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5 Aces

In: Business and Management

Submitted By meganfeijo
Words 1926
Pages 8
5 Aces

Lisa Feijo

ACCT/572

10/16/2013
Mrs. Adkins

5 Aces

The FBI investigated one of the biggest domestic bribery and bidding scheme in the history of federal contracting cases and the investigation began in the summer of 2009. The fraud had been going on for over 5 years and there was more $30 million that was stolen from federal funds through a ring of crooked public officials and government contractors in the D.C area that used kickbacks and bribery in the scheme. The FBI called the partners of the fraud the 5 aces because that term is used in reference to someone stacking the deck in a card game so they can cheat. The master mind of the fraud was Kerry Khan and there were a total of 15 federal employees and contractors and several companies involved. Some of the people involved in the fraud was Michael L Alexander, former program manager, Lee A. Khan, son of Kerry Khan, Harold F. Babb, former director of contracts at Eyak Technology LLC (Alaska Native-owned small business), Alex N Cho, the former chief technology officer of Nov a Datacom LLC, and Mckinny, the president of Alpha Technology Group Inc., (a provider of program management services). The fraud was committed within the US Army Corps of Engineers where Kerry Khan was employed. The U.S Army Corps has the guiding principle of environmental sustainably and that task is done with approximately 37,000 dedicated civilians and soldiers providing engineering services to customers in more than 130 countries. The Corps works diligently to strengthen our Nation’s security by building and maintaining America’s infrastructure and developing technology to help fight wars. They also provide valuable service in America by dredging the waterways to keep trade going and they have a part in providing recreation opportunities in our campgrounds, lakes and marinas. The corps also has a huge part in cleaning up the environment like the Everglades and helping to reduce risks from disasters. With all the expectations of the Corps there are a lot of projects going on and those projects get fulfilled with the help of “contracted labor”. The Corps motto is “through deeds, not words, we are Build Strong”, unfortunately it also opened up the gates of fraud. The FBI began its investigation into the fraud through a tip that an area business was submitting phony references and evaluations to help get government contracts. When investigators started looking into Nova Datacom the company’s founder, Young N. “Alex” Cho, tipped off investigators and agreed to wear a wire to get Kerry Khan. Khan was so driven by greed that the investigation was cut short because his “cash demands from Cho were too great” for the government to continue fronting the bribe money, according to the government’s sentencing memo (Marimow, 2013). Kerry F. Khan was sentenced to 19 years in prison for his part in masterminding a contracting scam of historic proportions. Judge Emmet G. Sullivan of federal district court called the conduct of the former manager, Kerry F. Khan, “shocking, vicious and cruel,” and the judge imposed a sentence four years longer than what prosecutors had recommended. He was also ordered to pay $32.5 million in restitution to the Army Corps of Engineers (The New York Times, 2013). Khan was in charge of contracts and how he got away with it was because of a contract call TIGER. The TIGER contract was used by authorized federal government agencies and departments to purchase products and services. It is what is known as an Indefinite Delivery/Indefinite Quantity contract. Authorized agencies and departments are not required to obtain three separate bids or to compare the TIGER contract to another contract before submitting an invoice for products and services through the TIGER contract. Kerry had made $12 million dollars and was still owed $6 million which he was supposed to have gotten the day of his arrest. Khan had was considered and worker and had received a great review the year prior to his arrest. The review had stated he was a complete loyalty to the company and possessed unquestionable integrity but that is not the person that prosecutors had seen. Kerry had a dark side that was shown from the wire taps showing violence and interest in 15 year old prostitutes.

On February 13, 2012 Michael A. Alexander, pled guilty to federal charges of bribery and conspiracy to commit money laundering and on September 12, 2012 he was sentenced to a six-year prison term and ordered to pay $1.25 million in restitution and a $1.25 million forfeiture money judgment. Alexander was the first person that Khan had spoken with to work together to get the government contracts to the corrupt contractors in 2006. According to Alexander, he received a total of $99,100 from the kick-backs that Khan was given from McKinney at Alpha Technology. All told, Alexander admitted receiving directly and indirectly about $1,150,000 of money and things of value from Nova Datacom and Cho. This included nearly $300,000 in checks and cash; $750,000 in wire transfers to an associate of Alexander’s in South Korea for the purchase of, among other things, a coffee shop called Seven Monkeys in Seoul; about $27,000 for the purchase of two designer watches for a member of Alexander’s family; employment of a family member at Nova Datacom, and other miscellaneous payments. Cho also promised Alexander future employment at Nova Datacom and $320,000 in additional payments (Federal Bureau of Investigation). On the same day as Alexander was pleading guilty, February 13, 2012, another party of the fraud was also making a plea, Robert l. McKinney plead guilty to bribery. He was sentenced in October 2012 to two years and nine months in prison. McKinney also was ordered to forfeit $246,000, representing the illegal proceeds he retained from the crime. In addition, he must pay $984,664 in restitution to the federal government. In the span of May 2007 and October 2008 Alpha Technology was awarded contracts and sub-contracts from the Corps of Engineers totaling $1,877,000. McKinney also signed a statement of offense that he admitted that he had created fake and inflated invoices to the Corps for payment. Alpha Technologies did provide some service for the money that they were paid, but of the 1.8 million that they were paid $850,000 of the expenses were false. McKinney states that of the $850,000 they only kept about $245,395 and the remaining money was given to Khan. This was either done directly or through a company that was owned by a family member. Lee A. Khan is the son of Kerry Khan and he was sentenced on January 31, 2013 to 37 months in prison for the part he played in the money laundering scheme. Lee was the channel in which $400,000 was funneled to another family member to keep them quiet. The family member was in jail on a drug trafficking charge and had threatened to report Kerry to the authorities unless they paid the money. Lee did not know the extent of the activities that his father was into but he did know that the money that his father was getting was not being made through lawful ways. Lee went above and beyond to make sure that the money that was going to the family member could not be traced to him or his father. Nazim Khan is the brother of Kerry Khan and he played a role in the fraud also. Nazim was the owner of KC Builders Custom Homes LLC, a company that helped channel money to Kerry Khan. He was sentenced in December 2012 to two years in prison and ordered to pay, along with two other defendants, a total of $611,904 in restitution. He also agreed to an order of forfeiture in the amount of $83,403. Nazim defense argued that he was not a part of the larger picture but the state did not agree. He also knew that the money was being made illegally and because he was having financial difficulties at the time he states that he was an easy target. Nova Datacom and its former president Min Jung Cho please guilty to conspiracy to defraud U.S government. The company admitted to paying more than $15 million in bribes. The company, Nova Datacom faces a fine of $39.6 million to $79.2 million. Cho faces a statutory maximum of five years in prison and financial penalties. Others that have been sentenced in relation to this fraud are: -Harold F. Babb, the former director of contracts at Eyak Technology LLC (EyakTek), an Alaska Native-owned small business. He was sentenced in October 2012 to seven years and three months in prison and ordered to pay $9,405,230 in restitution and to forfeit a money judgment of $689,342. -James Edward Miller, the owner of Big Surf Construction Management LLC. He was sentenced in October 2012 to five years and 10 months in prison. Miller also was ordered to pay $9,405,230 in restitution and to forfeit a money judgment of $4,055,063 and specific property, including bank account funds, a property in Virginia Beach, three vehicles, and diamond rings and other jewelry. -Larry G. Corbett, owner of Core Technology LLC and Enterprise Technical Solutions, Inc. He was sentenced in November 2012 to two years and three months in prison, ordered to perform 500 hours community service, and ordered to forfeit $290,000. -Theodoros Hallas, the former Executive Vice President of Operations for Nova Datacom, LLC. He was sentenced in November 2012 to one year and three months in prison and ordered to perform 500 hours community service.

This case was worked by many departments and it was because of the joint effort they have been able to recover $7.5 million in bank accounts, 19 properties, six cars and jewelry. The Army Corps on Engineering has had to make some major changes to their internal controls to ensure that this does not happen again. Special Agent in Charge Craig of DCIS said it best: “At a time when government and taxpayer resources are being stretched to their limits and our service members continue to make sacrifices to protect our national security, it is detestable that Nova Datacom and everyone involved would blatantly conspire to defraud the government and, eventually, the American warfighter. The illegal manipulation of contracts to facilitate bribes and kickbacks that circumvent the military contracting process costs the taxpayer and warfighter alike. This investigation sends a clear message to those who may follow in the defendants’ footsteps—the Defense Criminal Investigative Service and our law enforcement partners will take aggressive action to identify and investigate those that endeavor to take advantage of the Department of Defense and the men and women of the Uniformed Services.”

References
The New York Times. (2013, july 12). Retrieved 10 2013, from http://www.nytimes.com/2013/07/12/us/19-year-corruption-sentence-for-ex-manager-with-army-corps-of-engineers.html
Federal Bureau of Investigation. (n.d.). Retrieved 10 2013, from FBI: www.fbi.gov
Marimow, A. E. (2013, 7 11). Retrieved 10 2013, from Washing Post: http://articles.washingtonpost.com/2013-07-11/local/40505780_1_federal-contracting-history-khan-s-government-contracts/2
United States Department of Justice. (n.d.). Retrieved 10 2013, from The United States Attorneys Office: http://www.justice.gov/usao/dc/news/2013/jan/13-036.html

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