Another chapter in the story of one of the most brazen procurement fraud schemes in United States history came to a close on Monday, December 15, 2014, when Eyak Technology LLC (“EyakTek”) and Eyak Services LLC (“ESL”) agreed to pay $2.5 million and relinquish all rights to any additional payments to resolve alleged False Claims Act and Anti-Kickback Act violations.

Between 2005 and 2011, EyakTek, an Alaska Native-owned corporation, held the Technology for Infrastructure, Geospatial, and Environmental Requirements (“TIGER”) contract, a $1 billion prime contract with the U.S. Army Corp of Engineers. It was alleged that throughout the term of the TIGER contract, EyakTek’s former director of contracts, Harold F. Babb, directed subcontracts to vendors that paid him illegal kickbacks. EyakTek and ESL, according to the DOJ, “submitted invoices to the Army Corp that included charges for work that was never performed by the subcontractors and lacked internal controls to detect the improper charges.” The government alleges that EyakTek may have been overpaid nearly $30 million as a result of the misconduct.

To date, more than 15 people and businesses have pleaded guilty to charges related to their involvement in the contract fraud scheme. Among those individuals is Babb, who, in March 2012, pleaded guilty to bribery and unlawful kickbacks, and was subsequently sentenced to 87 months in prison, 3 years of supervised release, and ordered to pay more than $9 million in restitution.

Additionally, upon learning of the alleged scheme, the Army Corps ceased payments to EyakTek and ESL. The settlement with EyakTek and ESL requires the entities to “withdraw any appeals seeking the return of those funds, and relinquish all rights to any payments that have been withheld.”

This incident should be a reminder to all government contractors of the importance of developing and maintaining a robust and effective compliance program. Along those lines, the Company, in a prepared statement, asserted that they will continue to build their Compliance and Ethics program, which already incorporates regular ethics training for all employees, third party internal audits, and an ethics hotline that is monitored by an independent third party.

The Department of Justice Press Release can be read here.