Yusuf Acar, a city technology worker, was ordered held without bond pending a hearing Tuesday. Prosecutors said $70,000 in cash was found during a search of Acar's Washington home and that he posed a serious flight risk.
Technology consultant Sushil Bansal of Dunn Loring, Va., was released but was ordered not to conduct overseas financial transactions or leave the Washington metropolitan area. Bansal is due back in court on April 21, and prosecutors said they were hopeful that a plea agreement could be reached in his case.
Acar worked under Kundra, Obama's pick to coordinate federal computer systems. Obama spokesman Robert Gibbs would not say whether the White House knew the investigation was under way when it named Kundra last week, but called the case "a serious matter."
Acar, a 40-year-old native of Turkey, had a $127,468-a-year position purchasing the city's computer equipment and lining up contract workers for numerous city agencies.
Authorities say Acar and Bansal, along with others, defrauded the government through a variety of schemes, including billing the city for items that were never delivered and "ghost" contract employees who did not work. The scheme involved falsifying bills and splitting the money with vendors who submitted them, court documents alleged.
The FBI worked with another employee in the city's technology office, who recorded conversations with Acar as part of the investigation.
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