Navy Sinks In Hookers and Bribes Scandal

How the service steered into an alleged supply scam that has cost taxpayers nearly $20 million

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Illustration by Oliver Munday for TIME

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Visits by carriers, much bigger than other surface ships, were especially lucrative. Glenn Marine charged $884,000 for a five-day 2012 visit to Laem Chabang by the U.S.S. Abraham Lincoln. Pentagon auditors concluded that was at least $500,000 too much. After the U.S.S. George Washington diverted from Singapore to Port Klang, Francis flew Misiewicz and his family to Cambodia for a cousin's wedding, put him up at the swank Shangri-La Hotel in Singapore and gave him tickets to a 2012 Lady Gaga concert in Thailand. Francis pleaded for more. "Send me the latest updated schedules Bro," Francis e-mailed Misiewicz that month. "I need more visits please in Pearl Ports. Cheers, Leonard G. Francis."

Francis' techniques for wringing extra profits from Navy visits weren't particularly clever: he would bid low to win the chance to perform routine maintenance, prosecutors believe, and then piled on inflated extras once the ships made their way to his yards. Glenn Marine won a Navy contract with a bid of $21.6 million to supply ships in northeastern Asia. That was a third the size of a competing bid by South Korea's DaeKee Global Co. DaeKee's protest to the Government Accountability Office that the winning bid was too low went nowhere. "Price realism," the GAO explained, wasn't a Navy requirement. In another case, a Glenn Marine manager told a subordinate to inflate by 1,500% the bill for patrol boats to guard the amphibious assault ship U.S.S. Essex during a 2011 port visit to Bali, according to the federal filings.

System Failure

The Navy has always done business this way, permitting officers to manage their ships' resupply far from home. But if thousands of agreements with local suppliers of water, food, tugs and port fees might once have been difficult to monitor, that excuse is eroding in a computerized age. "The U.S. Navy's ability to track and analyze port-visit cost changes remains rudimentary," a 2009 Navy report said.

And for all the Navy's protests that the case is an isolated event, it looks more like evidence of a broken system: it wasn't a single band of Navy officers working together to fleece the government and enrich themselves; rather, each officer appears to have acted individually. Investigators are looking into whether other officers may have accepted gratuities from Francis simply because they were there when he was spreading his bribes around.

Just before Thanksgiving, the service said it had suspended business with Inchcape Shipping Services, a Dubai-owned, British-based ship-husbanding firm with $240 million in contracts to service the U.S. 5th Fleet in and around the Persian Gulf. The same day, former Navy engineer Ralph Mariano reported to federal prison in Massachusetts to begin serving a 10-year sentence after running an $18 million kickback scheme in Newport, R.I., from 1999 to 2011. He was convicted of pocketing $3 million in checks and biweekly payments of $3,500 in cash from 2003 to 2011 through fraudulent invoices. And federal authorities are investigating a fourth case involving three senior Navy intelligence officials who allegedly charged the Navy $1.6 million for rifle silencers that cost $8,000 to produce.

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