Behind Romney's battleship plan, an ill wind blows

If Mitt Romney’s high-finance cronies had more money invested in horses and bayonets, would  the Republican presidential candidate be insisting that our national security depended on them?

As it is, Romney is championing a vast and costly expansion in the number of the Navy’s big battleships, from which one of his top foreign policy advisers could make a healthy profit.

That would be John Lehman, CEO of J.F. Lehman & Company, an investment firm that specializes in acquiring “middle market companies in the defense, aerospace and maritime industries and the technologies that originate from them.”

He’s also a former secretary of the Navy during the Reagan administration, a member of the 9/11  Commission and a stalwart Republican who also advised John McCain’s losing presidential bid.  Lehman has been advocating for more big ships since his days in the Reagan administration – and as Wired magazine reported, he’s put himself in a good spot to profit from an increase in military shipbuilding. “He has profited hugely from the Navy’s slow growth in recent years — raising the prospect that he could make even more if Romney takes his advice on expanding the fleet."

And now he’s being mentioned as a possible secretary of defense in a Romney administration.

But Lehman’s history makes him a particularly dubious character to place anywhere near taxpayers’ money, especially as Romney insists he will preside over a huge increase in spending on defense – including Lehman’s pet project to increase the number of battleships. (Under Obama, the Navy plans to build an additional 15 warships by 2019, bringing the fleet to 300, at a cost of between $17 and $22 billion a year. Under the more ambitious Romney/Lehman plan, the fleet would grow to more than 350 ships by 2022.)

During the Reagan administration, Lehman was an acknowledged master of the Washington insider political game. But his management style at Navy was blamed for a massive corruption scandal involving military officials and big defense contractors.

Prosecutors dubbed their investigation, which began after Lehman returned to private life in 1987, “Operation Ill Wind.”  More than 50 government officials, corporate heads, consultants and military contractors were convicted.

But Knight-Ridder, citing a congressman and a former defense official, reported in 1988, “The autocratic management of former Navy secretary John F. Lehman Jr. created an environment ripe for the type of abuses uncovered by the Justice Department's probe into Pentagon contract bribery.”

Lawrence Korb, an assistant secretary for defense at the beginning of the Reagan administration, said: "The Navy, when I was in the Defense Department looking at it from the inside, and when I was outside, was a bureaucracy run amok. It was making its own procurement rules in many cases which were different from the Defense Department."

One of those who went to prison was a close associate of Lehman’s, Melvyn Paisley, who Lehman brought in as a top Navy Department official. Paisley pleaded guilty to accepting hundreds of thousands in bribes and served four years in prison and paid a $500,000 fine. Lehman was never charged with any wrongdoing, but according to media reports, he was suspected of improperly tipping off Paisley to the investigation.

Ill Wind investigators also discovered that when Lehman joined the administration, he had sold a lucrative defense consulting business from which he was earning $180,000 a year – but not before securing a guarantee from Boeing Corp., a major defense contractor, that it would use the consulting business. Knight Ridder reported that while Justice Department officials said Lehman’s actions violated no law, they constituted an ethical breach that would have required his dismissal had they been discovered while he was still Navy secretary.

The latest escapade in which Lehman surfaced was his company’s investment in the   government-backed construction of a superferry to carry passengers between several Hawaiian islands.

As detailed in Wired and the New York Times, the superferry ultimately was a failure for civilian travel, even with the encouragement of  $136 million in government loans. But it boosted the fortunes of a shipyard Lehman owns, along with the prospects that the Superferry would catch the eye of another very wealthy customer – the Defense Department.

Ryan Sibley, of the government watchdog group Sunlight Foundation told Wired that “Lehman’s involvement with the Superferry shows that he is no stranger to using personal connections to influence costly decisions.”