US Navy hit by another international bribery scandal
US Navy hit by another international bribery scandal
Federal agents are investigating a new U.S. Navy corruption case that has strong echoes of the Fat Leonard scandal, with a defense contractor facing accusations that he delivered cash bribes and bilked the Navy out of at least $50 million to service its ships in foreign ports, according to recently unsealed court records.
The Justice Department is trying to extradite the contractor — Frank Rafaraci, chief executive of Multinational Logistics Services, or MLS — from Malta, the Mediterranean island where he was arrested last week after an international manhunt.
Rafaraci, 68, is a dual U.S.-Italian citizen who splits his time between the United Arab Emirates and Sicily. Since 2010, the Navy and federal agencies have awarded MLS about $1.3 billion in contracts to resupply and refuel U.S. warships in the Middle East, Asia and other regions.
According to an arrest warrant unsealed last week in U.S. District Court in Washington, Rafaraci and MLS defrauded the Navy of at least $50 million by inflating invoices for port services between 2011 and 2018.
In one instance, when the aircraft carrier USS Carl Vinson visited Manama, capital of the Persian Gulf kingdom of Bahrain, in January 2015, MLS billed the Navy for more than $231,000 in "port authority fees," even though the Manama port authority charged only $12,686, the court documents show.
Federal authorities are also seeking Rafaraci's extradition on suspicion of money laundering and bribery. The arrest warrant alleges that he met with an unnamed U.S. Navy official at the Diplomat Hotel in Manama in August 2015, handed over an envelope stuffed with $20,000 in cash and told the official to "keep up the good work."
Three years later, at a Miami hotel, Rafaraci passed another envelope to the same U.S. official that contained $13,500, according to the arrest warrant.
The unnamed U.S. Navy official served for several years as a liaison officer in Bahrain before taking a job with the U.S. Army. Court papers show that the official pleaded guilty in June to a bribery charge in U.S. District Court in Washington and agreed to become a cooperating witness for the government. His identity and his criminal case file remain under seal.
In many ways, the allegations against Rafaraci and MLS mirror the "Fat Leonard" corruption scandal that has rocked the Navy since 2013.
In that case, a rotund Malaysian defense contractor, Leonard Glenn Francis, pleaded guilty to bribing scores of Navy officials with cash, prostitutes, extravagant meals and other favors so he could overcharge the Navy for port services in Asia. Several hundred Navy officials came under investigation, and 27 people have pleaded guilty in federal court to corruption-related charges. Seven more defendants - all current or retired Navy officers — are scheduled to go on trial in San Diego in February.
Navy officials pledged to clean up their contracting processes in response to the Fat Leonard scandal, but the case against Rafaraci alleges that corruption persists.
MLS took over numerous U.S. government contracts that had been handled by Francis's Singapore-based firm, Glenn Defense Marine Asia, and became the largest provider of port services to the Navy in the world. It operates throughout Asia, the Middle East, Africa and Europe. The Navy relies on private contractors to supply fresh water, fuel, food, security, tugboats, barges and other equipment and services in foreign ports.
The Navy suspended MLS and Rafaraci on Friday from doing future business with any federal agency, though they will be allowed to fulfill their current contracts with the Navy, according to Cmdr. Courtney Hillson, a spokeswoman for the branch. The Navy "expects all individuals and companies with whom it conducts business to act with the highest degree of integrity and to have effective standards of conduct," she said.
Hillson said agents from the Naval Criminal Investigative Service (NCIS) and the Defense Criminal Investigative Service (DCIS) uncovered the alleged wrongdoing and "have been actively coordinating with other law-enforcement authorities around the globe."
An investigator from the Fat Leonard case — DCIS agent Cordell "Trey" DeLaPena — is also a lead agent in the MLS matter, court records show.
It can be difficult to extradite international defense contractors to the United States. Francis, a Malaysian citizen, was arrested in a sting operation in 2013 after NCIS and DCIS agents lured him to San Diego on the pretense of meeting with Navy admirals to discuss expanded business opportunities. He had been under criminal investigation for several years, and federal authorities at one point considered capturing him aboard a U.S. Navy warship in Singapore and bringing him to the United States against his will.
Rafaraci lives primarily in Dubai, but the United States does not have an extradition treaty with the United Arab Emirates.
Federal agents had been tracking his movements and learned last month that he was planning a brief visit to Malta, where MLS is headquartered. He arrived in Malta on Sept. 26 and was arrested hours later by local authorities at a hotel in St. Julian's, a town on the east coast near the capital, Valletta.
Since then, efforts by Maltese and U.S. officials to keep him in custody have gone awry. At Rafaraci's initial court appearance, on Sept. 27, a Maltese magistrate ruled that the businessman could remain free while his extradition proceedings unfold.
Prosecutors had argued that he should remain in detention because he posed a flight risk. But Rafaraci's attorneys successfully challenged the legitimacy of the arrest warrant, saying that U.S. and Maltese officials had not followed proper legal procedures, according to news reports in the Times of Malta and other local publications.
Rafaraci is scheduled to have another court hearing Monday. One of his attorneys, Stefano Filletti, did not respond to emails Sunday seeking comment.
Unlike Francis, a flamboyant figure who flaunted his wealth and loved to entertain Navy admirals at parties and Michelin-starred restaurants, Rafaraci maintains a low public profile.
He is scarcely mentioned on his company's website except for a page detailing MLS's code of business ethics. Under the code, Rafaraci pledges that he and his company will follow "individual conscience, common sense, good judgment and compliance with governmental laws and regulations."
In an affidavit filed in support of the arrest warrant, DeLaPena accused Rafaraci of using a network of shell companies to launder money obtained illicitly so he could evade U.S. income taxes. Rafaraci code-named the scheme "Keep Going" and used it to transfer funds from corporate accounts in Malta and Britain to a shell company in the United Arab Emirates, court records show.
The affidavit also accused Rafaraci of conspiring with MLS's chairman to commit bribery. Though the individual was not identified by name, the chairman of the company is listed publicly as Thomas Rafaraci, Frank's brother.