Does EyakTek scandal mean trouble for Alaskan firms?

If people want proof that the Alaska Native Corp set-aside program needs reform, the indictment this week of an executive at Eyak Technology on allegations of fraud won’t help. But the case means less for the future of the ANC program overall than its critics might want, experts say.

“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.

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.

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“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 Native 8(a) Works organization said in a statement released late on Oct. 4.

Earlier that day, Justice Department officials announced they had 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.

The ANC small-business set-aside program may feel more pressure from Congress. Sen. Claire McCaskill (D-Mo.) has investigated the ANC program and found loopholes that she says have to be closed.

“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 McCaskill, chairwoman of the Homeland Security and Governmental Affairs Committee’s Contracting Oversight Subcommittee.

McCaskill added that the ANCs need to compete, like other small businesses, for large contracts. They should not have the option of receiving a sole-source contract of any size, she said.

“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 said in her statement.

About the Author

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

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Reader comments

Sat, Apr 16, 2016

a corrupt KO willing to commit such brazen fraud is in no way an indictment of any of the US Government's SBA programs, 8(a) or otherwise. The SAIC/Citytime theft, which was orders of magnitude worse than this, happened right under the government's nose. That is a reflection of a powerful official's willingness to defraud the taxpayer, not a weakness in any of the programs available to women, minorities, or Native Americans.

Fri, Oct 7, 2011 Frank Matt

How many more documented cases of graft, corruption, bribery, questionable business practices, and criminal activity does the U.S. Government need discover to finally say the ANCs need to be reformed, cleaned up, in some cases disbarred and policed up much better! Need for every ANC to go through the same process, scrutiny, oversight, yearly updates and restrictions as do SDVOSBs & 8(a)!

Fri, Oct 7, 2011 Interested Party

From my perspective, this is not a problem with the set-aside program,it is a problem with ANC's special priveledges status with their ability to be awarded unlimited dollar non-competitive set-asides. They should play by the rules that all other 8(a)s play by. That would have stopped the HUGE opportunity for theft. Nonetheless, this is a black eye for a very useful and good program.

Fri, Oct 7, 2011 Hampton Brown United States

I have a problem with the overall program of seta-sides. It has allowed too many folks the opportunity to game the procurement system at the expense of giving the taxpayer a fair shake. For example, The Veteran Administration reduced the number of self registered service disable firms from 20,000 to 2000. They didn't meet the quals. For American Indian set-asides, it's been a sad commentator. The Post reported the folks (shareholders) who were suppose to enjoy the awards never got a penny (Washington Post) October 2010. Rod Worl comment that he has taken care of the problem as if it's a one off does not explain EYAK previous role with GTSI. GTSI got whacked, but for EYAK, it appears that it still has its fingers in the cookie jar. We need to eliminate these special privilege programs and get folks to work in the real world with real competition.

Fri, Oct 7, 2011

Can someone explain why Alaska Native Americans deserve a more priviledged status than, say, Oklahoma Native Americans or New Mexico Native Americans? I mean, other than the legacy of Ted Stevens...

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