Pearl Harbor shipyard worker denounces anonymous claim of spying

By WILLIAM COLE | The Honolulu Star-Advertiser (MCT) | Published: January 21, 2014

HONOLULU — A senior Pearl Harbor shipyard manager says he was falsely accused of espionage, taken off the job in March and has not been paid since July — even though an investigation cleared him of the "foreign influence" allegations.

Gerald "Gino" Palermo, a former submariner who has worked in the shipyard since 1981, most recently in the "Code 930" mechanical group as a process manager, said he was cleared in June of allegations involving contact with several Chinese women and a Japa­nese female.

But right before he was to return to work, an anonymous "tip" was made claiming he passed information to two of those Chinese women — one of whom he was dating, he said.

That tip resulted in no pay since July 19 and an investigation reopened, although a Naval Criminal Investigative Service agent said in late October that nothing "negative" was found, according to Palermo and his attorney.

"It's a complete denial of due process to have an anonymous tip cause a favorable security determination to be entirely derailed and to cause the employee to now be out of work for more than half a year," said Palermo's attorney, Elizabeth Newman, a Washington, D.C.-based expert on security clearance law.

Palermo, 65, admits he met a Chinese woman in Bahrain in 2010, visited her in China that year and in 2011, sent her $7,500 and developed a "distant/romantic relationship" with the now 41-year-old woman.

The married man admits that on a visit to China in 2011, he met three women in a porcelain shop, sent them nuts and chocolate as presents and continued to stay in contact with one of them.

He also admits that when he was on a work assignment in Guam in 2009, he met a Japa­nese national who was a college student, later visited the woman in Japan and contacted her by Skype.

Navy officials know that because Palermo told them — as he was required to do on a security questionnaire in 2012.

"I did not realize that this involvement (with the Chinese woman) could be a security concern," Palermo said in a statement to the Navy. "I thought that as long as I reported the relationship, it would not be a continuing problem."

The Kaaawa man said his loyalty to the nation is "steadfast and uncompromising," and when he found out the government's concerns, he ended the relationships.

"I never, ever, discussed anything to do with work with any foreign national," Palermo said.

Perhaps not surprisingly to others, given headlines of arrests for passing sensitive information — sometimes through a relationship — the contacts Palermo made became a huge problem for him.

In another case, authorities announced in March that Benjamin Pierce Bishop, 59, a defense contractor for U.S. Pacific Command at Camp Smith, was being charged with leaking classified information to his Chinese national girlfriend.

Even Palermo's attorney says having too much contact with a foreign national can be a security clearance killer.

"If you have a security clearance, the government is concerned that you cannot have a close and continuing relationship with a foreign national from one of the countries that the United States is concerned about — and that includes China," said Newman, author of a book, "Security Clearance Law and Procedure."

Newman said she's had "numerous" cases of government workers with security clearances "who then begin a relationship with someone who they don't realize is going to have adverse implications for their security clearance."

But in looking at the "whole package" with Palermo, including his lengthy government service, as well as the findings of the first investigation, her client should have gotten his job back, Newman said.

A June 18 letter from the Department of Defense Consolidated Adjudications Facility Navy Division to Palermo reported a "favorable security determination after due process."

DODCAF is responsible for determining eligibility for access to classified information.

"Accordingly, you have been determined eligible for a Secret security clearance and assignment to a sensitive position," the letter states.

DODCAF said in May that the foreign influence was "mitigated as (Palermo) has ended his relationship with the foreign nationals."

"Subject now appears to understand that his previous relationships/associations were a security risk and took the responsible approach of ending those relationships," correspondence states.

But the subsequent "anonymous tip" led to the security clearance issue being reopened.

"The point isn't that it's (still) in adjudication, the point is why didn't you return him to work first while you were investigating this clearly baseless anonymous complaint — which may be just somebody who was angry with (Palermo) and doesn't know anything about anything," Newman said.

The Defense Department and shipyard provided two similar statements about the actions taken against Palermo.

"Due to the ongoing adjudication of Gerald Palermo's case, I'm unable to comment about it," Air Force Lt. Col. Tom Crosson, a Pentagon spokes­man, said in an email.

"Mr. Palermo's security clearance is still under adjudication with the DODCAF and until a decision is rendered by them, the shipyard cannot reinstate his access," said shipyard Executive Director Randy Sawyer in another email.

Palermo said in a statement that "service to one's country was an integral part of my upbringing."

His father was standing watch on the USS Curtiss in Pearl Harbor at the time of the Dec. 7, 1941, attacks, he said. His mother enlisted in the Coast Guard in 1942.

Palermo said when he graduated from high school, he enlisted in the Navy, served as a submariner, held a top-secret security clearance and was honorably discharged. He went through the University of Hawaii on the GI Bill, he said.

Palermo's security clearance problems began when he filled out a questionnaire in early 2012 that asked about foreign contacts — a query that rolls around every 10 years, he said.

An investigation followed, and on March 13, DODCAF issued a letter to Palermo indicating its "intent to revoke eligibility for security clearance and assignment to a sensitive position" in the shipyard.

The reason given was the aforementioned "foreign influence" and the contacts with the Japa­nese and Chinese women.

The government agency said foreign contact could create "a heightened risk of foreign exploitation, inducement, manipulation, pressure or coercion." Palermo said he was suspended with pay.

With the subsequent June clearance, Palermo was due back at work on July 10, but sometime in early July is when the anonymous tip came in — he doesn't know whether it was by phone or mail — and on July 9 he was told not to report, he said.

Palermo complained that he "could never get a straight answer as to what was going on," and he found out about the anonymous tip only through a Freedom of Information Act request for information.

He believes office politics may be at play and said only about five to seven people in the shipyard knew about the earlier adjudication that allowed his return to work.

"What they (officials) will tell you is that because it's a security issue, that even if they knew who it was (who made the anonymous complaint), they wouldn't tell me, and there's no legal action I could take against the individual," Palermo said.

A July 9 email from Kathleen Suwa, the shipyard's personnel security specialist, said "speculation of this information was received by (U.S. Pacific Command)," and it alleged Palermo passed information to a "foreign girlfriend" using government phones.

NCIS looked into the anonymous tip. But Palermo's attorney, Newman, said she spoke with NCIS agent Chris Mitchem in late October, and "Mitchem told me they were at the end of their inquiry into the tip, (and) they had not found out anything negative."

Palermo received a letter of reprimand stating he shouted at a shipyard employee and grabbed his arm Feb. 7. He claims he never received such a reprimand before but fears the shipyard wants to draw out the process and force him to retire.

Among the character references Palermo obtained was a note from Donald May, the security operations branch head, who noted that Palermo also was a department security coordinator, and in that job he "consistently exemplified our shipyard values of honor, courage, commitment and aloha."

Palermo, now on unemployment, would like to go to work for a defense contractor — but for that he needs his security clearance.

He sought congressional help and can file a lawsuit, but said that would be expensive.

"I do have principles, and to retire without having this adjudicated in my favor basically says, ‘Oh, he just put his tail between his legs and he walked away,'" Palermo said.


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