Navy Bribery Scandals Highlight the Importance of Enforcing a Code of Conduct


There are a wide range of business opportunities available for supplying, equipping and servicing the U.S. Navy's more than 323,000 active personnel, 290 ships and over 3,700 aircraft around the world. Unfortunately, this also makes it an enticing target for those willing to engage in corrupt behavior and defraud the U.S. government.

Fraud and bribery scandals have hit the Navy in recent years, including one involving the Navy's Military Sealift Command (MSC), the primary provider of ocean transportation for the Navy and the rest of the U.S. Department of Defense. The scheme involved co-conspirators from two different companies and the payment of more than $265,000 in cash bribes and other things of value over the course of five years. In return, the companies received favorable treatment that helped secure more than $5 million in federal contracts to provide information technology and communications services and support to the MSC. The U.S. Department of Justice (DOJ) recently announced that a former contractor for the MSC pleaded guilty to soliciting and accepting bribes from the two companies while he managed telecommunications projects and awarded government contracts, subcontracts and task orders for the command. While he faces up to 15 years in jail on the bribery charge, other individuals involved in the scheme have received sentences ranging from 24 to 96 months in prison; another defendant awaits trial.

Similarly, a scheme revealed last year found that an Asian contractor routinely overbilled the Navy for port services, costing the government more than $20 million. The contractor — which had serviced and supplied Navy ships and submarines at ports around the Pacific for 25 years —bribed Navy personnel with cash, luxury travel, expensive meals, consumer electronics and prostitutes in exchange for classified information used to win Navy contracts, submit false and inflated invoices, and stall existing criminal investigations it faced. The government has since debarred the contractor and terminated nine Navy contracts worth $205 million.

Such unethical conduct clearly goes against the Navy's core values of duty, integrity, ethics, honor, courage and commitment. Such values are not unique to the military, and can apply to businesses and other organizations concerned about fostering an ethical environment and avoiding the penalties and reputational damage resulting from corrupt behavior.

Compliance training is an important step organizations can take to ensure that employees understand the personal and organizational consequences of corruption, particularly for those who interact directly or indirectly with government officials on the organization’s behalf.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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