Bribery occurs in the United States — what a surprise! Transparency International’s Corruption Perception Index ranks the United States as 25 out of 179, a relatively low ranking for corruption.  Some have argued (including me) that the US ranking may be inaccurate given current regulations surrounding campaign finance and other means by which influence peddling and corruption can occur with low detection risks.  That is an issue for another day – my point today is corruption is corruption, whether in the US or internationally.  It is usually the same old story with common incentives, schemes and techniques.

In a recent case, the Justice Department announced criminal charges against the CEO of Multinational Logistics Services (“MLS”) for a long-time bribery scheme beginning in 2010.  Frank Rafaraci, a US citizen, is the CEO of MLS, a defense contractor that provides ship husbanding services (e.g., refueling and stocking provisions) to US Navy ships at ports worldwide.

Starting in 2010, the US Navy, DoD components, and US government civilian agencies awarded MLS with husbanding contracts totaling $1.3 billion. Beginning in 2011, Rafarcai participated in a bribery scheme, defrauded the US Navy by submitting falsely inflated invoices and laundered illegal proceeds through shell companies in the UAE.

Rafarcai, the Chairman of the Board, and the CFO for MLS acted together to pay a “stream of benefits” to a U.S. Navy official who supervised ship husbanding services in Bahrain, including MLS.  The U.S. Navy official pleaded guilty to conspiracy to commit bribery and is cooperating in the prosecution of Rafarcai.

Rafarcai paid the U.S. Navy official two bribes totaling $33,500 for the official’s support for MLS contracts and other business activities. 

Rafarcai, the Chairman of the Board, and the CFO for MLS engaged in a scheme to submit inflated invoices for port services under the husbanding contracts with the US Navy. These services were supposed to be charged at cost under the contract. 

MLS and the local port authority agreed to split the difference between the cost and the inflated price submitted on the invoice.  During a seven-year period from 2011 to 2018, MLS submitted inflated invoices totaling $50 million in illegal proceeds.

In the affidavit in support of an arrest warrant for Rafarcai, the government cited several examples of inflated invoicing practices.

In January 2015, MLS submitted invoices from the Manama port in Bahrain to the US Navy totaling $231,114.43, while the actual accounting records reflected that MLS paid only $12,686.40 to the Manama port authority.

In another incident in June 2015, MLS submitted invoices from Manado, Indonesia port authority totaling approximately $89,376, while the actual accounting records reflected that MLS received a discount from the port authority of approximately $13,656, which was not passed on to the US Navy.

MLS maintained its primary bank account in Malta.  MLS laundered the proceeds of the inflated invoices from the Malta bank account to shell bank accounts for Rafaraci’s personal benefit.  Rafaraci and the CFO created fake invoices from the shell companies to an MLS bank account in the UAE to effect the payments. The shell companies, in fact, had not provided any services.  The purpose of the fake invoices was to disguise the laundering of proceeds from the Malta account.