Obama technology pick on leave after FBI raid

Authorities did not implicate Vivek Kundra in the scandal, but a White House official said he was on leave "until further details become known" about the investigation into the D.C. Office of the Chief Technology Officer, which Mr. Kundra headed from 2007 until this year.

The White House official asked not to be identified discussing an ongoing investigation.

The incident is the most recent embarrassment for the Obama administration, which has struggled to make scandal-free high-level appointments.

"Obviously, this is a serious matter," said White House press secretary Robert Gibbs.

FBI agents raided the city's technology offices about 9 a.m. Yusuf Acar, an employee in the chief technology officer's office, and Sushil Bansal, the chief executive officer of a Washington-based information technology company, were arrested and appeared Thursday in U.S. District Court on charges of conspiracy to commit bribery and money laundering.

Court documents state that the two men were involved in a scheme to steal money from the D.C. government that featured contract kickbacks and billing the city for hours worked by "ghost" employees.

Mr. Kundra is not named in court documents released in the investigation and is not a target of the probe, a source said. On Thursday morning, he was delivering a speech at a trade show held at the District's Walter E. Washington Convention Center.

"Transparency allows people to participate in the public civic process, to look at where their money is going, how it's being spent and to hold the government officials accountable," Mr. Kundra said in his speech. "That's one of the central pillars of this administration as we talk about driving forward, as far as radical transparency is concerned."

Mr. Gibbs said the administration was aware that the raid would take place but declined to answer questions about whether the president was confident Mr. Kundra was not involved in the probe.

He said he would not comment on an ongoing investigation. He directed questions to the Justice Department after repeated follow-ups from reporters during his daily briefing, refusing to say whether Mr. Obama was concerned about the investigation.

Mr. Kundra was named by Mr. Obama to the newly created post of chief information officer March 5. He is responsible for directing policy for federal information technology investments and oversight of federal technology spending. The position is not subject to Senate confirmation.

Last month, former Senate Democratic leader Tom Daschle dropped out as health and human services secretary because of his failure to pay taxes. Mr. Obama called the Daschle situation "an embarrassment" for his administration. In addition, Nancy Killefer removed herself from a nomination to be chief performance officer because of her smaller problems with a tax lien on her home.

Five of Mr. Obama's nominees have faced tax problems. The president's choice for chairman of the National Intelligence Council - Charles "Chas" W. Freeman Jr. - withdrew from the post Tuesday, while the stepson of Mr. Obama's nominee for drug czar, Seattle Police Chief Gil Kerlikowske, also was arrested last month for a parole violation and faced misdemeanor marijuana-related drug charges in 2006 and 1998.

Mr. Acar is an information technology security specialist who earns a salary of $127,468 and was hired by the city in 2004, said Mafara Hobson, a spokeswoman for D.C. Mayor Adrian M. Fenty. He is the technology office's acting chief security officer, court documents say.

Mr. Bansal previously worked as a "project manager in D.C. government and implemented its financial system," according to the Web site of his company, Advanced Integrated Technologies Corp.

Mr. Acar was responsible for purchasing software and hardware, as well as securing contract employees for various city agencies.

The documents say one facet of the scheme involved placing an order for goods from a vendor such as Mr. Bansal's company, which would then order a lower number from the distributor but bill the agency for the full amount.

"An OCTO official, such as Yusuf Acar, falsely certifies that the greater quantity was actually received and the vendor bills the District of Columbia government for the greater amount and is paid accordingly," the documents state. "The co-conspirators then split the proceeds of the crime."

The suspects also conspired to bill the city for nonexistent work by "ghost" employees of a vendor under contract with the D.C. office, according to the documents.

"However, these ghost employees never actually perform any work under the contract," the documents say.

Mr. Bansal's company was founded in April 2003, and was awarded at least four contracts worth more than $700,000 with the D.C. government that covered periods from 2007 to this year, including four with the D.C. information technology office for services that included working with the city's human resources software, according to city records.

The city also awarded a contract from July 2008 to 2009 worth up to $10 million to Mr. Bansal's company for information technology services, equipment and software. Under the contract, the company could be paid no more than $10 million for its work, but does not necessarily mean they earned that amount.

Mr. Acar was ordered held without bond Thursday, while Mr. Bansal was released on his own recognizance.

In 2007, officials discovered a roughly $50 million embezzlement scandal in the D.C. Office of Tax and Revenue.