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Top U.S. Navy official knew of probe months before bribery scandal broke

By David Alexander and Phil Stewart

WASHINGTON (Reuters) - U.S. Navy Secretary Ray Mabus said on Friday he knew about a Navy contracting investigation for months before it erupted into a major bribery scandal and that Navy investigators planted false information that helped lead to the first arrests in the case.

In his first public comments on the scandal involving maritime services firm Glenn Defense Marine Asia and its colorful chief executive Leonard Glenn Francis, Mabus said there would be "more disclosures" in the case, which has so far led to action against six senior Navy officers and an investigator.

Francis, a 49-year-old Malaysia native, is accused of giving prostitutes, cash, luxury travel and concert tickets to Navy officials in exchange for information to help him win millions of dollars in business at ports across Asia.

"I certainly don't think we've seen the end of it," Mabus told a Pentagon briefing on the case. He said he had told Navy investigators to pursue the probe "wherever it leads" and that an independent federal investigation had "pulled no punches."

If federal prosecutors decide not to charge some individuals involved, Mabus said the Navy would appoint a four-star admiral and a team of professionals to examine the allegations and hold people "appropriately accountable."

The scandal broke in mid-September after Francis, known as "Fat Leonard" in military circles, was lured from his Singapore base to San Diego for what he believed would be a meeting with Navy officials but was instead arrested by federal authorities.

Francis had been encouraged to make the trip in part by a false report planted by Navy criminal investigators who had discovered one of their own was passing information to the firm, Mabus said, citing information from the U.S. Attorney.

Francis was arrested and charged with conspiracy to commit bribery, as were U.S. Navy Commander Michael Misiewicz and Navy criminal investigations special agent John Beliveau.

Beliveau pleaded guilty to conspiracy and bribery charges earlier this week, admitting he had taken envelopes of cash and prostitutes from Francis in exchange for providing information on the Navy investigation into his billing practices.

He admitted giving Francis at least 76 internal Naval Criminal Investigative Service reports in exchange for payoffs of cash, prostitutes and travel, but still he demanded more. Court papers say he told Francis in a note: "You give whores more money than you give me ... I can be your best friend or your worst enemy."

The case has led to the arrest of another Navy officer as well as administrative action suspending or removing several others from their command positions.

The seniormost officers touched by the probe so far are Vice Admiral Ted Branch, the director of Naval Intelligence, and Rear Admiral Bruce Loveless, the director of Intelligence Operations, both of whom were put on temporary leave and had their access to classified information suspended. No charges have been filed against them.

Mabus said the firm continued to win contracts even after the Navy opened the investigation because the Navy needed to develop the evidence before it could bar Glenn Defense Marine Asia from doing business with the government.

"If the Navy suspends a company's ability to compete for contracts or refuses to award a contract to a low bidder, we are required by federal law to give that contractor a reason," Mabus said. "In this case, a notification would have tipped off GDMA that something was wrong."

Mabus said since 2009 the service has suspended 252 contractors and debarred 400 others. But he added it was evident the Navy needed to go further and he had ordered a review of contracting practices for maritime services - known as husbanding services - at overseas ports.

(Reporting by David Alexander; editing by Jackie Frank)

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