Federal agents arrested an executive with an Alaska Native corporation subsidiary Tuesday for his alleged role in a massive kickback scheme likely to intensify scrutiny of the federal contracting privileges Native corporations have used to make billions of dollars.
Federal prosecutors have charged Harold F. Babb, the director of contracts for Eyak Technology LLC, which has offices in Virginia and Anchorage. The firm is owned by Eyak Corp., the village corporation for Native shareholders in Cordova.
Babb and the three others arrested live in the Washington D.C. area, where the crimes allegedly occurred and where they are being prosecuted. Two of those arrested are Army Corps of Engineers officials who administered the Eyak Technology contract.
U.S. Attorney Ronald Machen called it "one of the most brazen corruption schemes in the history of federal contracting."
Prosecutors say the $20 million bribery and kickback scheme involved the corrupt Army Corps of Engineers officials using the money for BMW's, Rolex and Cartier watches, flat-screen televisions, first-class airplane tickets and international properties.
The scheme revolved around an Eyak Technology five-year, $1 billion federal contract for software and information technology. The Army Corps administered the contract for Eyak Technology, which is known as EyakTek.
The Anchorage corporate office of Eyak Corp. said it could not comment on the charges. Chief Executive Rod Worl said in a statement that its subsidiary is cooperating in the investigation and that the arrested executive, Babb, was fired.
EyakTek is one of the most successful Alaska Native corporation subsidiaries, which take advantage of the bidding advantages that Congress, led by Alaska Sen. Ted Stevens, provided to Alaska Native firms in the 1980s and 1990s. The arrest of its executive comes as the sole-source contract advantages are under scrutiny in Congress, with questions about how much of the money goes to improve the lives of Alaska Natives and how much is passed to big companies in the Washington, D.C., area.
Sen. Claire McCaskill, a longtime critic of the Native corporation bidding advantage, sent a written statement to the Associated Press on Tuesday saying that the federal charges expose problems with the "large no bid contracts that Alaska Native Corporations are allowed to enjoy at the expense of American taxpayers."
"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," McCaskill, a Missouri Democrat and chair of the Senate Committee on Contracting Oversight, said in the statement.
The group Native 8(a) Works, set up by Native organizations to counter such criticism, sent out its own statement in response to EyakTek's involvement in the scandal.
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