A contracting scandal in the Pacific fleet has widened after the U.S. Navy suspended a shipping services firm that was a rival to that owned by alleged swindler Leonard Glenn "Fat Leonard" Francis.
The Navy announced last week that its business with Britain-based Inchcape Shipping Services was being suspended while the Justice Department and the Navy investigate "questionable business integrity affecting ISS's present responsibility to be a government contractor."
"The suspension prevents the Department of the Navy and all other Federal departments and agencies from entering into any new contracts [with Inchcape or its affiliates]," Rear Adm. John F. Kirby, the Navy's chief of Information, said in a statement.
The Navy did not specify Inchcape's "questionable" practices but the New York Times, citing court records from civil fraud suits, said the main allegation involved paying commissions to subcontractors for major discounts on work for the Navy. Inchcape then allegedly pocketed the difference rather than refunding the discounts said to be worth millions to the Navy.
Inchcape was an occasional competitor with Francis’ firm, Glenn Defense Marine Asia, in providing “husbanding” services including everything from tugboats to fuel and food for Navy ships at ports in the Pacific.
The Malaysian-based Francis, 49, known as "Fat Leonard" to Navy officials and ships' commanders, was arrested in San Diego in September in a sting operation run by the U.S. Attorney's Office in San Diego and the Naval Criminal Investigative Service. Francis allegedly bribed Navy officials and commanders with cash, prostitutes and Lady Gaga tickets for information on ships' movements.
Last month, the Navy announced that Capt. David Haas, 45, deputy commander of Coastal Riverine Group 1 in Imperial Beach, Calif., had been suspended while his alleged connections to Francis were being investigated.
In addition to Haas, two admirals, a captain, two commanders, and an NCIS agent are also under investigation in the scandal involving Glenn Defense Marine, which has won contracts from the Navy worth more than $200 million since 2009.
Inchcape Shipping Services bills itself as "one of the world's leading maritime services providers" with more than 3,800 employes in 66 countries, according to its website. The firm serviced Navy ships, including at least six aircraft carriers, at ports throughout the Middle East, Africa and Latin America.
Inchcape did not immediately reply to requests for comment but the New York Times quoted Sheila Armstrong, Inchcape's head of corporate communications, as saying in a statement that the suspension involved "a small number of Navy ships between 2005 and 2008."
Armstrong added that Inchcape was in discussions with the Justice Department "with a view to bringing this matter to a conclusion."
The investigation of Inchcape could have the potential for rattling U.S. business and political relations with the United Arab Emirates, a U.S. ally in the Persian Gulf.
Inchcape is owned by Istithmar World, the investment arm of the government of Dubai, one of the Emirates. Istithmar in turn reports to the holding company Dubai World, which manages a huge portfolio of businesses and projects for the Dubai government.
According to its website, Dubai World has a majority ownership in DP World, a Dubai-based marine terminal operator that runs more than 60 ports around the world.
In 2006, DP World's bid to run port operations at six U.S. ports, including New York City, Newark, and Baltimore, caused a major confrontation between Congress and the administration of former President George W. Bush.
Bush theatened to issue his first veto against any move by Congress to block the deal, saying "It would send a terrible signal to friends and allies not to let this transaction go through."
Bush later backed off against growing opposition from both houses of Congress to allowing a Middle Eastern firm to control port security, and the deal collapsed.