Navy Secretary on Prostitution and Bribery Scandal: ‘We Go After People’

For months, the U.S. Navy has weathered a titillating scandal involving a fat-cat defense contractor from Malaysia who allegedly used cash bribes, prostitutes and posh hotel rooms to lure top Navy officials into providing classified information he used to defraud the United States. Navy Secretary Ray Mabus addressed the controversy for the first time Friday, pushing back against the notion the service is a soft target for corruption while acknowledging even more Navy officers could be take down by an ongoing investigation.

"We go after people," he told reporters at the Pentagon. "We have set up procedures to try to prevent fraud, but any time — any time — you have this kind of money, there are going to be people trying to steal. Trying to defraud the government."

Mabus’ comments came three days after a senior agent with the Naval Criminal Investigative Service, John Bertrand Beliveau, pleaded guilty in federal court in San Diego after admitting to serving as a mole for the contractor, Glenn Defense Marine Asia. According to court documents, he tipped off the company’s CEO, Leonard Glenn Francis – widely known as "Fat Leonard" – and enjoyed luxury trips in which prostitutes would meet him on Francis’ dime. Francis is accused of bribing Navy officials in exchange for information he allegedly used to overcharge the U.S. military millions of dollars to service the ships, a process known in the mariner world as husbanding. He has pleaded not guilty.

Mabus defended the Navy’s ability to ward off crooked contractors on Friday, but also highlighted several new efforts to crack down on billing problems with contractors. In September he directed a senior official, Assistant Navy Secretary Sean Stackley, to review acquisition strategy for husbanding contracts worldwide. That has since led the service to develop so-called "red teams" that are scrutinizing the process, and will eventually lead to change, Mabus said. The Navy also is conducting a broad audit of its service contracts that is due in June.

The Fat Leonard scandal already has reached the highest ranks of the Navy. On Nov. 8, the service announced that it barred two admirals from being to access their access to classified information, effectively relieving them from duty. Vice Adm. Ted Branch and Rear Adm. Bruce Loveless — the service’s director for naval intelligence and director of intelligence operations, respectively — have not been charged with any crimes, but were suspended due to unspecified links to the scandal. Navy officials said the allegations against the two senior officers "involve inappropriate conduct prior to their current assignments and flag officer rank."

Two active-duty Navy officers — Cmdr. Jose Luis Sanchez and Cmdr. Vannak Khem Misiewicz — have been charged by authorities with accepting bribes and women in exchange for ship schedules and other sensitive information. The others charged in the case are Francis, Beliveau and Alex Wisadagama, another Glenn Defense employee who allegedly participated in the plot.

Mabus said he was briefed about the investigation for several months before authorities made the first arrest in the case. The Navy began investigating the case in May 2010 after contracting officials noticed suspicious billing by the Glenn Defense, and eventually planted false information about the status of the case when it realized Beliveau was effectively acting as a mole for Francis, Mabus said. Meanwhile, the service continued to award multi-million dollar contracts to Glenn Defense because it didn’t want to jeopardize the investigation.

"If the Navy suspends a company’s ability to compete for contracts or refuses to award a contract to a low bidder, we are required by federal law to give that contractor a reason why," Mabus said. "In this case, a notification would have tipped off GDMA that something was wrong."

In addition to the five men charged and the admirals who lost their security clearances, the Navy also has suspended Capt. David Haas as deputy commander of Coastal Riverine Group One in San Diego and relieved of command Capt. Daniel Dusek, who commanded the amphibious ship Bonhomme Richard, in connection with the investigation. The officers implicated in the scandal nearly all share one of two commonalities: service on the Blue Ridge, the command ship for the Navy’s 7th Fleet, or service at Fleet Logistics Center Yokosuka in Japan. The facility provides repairs and maintenance to a variety of U.S. and allied ships and equipment.

The Navy’s problems with awarding contracts to service its ships has widened in recent weeks to include another company, Inchcape Shipping Services, which the service cut ties with last month after concluding that it had "questionable business integrity." On Friday, the New York Times reported that a third company, Multinational Logistic Services, had suspended a senior executive, Akbar Khan, who had worked previously for Inchcape.

Mabus left little doubt more officers will be implicated in the scandals. And if federal authorities decide not to pursue criminal charges against some of those involved, the Navy will review allegations against them itself. A single four-star admiral with no connection to the case — yet to be identified — will lead the service’s own investigation if that becomes necessary and oversee each case, the Navy secretary said.

"I would rather get bad headlines," he said, "than let bad people get away."