Navy suspends business with defense contractor Inchcape Shipping Services
The Navy announced Wednesday that it has suspended business with a major defense contractor over “questionable business integrity,” the second time in two months that it has revealed deep problems with a company that services its ships around the world.
In a statement it released Wednesday night, the Navy said it had suspended Inchcape Shipping Services, an old-line maritime trading firm based in Britain that delivers cargo and provides port services in 66 countries. Inchcape held current Navy contracts that had been valued at more than $240 million, mostly for supplying ships in the Persian Gulf and elsewhere in the Middle East.
The Navy was vague about what prompted the action, saying the matter remained under investigation. Rear Adm. John Kirby, the Navy’s chief spokesman, said in a statement that the decision was “based upon evidence of conduct indicating questionable business integrity.” He declined to give details.
The suspension follows the Navy’s decision in September to terminate business dealings with one of Inchcape’s chief competitors, Glenn Defense Marine Asia, which held similar contracts in the Pacific valued at more than $200 million. That company’s chief executive, Leonard Glenn Francis, was arrested and charged in federal court with bribing several Navy officers with prostitutes and cash in exchange for inside information about contracts and ship movements.
Navy officials said that the two cases are unrelated and that the problems surfaced separately. Along with other recent investigations, however, they raise fresh questions about the Navy’s dealings with contractors and its ability to prevent fraud, waste and misconduct.
Also Wednesday, a former Navy employee reported to federal prison in Massachusetts to begin serving a 10-year sentence in an $18 million kickback scheme. Ralph M. Mariano, who worked for the Naval Undersea Warfare Center in Rhode Island, had pleaded guilty to stealing money over a 15-year period by funneling it through contractors and shell companies.
And in yet another unfolding case, federal authorities are investigating three senior Navy intelligence officials in an alleged contracting scheme that charged the military $1.6 million for homemade firearm silencers that cost only $8,000 to manufacture.
The Navy has depended on Inchcape, Glenn Defense Marine and other contractors in the naval husbanding industry to resupply its global fleet of ships and submarines. The private companies provide fuel, tugboats, security, sewage disposal and anything else a vessel might need during a port visit.
Inchcape, for example, holds a $194 million contract to support the Navy’s 5th Fleet, which is responsible for all maritime operations in the Persian Gulf and other parts of the Middle East. That contract is scheduled to expire in January. Inchcape also holds Navy contracts for services in Mediterranean ports and parts of Africa.
Navy officials said they would honor the minimum requirements of existing contracts with Inchcape but would not renew any deals or approve options or extensions — a common practice with military contracts.
An Inchcape spokeswoman did not immediately respond to requests for comment Wednesday night.
The firm was purchased in 2006 by Istithmar PJSC, a private-equity firm from the United Arab Emirates. The Dubai-based company sought to resell Inchcape in 2010, but a deal was scuttled after media reports that the shipping firm was under scrutiny by the U.S. Justice Department.