Navy Contractor Receives Bribery Sentence, DoJ Drops $50M Fraud Claim

Defense contractor pleads guilty in bribery case 

On November 9, 2023, a defense contractor Frank Rafaraci admitted guilt in a bribery case and received a sentence of one year and a day behind bars, per The Washington Post. The individual had been caught slipping envelopes filled with $33,500 in cash to a U.S. Navy official. Interestingly, the Justice Department initially accused the contractor of orchestrating a much larger multimillion-dollar fraud scheme within the global industry that services navy ships in foreign ports. However, during the proceedings, the Department scaled back those allegations.

Frank Rafaraci and his legal troubles

Frank Rafaraci, a 70-year-old executive at Multinational Logistics Services (MLS), a significant contractor for the U.S. Navy, found himself in legal trouble when he was apprehended on September 27, 2021, on the Mediterranean island of Malta. The arrest was the result of a collaborative effort between U.S. and Maltese authorities. Initial allegations against Rafaraci were weighty with an affidavit supporting the arrest warrant claiming that he had defrauded the U.S. Navy of a staggering $50 million. The accusations included the inflation of invoices for port services spanning the period from 2011 to 2018. Additionally, it was asserted that Rafaraci had utilized a network of shell companies to launder ill-gotten gains, facilitating the evasion of U.S. income taxes.

However, as the legal proceedings unfolded, the United States retreated from the initially painted picture of the case's magnitude. Subsequently, Rafaraci, a dual U.S.-Italy national who divided his time between Dubai and Italy, opted to plead guilty to a single bribery count in April 2022. This marked a significant shift in the narrative, emphasizing a more focused aspect of the charges against him.

Proceedings and judge's decision

In front of U.S. District Judge Dabney L. Friedrich in D.C., Frank Rafaraci took responsibility for his actions and expressed full acknowledgment of the consequences. He shared that his motivation was to assist a friend in covering his son's tuition although he clarified that the bribery was not initially his idea. Rafaraci underscored that neither his company nor taxpayers reaped benefits from the illicit transaction.

However, Judge Friedrich emphasized that regardless of the ostensibly noble cause, Rafaraci's conduct, given his role as the chief of one of the Navy's major contractors, set a concerning precedent. The judge remarked that the nature of the bribe remained unchanged, asserting that whether the funds were destined for a college education or a party in Vegas, it still constituted a bribe.

Bribes history

Rafaraci admitted to providing Randy Alford with money at hotels in Bahrain and Miami in August 2015 and May 2018, accompanied by a note stating, "Keep up the good work." Alford, employed as a marine liaison officer for the U.S. Navy's 5th Fleet based in Bahrain, received these payments. In his plea papers, Rafaraci acknowledged that these financial transactions were conducted with the explicit intention of inducing Alford to take official actions beneficial to him and his company.

Rafaraci asserted that Randy Alford had solicited the payments. In October 2022, Judge Friedrich sentenced Alford to a year and a day in prison. Alford had previously pleaded guilty to one count of conspiracy to commit bribery. Both Rafaraci and Alford were expected to serve approximately 10 months in the U.S. prison system factoring in good time credits. This development marked a legal conclusion to the case with both individuals facing the consequences of their involvement in the bribery scheme.

Reduced sentence and its scope

Prosecutors advocated for a reduced sentence of eight months for Rafaraci, highlighting his cooperation and favorable personal history. As the head of one of the largest ship-husbanding companies catering to the U.S. Navy and global navies, Rafaraci played a crucial role in supplying essential services and provisions when naval vessels docked at foreign ports. In demonstrating his commitment to accountability, Rafaraci voluntarily returned to the United States instead of evading authorities when his extradition request was denied in Malta. Not only did he surrender his electronic devices and provide pertinent documents but he also expressed a willingness to be interviewed by prosecutors, as outlined by U.S. prosecutor Lauren Archer.

Moreover, the defense underscored MLS's positive contributions, citing the company's assistance to the U.S. Navy during the COVID-19 pandemic, involvement in evacuating refugees from Afghanistan in 2021, and a historic intervention in 1989. According to the defense, MLS stepped in when no other contractor was willing to rescue a U.S.-Russia presidential summit near Malta that was endangered by storms. These factors were presented as evidence of Rafaraci's broader positive contributions and sense of responsibility.

Frank Rafaraci's lawyer contests allegations

In a letter to the court, Frank Rafaraci's lawyer, Michael R. Sherwin argued that Rafaraci's mistake doesn't reflect his true character and patriotism. He disagreed with the government's initial claim that Rafaraci was running a widespread fraud scheme. Sherwin suggested that investigators were eagerly looking for another big corruption scandal like the Fat Leonard case which shook the Navy a few years back. In that case, a Malaysian defense contractor bribed Navy officials and overcharged for services in Asia, leading to convictions of more than 20 people. Later on, U.S. prosecutors admitted that some of the initial accusations against Rafaraci were unfounded. Sherwin said Rafaraci shouldn't go to jail, and he might have been treated more leniently if the broader investigation into the industry hadn't hit a roadblock. He also raised concerns about the lead investigator, Cordell "Trey" DeLaPena who was involved in both the Fat Leonard and MLS cases. DeLaPena faced criticism in another case where charges against Navy officers were dropped due to mistakes by prosecutors. This raises questions about how reliable the investigations were.

Legal disputes and investigation

Rafaraci's lawyer, Michael R. Sherwin was unsure why the government's investigation stopped and questioned if DeLaPena was in charge. He mentioned that Rafaraci gave a lot of documents about corruption and security risks involving foreign workers in the industry. The prosecutor, Lauren Archer admitted that Rafaraci provided information but it didn't help significantly in prosecuting someone else. She said this was due to legal time limits, worries about criminal responsibility, and the existence of similar information from other sources.

Judge Friedrich didn't let unproven facts influence her decision. She also reminded everyone that she had already decided that DeLaPena's actions weren't connected to Rafaraci's guilty plea. This emphasizes the court's focus on confirmed facts and the judge's earlier decision about DeLaPena's role in the case.