Two U.S. Corps of Engineers officials and two other men were arrested on Oct. 4 and charged with conspiracy, bribery, kickbacks and money laundering on two Corps contracts, the Justice Dept. says. U.S. Attorney for the District of Columbia Ronald C. Machen Jr. said, “This indictment alleges one of the most brazen corruption schemes in the history of federal contracting.”

The case involves an indefinite-delivery/indefinite-quantity contract with a $1-billion-plus maximum value and a planned contract with a $780-million cap.Neither was competitively bid.

The indictment, returned by a grand jury on Sept. 16 in U.S. District Court in Washington, D.C., and unsealed on Oct. 4, did not say if the contracts included construction or related engineering. It has a reference to “information assurance and security equipment and services.”

Federal officials said those arrested are Kerry F. Khan, a program manager with the Corps directorate of contingency operations; Michael A. Alexander, a program director with the same directorate; Lee A. Khan—Kerry Khan's son—and Harold F. Babb, director of contracts for EyakTek, Dulles, Va., a unit of Alaska native-owned Eyak Corp.

The indictment alleges that, from 2007 until this summer, Kerry Khan, Alexander and Babb helped to steer more than $45 million in payments to a firm identified as “Company A” through a Corps contract they oversaw. It says payments were fraudulently inflated by some $20 million, which was paid “directly and indirectly” to the Khans, Alexander and Babb. EyakTek was the prime contractor.

The indictment says Kerry Khan, Alexander, Babb and others planned a further “scheme” to steer a second contract to Company A “as a vehicle to enable Company A to funnel monies and other things of value” to the three defendants and other people. If convicted, the defendants face prison terms of 25 to 40 years.

The Corps said it is cooperating with investigators and working with Army officials to suspend those involved and “to ensure appropriate contracting and other safeguards are in place.”