Alaska delegation wary of Native contracting investigation

Hearing could be "showboat" politics, Begich says.

Anchorage Daily NewsOctober 5, 2011 

Massachusetts Rep. Ed Markey on Wednesday called for hearing to investigate Alaska Native corporation federal contracting in the wake of a massive bribery and kickback scandal involving an executive at a subsidiary of the Eyak Corporation.

Members of Alaska's congressional delegation questioned the move, with the spokeswoman for Alaska Democratic Sen. Mark Begich suggesting it could be a "showboat political hearing."

Markey, the Democratic ranking member on the U.S. House Committee on Natural Resources, wrote the committee chairman, Washington Republican Rep. Doc Hastings and asked for an immediate hearing on the matter.

The $20 million scheme allegedly involved corrupt Army Corps of Engineers officers working with an executive at EyakTek to inflate invoices and pocket kickbacks as part of EyakTek's federal contract. Four people, including the EyakTek contracts director and two Army Corps of Engineers officials, were arrested in the Washington D.C. area on Tuesday.

EyakTek is owned by the Eyak Corp., the village corporation for Native shareholders in Cordova. Alaska Native corporations receive special federal contracting privileges. Critics, particularly Missouri Democratic Sen. Claire McCaskill, argue the Alaska Native corporation privileges lead to waste as the money is funneled to Washington D.C. subcontractors.

Markey wrote that the scam "raises questions about whether there are adequate controls in place to prevent fraud and abuse at ANC's and protect U.S. taxpayers and Alaska Native shareholders. I ask that the Committee immediately schedule a hearing to investigate this matter."

Hastings won't commit to holding the requested hearing but didn't rule it out either. "We're taking a look at this matter but involves many facets beyond the authority of this one committee," said Hastings spokesman Spencer Pederson.

Congressman Tim Bishop, D-N.Y., said he wants a separate hearing before a subcommitee with jurisdiction over the Army Corps of Engineers.

"This oversight hearing should also explore what affirmative steps are being undertaken by the Corps to safeguard against similar abuses of the public's trust and finances, both potential ongoing abuses as well as into the future," Bishop wrote.

Bishop is the ranking Democrat on the subcommittee on water resources and the environment, which has oversight over the Corps of Engineers.

Massachusetts Rep. Markey, in his call for a hearing before the natural resources committee, noted that committee has jurisdiction over Alaska Native corporations. Markey wrote he is "concerned that EyakTek's status as an ANC may have facilitated this scam."

He wrote that the Alaska Native Claims Settlement Act included corporate governance and disclosure requirements for Native corporations.

"An investigative hearing on this matter would give the committee an opportunity to investigate whether these requirements were observed at EyakTek, what internal controls the corporation has in place to protect against bribery or other malfeasance by company employees, and whether additional protections are needed," Markey wrote.

Alaska Republican Sen. Lisa Murkowski said the scandal is tragic and offensive.

"When I read about it, I can tell you that I was really upset because I believe this gives fodder to those who do not support (the Alaska Native corporation contracting program) and have been kind of looking under every rock to try and find an instance of unfair advantage or in this case clear and outright corruption. This does damage to everybody who has been working hard in the past to ensure that this program is good and it's right and it's reasonable," Murkowski said.

Murkowski said her views on having a hearing would depend on what the goal was. She said that, given the fact that those involved have been arrested, they aren't likely to testify to Congress about what exactly happened. But she said she would welcome a look at whether the Small Business Administration regulations are sufficient to prevent this kind of scandal.

The spokeswoman for Sen. Begich said he's glad there was an indictment and that EyakTek fired its arrested executive. But the spokeswoman, Julie Hasquet, expressed wariness of the hearing being proposed by Markey.

"Sen. Begich has said all along we need to weed out the bad actors and work toward meaningful reform of the 8(a) program," Hasquet said. "Instead of a showboat political hearing, what's needed is proper oversight from the federal government to prevent activities like this in the future and Sen. Begich is working toward that goal."

Alaska Rep. Don Young noted that the allegations involved a corporation executive living in Washington D.C., and not Native corporation shareholders.

"No Alaskans are alleged to have been involved with this scheme and as such it would be premature to point the finger at Alaska Native corporations ... The congressman believes that four bad apples should not overshadow the overall success of the Native 8(a) contracting program. As a criminal case, this should be dealt with in the courts," said Young spokesman Luke Miller.

The allegations involve EyakTek subcontracting work on a $1 billion federal contract to a Virginia firm that is identified in the indictment only as "Company A."

Prosecutors allege the chief technology officer for "Company A" would then submit fraudulently inflated invoices for the work.

One of the corrupt Army Corps of Engineers officials would approve the invoices, prosecutors say. The federal payment would go to EyakTek, which subtracted its profit margin and paid the rest to "Company A," according to the indictment.

The inflated invoices allegedly totaled about $20 million between 2007 and this year, according to the indictment. The chief technology officer of "Company A" would allegedly funnel shares of the extra cash to EyakTek executive Harold Babb and the Corps of Engineers officials.


Reach Sean Cockerham at scockerham@adn.com or 257-4344.

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