Navy Contracting Scandal Includes Deal for SEALs

The Navy contracting scandal has broadened to include three civilian intelligence officials under investigation for an alleged scam on a $1.6 million deal to buy rifle silencers for the SEALs that cost $8,000 to produce, the Washington Post reported.

The investigation by the U.S. Attorney's office in Alexandria, Va., followed on separate disclosures last Friday by the Navy that two admirals from Navy intelligence were under investigation for their ties to an alleged business hustler known as "Fat Leonard" who has been arrested on charges of bribing officers with prostitutes, Lady Gaga tickets and cash.

"We take seriously all allegations of wrongdoing and investigate them thoroughly," said Rear Adm. John Kirby, the chief of Naval Information, in a statement.

Kirby said that Navy Secretary Ray Mabus "has made it clear that he holds senior leaders in the Navy Department accountable to high standards of ethics and conduct."

The latest allegations involved three Navy senior civilian officials who oversaw classified intelligence. The three civilians allegedly arranged for a $1.6 million contract to go to the brother of one of them for the production of rifle silencers for the SEALs that cost only $8,000 to make, according to the Washington Post report that cited court documents.

The latest allegations of waste and fraud in Navy contracting comes as the Navy and the other services were locked in a long-running debate with Congress on maintaining funding and avoiding scheduled budget cuts that could take $52 billion out of defense spending next year.

In a statement late Friday, the Navy said that Vice Adm. Ted Branch, the Director of Naval Intelligence, and Rear Adm. Bruce Loveless, Director of Intelligence Operations, were being suspended from access to classified material.

The suspensions were "based upon the nature of allegations against Adms. Branch and Loveless in connection with an ongoing Naval Criminal Investigative Service (NCIS) investigation into illegal and improper relations" with Leonard Francis, the chief executive officer of Glenn Defense Marine.

The Singapore-based Francis, dubbed "Fat Leonard" in the Pacific fleet, allegedly bribed officers for years for information on the port visits of ships that could be serviced by his company. Francis was arrested in San Diego last month in a sting operation.

At a Pentagon briefing Tuesday, George Little, the Pentagon spokesman, said of the Navy scandals that Defense Secretary Chuck Hagel Secretary Hagel "has been regularly briefed on these matters and these troubling allegations."

"I'm not sure that he's ready to assign or label or characterize the allegations as systemic at this point. I think we have to let the investigation proceed," Little said. He noted that "it was the U.S. Navy itself that discovered these problems and has investigated them. So I think they deserve credit for looking after these problems themselves."

"This wasn't some outside agency or department coming in to look at these deeply troubling issues," Little said. "It was NCIS that took the lead, and we believe that they're holding people's feet to the fire."

In recent Capitol Hill hearings, the Navy has come under withering criticism for the way it does business in contracting and the resulting cost overruns in an era of fiscal constraints.

"We're tapped out," Adm. Jonathan Greenert, the chief of Naval Operations, told the Senate Armed Services Committee last Thursday in pleading for another $500 million for work on the new carrier, the Gerald R. Ford.

In response, Sen. John McCain, R-Ariz., said it was difficult to justify another $500 million for the new carrier given the $2 billion in cost overruns already incurred in building the Ford.

"You didn't mention that we have a $2 billion cost overrun in the Gerald R. Ford," McCain told Greenert. "Tell me, has anybody been fired from their job as a result of a $2 billion cost overrun of an aircraft carrier?"

Greenert responded: "I don't know, senator. I'll find out."

"You don't know?" McCain said. "Actually, you should know – you should know, Admiral, when we have a $2 billion cost overrun on a single ship, and now you're asking for $500 million more."