Army Corps of Engineers employees arrested in alleged bribery, kickback scheme

(AP, ABC7) - Two employees of the U.S. Army Corps of Engineers and two others have been arrested in a bribery and kickback scheme.

An indictment unsealed Tuesday includes charges of bribery, conspiracy and unlawful kickbacks.

“This indictment alleges one of the most brazen corruption schemes in the history of federal contracting,” said U.S. Attorney Ronald Machen. “These charges are only the beginning of a far-reaching, steadfast effort.”

Prosecutors say the defendants steered a contract worth $780 million to a favored Virginia-based contractor in exchange for millions of dollars in kickbacks that paid for Rolex watches, Neiman-Marcus clothing, airline tickets, home renovations and other personal expenses.

The two Army Corps employees are Kerry F. Khan, a program manager, and Michael A. Alexander, a program director.

Also charged are Khan's son, Lee A. Khan and Harold F. Babb, the director of contracts for Eyak Technology, a Virginia-based contractor. Khan worked from his home in Alexandria, which stands out because it's so opulent compared to the houses around it.

"It used to look like all the other houses, but they tore it down and built this,” neighbor Eric Cativo said.

The FBI is currently raiding eight locations - seven in Virginia and one in D.C.

Curry Graham, director of public affairs for the Army Corps, said at least one of the Army Corps employees was arrested at work. He confirmed that search warrants were presented at the agency's offices Tuesday, but referred other questions to the Department of Justice.

"We hold our employees to a high standard, and we cooperate with all federal authorities to make sure that we get to the bottom of all these cases and allegations," Graham said.