Business/Economy

Native corporation subsidiary agrees to pay Justice Department $1.3 million over employee’s alleged kickback scheme

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A subsidiary of an Alaska Native corporation has agreed to pay $1.3 million following a U.S. Department of Justice investigation into a kickback and fraud scheme involving a former employee.

Alutiiq International Solutions admitted in a nonprosecution deal with the agency that former manager Elmer Baker received cash and other kickbacks over several years in connection with a project to modernize the Harry S. Truman Federal Building in Washington, D.C., the agency said in a statement Wednesday.

Baker, the project’s manager, also improperly billed the contract manager, the U.S. General Services Administration, for services provided by an on-site superintendent.

No superintendent was on site, the Justice Department said.

The fraudulent billings, combined with inflated contract modification costs, caused the General Services Administration to pay $1.3 million to Alutiiq International Solutions that should not have been paid, the Justice Department said.

Baker’s trial is set for Dec. 7 before U.S. District Court Judge Amy Berman Jackson, who sentenced Roger Stone, an ally of President Donald Trump, to three years in prison earlier this year.

Alutiiq International Solutions performs construction work on government contracts, the Justice Department said. Its parent company is Afognak Native Corp., created in 1977 with the merger of two village corporations in the Kodiak region.

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Alutiiq International Solutions agreed to pay $1.3 million to the GSA in victim compensation payments, the Justice Department said.

“From the moment we first learned of the investigation, we cooperated fully and completely with DOJ,” Afognak said in a statement.

Alutiiq and Afognak were unaware of the wrongdoing until 2017, when they were informed of the investigation, the nine-page settlement says.

“Since learning of the investigation, we have further enhanced our compliance program and taken numerous steps to ensure employees understand and adhere to our expectations,” Afognak said.

Alutiiq International Solutions received a $12.3 million contract to modernize the building in 2008, and hired Capital Contracting of Maryland as a subcontractor to perform some of the work.

Over several years, contract modifications boosted the contract value to $20 million, the Justice Department said.

In the agreement, Alutiiq admitted that Baker around June 2010 began receiving kickbacks from Capital Contracting in exchange for steering work to the subcontractor.

Baker initially received meals, vacations, golf sessions and other things of value.

But by 2015, he began receiving cash kickbacks worth 10% of contract modifications awarded to the subcontractor. He received about $309,000 in kickbacks, the Justice Department said.

In May 2019, a federal grand jury in Washington, D.C., indicted Baker on charges of conspiracy to violate the Anti-Kickback Act, and four counts of wire fraud, the Justice Department said.

Afognak and Alutiiq took “extensive remedial measures” as soon as the companies learned of the misconduct, the Justice Department said.

The companies agreed to “enhance their compliance program and internal controls, where necessary and appropriate, to ensure they are designed to detect and deter, among other things, fraud and kickbacks in connection with U.S. federal government contracts,” the Justice Department said.

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Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.

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