eyak Corporation and president of EyakTek, said on Oct. 5 that Babb had been fired from his position at the company.

A Justice official called it “one of the most brazen corruption schemes in the history of federal contracting.”

Despite its brazenness, Roger Waldron, president of the Coalition for Government Procurement and former federal procurement official, said regulators and lawmakers should not write rules based on a single case. This should not be part of the proof of a program's problems, he said.

In the same vein, the federal contracting community cannot label an entire set of companies because of this case, just as government employees should not be labeled as corrupt because of the two involved in the collusion, Soloway said.

That’s not always how it goes though.

“Too often, people do regulate and legislate based on the worse case scenarios,” Waldron said.

But regulatory changes need in-depth cost-benefit analysis with the broad community in mind, he said. The vast majority of law-abiding companies should not be punished with overburdening oversight.

In fact, “this is demonstration that the system works,” Waldron said.

About the Author

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

Reader Comments

Mon, Oct 10, 2011 Guy Timberlake McLean, VA

Yes, this could happen to anyone, but not at the same levels. I respectfully disagree with Stan this is not associated with the ANC status since no other socioeconomic designation has the ability to take down contracts of this magnitude with little if any scrutiny. While limits exist for traditional 8(a) companies, the Super 8(a)'s were not put under limits ($20M) until recently. The contracting community is too accustomed to seeing ANC companies receive very large awards thus, it raised no eyebrows. Guy Timberlake The American Small Business Coalition

Mon, Oct 10, 2011 Rick DC

It was recently discovered that over 2/3 of the "Disabled-Vet" owned small businesses in Virginia were fraudulently categorized. As a non-minority male with no military experience my small business is always at a disadvantage to every other category. It is time to close these loopholes and put all "small businesses" (i.e. making revenue under common threshold) on the same level playing field. Too many folks are gaming the system.

Fri, Oct 7, 2011

This is a problem usually on a smaller scale for all the ANC companies as the management has been delegated to non native persons here in the lower 48 states. The ANC Boards are in Anchorage and they have rarely any native employees who are invested in their companies involved so the culture has become we the non native managers own and operate the business. Their next false step is since they feel like they own and operate the ANC companies they are entitled to some extra benefits and perks like bonuses fancy offices etc. Until the ANC native owners actually manage on a daily basis their businesses here in DC and elsewhere there will be the risk of more criminal and unethical behavior. Let the law be changed to require them to be more closely involved in the day to day operations and management of the ANC business.

Fri, Oct 7, 2011

Most of the corruption in government contracting is in relatively small amounts, but, the aggregate costs are contributing to our economic downfall. In its simplest form we see more and more government official manipulating the award of significant contracts and then "surprisingly" getting a big job with the awardee. Are we learning this behavior from our law makers? The hill is flooded with examples of selling favors. Our society may have left our age enlightenment and enter our age of entitlement.

Fri, Oct 7, 2011 Reston Virginia

Having recently lost a small business setaside to an ANC that was transparently and obviously a front for another ANC mega corporation brought to our attention the unfair advantage ANCs apparently routinely have in competing with other small businesses who are truly small. In looking into ANCs and recent congressional hearings such abuses seem to be rampant The entire ANC scheme needs a serious review and major changes to level the small business playing field

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