Defense News: CNO Q&A at America’s Future Fleet: Reinvigorating the Maritime Industrial Base

Source: United States Navy

ADMIRAL JAMES G. FOGGO (RET.):  So we’re going to have a seat and a little fireside chat after the admiral’s comments.  

We’ve got a lot of friends in the Washington area and for the last couple of weeks, knowing that Admiral Franchetti has been here, we canvassed our affiliates, some who couldn’t be with us today, both in industry and in public policy and at the think tanks, and we’ve come up with a number of things that are of interest – that will be of interest to this crowd.

So I will serve as the interlocutor today.  Admiral Franchetti is on the hot seat but, like I said, she is an exceptional strategic communicator.  So let me start, Admiral, with the subject of recruiting and retaining top tier talent.  

It’s been difficult for all of the services due to a shrinking recruitment pool, private sector competition, and, you know, prosperity or propensity to serve.  So kids are thinking about other options nowadays.  

I know you’ve been deeply involved in this in trying to help the recruiters.  You have personally detailed people to positions.  Muddy Waters is one of them, and I think he’s doing a pretty good job – submariner, callsign Muddy Waters.  What other steps has the Navy and have you taken this year to attract and retain the next generation of sailors that are going to potentially fight that conflict in 767 days? 

ADMIRAL LISA FRANCHETTI:  Well, thank you for that.  

You know, recruiting, when I first came into the job, really was one of my number-one concerns and I’m happy to report that last year was really good.  When you look back in 2023, you know, we had missed our goal by about 7,400 sailors.  

But, you know, the team really decided that they were going to even raise our goal and really go after it as a stretch goal to get over 40,000 new sailors into the Navy this year, and we succeeded.  

We were able to contract above our goal with about 40,958 sailors this year.  In fact, we’ve contracted so many sailors we could not get them all through boot camp this year so we put them in our delayed entry pool and they are moving along.  

But it has been – I talk about these all-hands-on-deck efforts because we really do need to get more players on the field and it’s those people from all across the rich fabric of America that we’re out there getting to expose them to the great things that the Navy is doing and I accredit a lot of things to that.  So let me just give you a few things that we’ve done.

First, you talked about Admiral Waters.  We put a two-star in charge of Navy recruiting and when he got there he really took a step back and took an enterprise approach to recruiting, really borrowing from the model of aviation and how they used data and a performance to plan approach to be able to raise the level of strike fighter readiness from 50 percent to 80 percent.  We did the same thing in recruiting.  

So, taking a step back and looking at it as an enterprise.  Instead of 26 individual recruiting stations, we looked at it as an enterprise where we could look at what are the drivers of recruiting, what do we need to do to increase the throughput per recruiter, which, it turns out, is the number-one driver for recruiting.  

And once we could get our recruiting stations fully manned we could get our recruiters out where they needed to be, we could take advantage of all the Fleet Weeks and really getting rid of sea blindness – you know, letting people see what their Navy is doing for them every day – that was really a big part of being able to improve our throughput per recruiter and increase the number of people that we’re getting.

But we also took a lot of other steps to get after that to really expand the pool of opportunities for people.  We set up a future sailor prep course, modeling ourselves after the successes of the Army, so we can have an academic prep course.  We have a physical fitness prep course, and that really gives sailors even more opportunities for different ratings that they could go into once they finished this course.  

We established a robotics rating.  You know, I wasn’t sure – 

ADM. FOGGO:  Yeah.  That’s great.

ADM. FRANCHETTI:  – that that was going to be a big hit but it really was a big hit.  A lot of sailors are interested in that.  

I also created a thing which I called Every Sailor a Recruiter, and I went out to – we have 5,000 UICs in the Navy.  So if we one – every command got one person we’d have 5,000 more sailors.  That program just in the last year created 1,800 leads and about 440 new sailors have already joined the force.  So, again, it’s really thinking about recruiting a little bit differently.  

I think, you know, the other part you talked about, propensity to serve, and, you know, I just had an opportunity to be down at Corry Station, you know, where we bring in all of our new information warfare professionals and I can tell you they are excited to serve.  They are really looking for the same things that you and I were looking for.  They are looking for an opportunity to improve themselves.  They’re looking for an opportunity to serve their country.  They’re looking for an opportunity to serve the world.  

So there’s a lot of excitement out there and I’m glad that – and I have to give a shout out to Recruiting Nation to really being the face, you know, of our Navy and bringing in those sailors.  

The other part of the manning piece is also retention, and so while we focus a lot on recruiting we’ve also focused a lot on retention and, again, that’s another good news story.  We have over a hundred percent retention for all three of our enlisted pay bands.  Officer retention remains consistent at just over 90 percent for the last 10 years and I think that tells me a couple of things.  

People want to join our Navy, in the first place, because they love our mission.  They love what we’re doing all around the world, and then they stay because they can see themselves in the mission.  They can see how they’re contributing and they really appreciate the work we’re doing to improve their quality of service.  

We stood up a cross-functional team in 2023 to really look at some of the challenges that our sailors and their families were facing whether it was a quality of life or quality of work, and we called that quality of service.

And we started really focusing in the area of Newport News shipyard.  We have a lot of sailors there.  They are in an unconventional environment where they’re not in a regular fleet concentration area.  So we started looking at how could we make things better for them and we stood up this cross-functional team led by the vice chief, supported and executed by the chief of Navy installations command, that brings in all the stakeholders including the customers.  

So we always want to get the voice of the customer to see if we’re really solving the problems that they’re seeing and then when we implement a solution did it actually improve the situation.

So things that we’ve been able to do for that area have been working on improving parking, separating life from work so sailors have a good barracks room to live in.  We’ve invested in our unaccompanied housing, a hundred percent funding for the sustainment of that and really improving that.  

We’ve got some new berthing barges.  No one has to live on a berthing barge.  They all get a room.  So that’s really important for them to be able to separate that shipyard environment from their regular life.  

I think other things that seem small but, you know, expectations of the workforce to be a world-class employer.  They’ve got 24/7 gym access.  You have a wi-fi pilot so people get free wi-fi in their barracks room.  Again, everybody – you can’t function without wi-fi these days so we want to provide that as a service, working to do that.

I think other small things like having the opportunity to cook their own food in their barracks room we’ve spread that universally.  I think 90 – over 90 percent of our gyms are open 24/7 now with – (inaudible) – access.  

So, again, a lot of opportunities that we’ve had to improve the quality of life for sailors.  The longer-term investments we’re making in things like MILCON to meet the DOD standard of one person per room and no more than two people sharing a bathroom, to build 12 more CDCs to provide access to childcare, and also improve everybody’s ability to access health care.  

And so that was one of the things we found in the shipyard is that they were having to travel long distances to be able to, like, do a dental appointment, just routine medical.  So how do we bring that closer to the sailor with a wellness center right there in the shipyard?  And, again, these are things that we are learning that we are now scaling out to other parts of the Navy and I’m excited about it.  

So great news on recruiting but we can’t take that for granted.  Great news on retention.  We can’t take that for granted.  We’re going to continue to double – redouble our efforts to get after both of those things in the coming year.  

ADM. FOGGO:  Absolutely fantastic, and that was really the second part of my question.  Just let me make a comment about quality of service.  

So, and you’ll recall it was less than a year ago you were gracious enough to chat with me on the phone before I went on CBS to do a live interview with Tony Coppola and, you know, I said, hey, it’s all about the Red Sea.

And so I’m going to say all unclassified talking points.  But is there something – can I carry your message?  And of course Admiral Franchetti’s like, I’m so proud of what those sailors are doing out there.  But she said:  Jamie, do not forget to mention the families back home.  And you have really taken that forward, too, fairly well on caring about your families and if you win into families you win the sailor.  Propensity to serve nowadays is low but so is the pool of qualified applicants.  Twenty-three percent of Americans not even eligible because of issues – mental health, maybe drugs.  

And so the program actually take(s) young kids and bootstrap them up I think is commendable.  Some of the services have had commentary about that.  Some are pro.  Some are con.  I think it’s been brilliant and you’re a thousand over your quota.  

Not a lot of people know this but our great friend, my mentor, Admiral Ed Giambastiani, four-star submarine and former vice chairman of the Joint Chiefs, was a recruiter.  I don’t know – Rob Gaucher was, too.  Rob was one of those guys.  He was a detailer.

MR.     :  Rick was.  I was –

ADM. FOGGO:  Yeah, you were a detailer, so it’s almost the same thing.  (Laughter.)  

But Admiral G came up to me a couple years ago, puts his hand on my shoulder.  He goes, oh man, we’re in very dire straits.  I go, what do you mean?  He goes, they’ve emptied the delayed entry program, and I’m, like, what do you mean?  And he goes, well, in order to make quotas we’ve taken all the kids who are waiting out of the delayed entry program and put them in uniform so we don’t have the surge tank anymore.  You’re building that surge tank back up again.  

The last thing I’ll say is we were down in the center in Newport News at Huntington Ingalls taking a tour of the shipyard and every year they sponsor us down there, and it’s brilliant.  Old Miller – Tom – one of my classmates at Lydall (ph).  We had 31 professional staffers from the Hill, both sides – the House and Senate – committee members, affiliates, and your fingerprints were all over the place.  

You had just been down there, and you had just looked at the parking.  You’d looked at the facilities.  You’d agreed to take a couple of old hotels or whatever and then refurbish them, and then put, like, a little NEX in there so people could get uniform stuff, snacks.  Pretty cool.  When you walk in, it’s one of those automated things where you register your credit card – (inaudible).  You know, guys like me don’t understand that, but absolutely.  And there was a buzz about that.  So you really have made a huge dent on quality of service.  Thank you.  

ADM. FRANCHETTI:  You know, the one thing I found really interesting in visiting there and talking with some of the submariners that are there I asked them, you know, if they knew about these things and the one thing they said – I said, how do you feel about them, because none of our – not all of them are going to materialize while you’re here, especially the parking as we’re working on the parking garage.  And they were, like, we don’t care.  We’re so excited that it’s happening – (laughter) – and that it’ll be for the people coming after us, and I thought that was a really great perspective on the sailors, not just worried about themselves but worried about their people that would be there in the future.  

So, again, these programs, the ones that have the immediate effect they’re really making a big difference, but they can also see that we are really investing it in the future and that we’re serious.  We’re putting our money where our mouth is.

ADM. FOGGO:  Yeah, and you’re going to scale it across the country, too, which I think is terrific.  

OK.  Second one here.  Our adversaries are relying on gray zone activities.  We talked earlier about the illegal, unreported, unregulated fishing.  National Security Advisor Robert O’Brien sat in that chair last year.  He actually called the Chinese distant water fishing fleet and their activities an act of war on our allies and partners.  And that was a pretty stunning revelation, but he was passionate about it.  

So all sorts of things are going on with militias at sea, white shipping that’s interfering, economic coercion, cyberattacks.  Pretty tough challenges for the maritime services and particularly the Navy.  How are you responding to all of this? 

ADM. FRANCHETTI:  Yeah.  You know, I think this is a really important aspect when you think about the changing character of war and all the things that we see in the maritime.

I think the most important thing about gray zone competition or coercion is that the best way to combat it is to be there, to be present, to be operating everywhere that international law allows, and encouraging and working alongside our allies and partners to make sure that they’re doing the same thing because the only way that you can confront that is to be there, is to report it, to expose it, and to continue to talk about it.  

I think if you think about the big aspects of gray zone competition it’s really about changing the international order slowly one salami slice at a time that you don’t even notice that it’s happening, a little bit like a boiling frog and that – you know, that is what we need to get in there to see and to prevent.  

I think when you look at the, you know, China maritime militia and all the things you see them doing around the Philippines and the East China Sea preventing the Philippines from being free – having freedom of action in their own exclusive economic zone, these are things that we are concerned about and we want to make sure that we are always present, always working with our allies and partners, and really doubling down on those relationships to expose that bad behavior and make sure that it is illuminated for the international community because I think together, you know, we can continue to stand up for that rules-based international order that promotes commerce, security, prosperity, really for the nations all around the world and the Navy is right there front and center doing that.  You see us doing that all over the world.  We have to continue that forward operating presence.  

It’s not just about being ready to respond in a crisis but that campaigning approach, having those operations and activities all around the world, exercising with allies and partners, that will cut down and be able to confront gray zone competition.  

I think when you talk about cyber, you know, that’s a really important aspect.  When you, again, think about the changing character of war you think about Russia and you think about the Colonial Pipeline, SolarWinds.  You know, it seems like that was a long time ago but all of those efforts continue.  

Russia is certainly willing to use state and nonstate actors to get after the cyber domain.  And it’s not only about DOD networks, it’s about networks all over our nation and all over the allies’ and partners’ networks as well.  

And so I think as a person who is responsible in the man, train, equip part of that, you know, my job is to develop sailors who are basically cyber defenders every day.  You know, you think about when you serve on a ship or a submarine you’re always a damage controlman.  You know, you know how to do damage control.  You know how to put out a fire.  

I think every sailor also needs to be a cyber defender.  They need to be aware of their environment whether it’s in their workspace or on their home devices, their personal phone, because everything is a surface area – that we need to reduce the amount of surface area that’s available to attack.  

I think on the other side is really developing that professional cyber mission force alongside CYBERCOM and, you know, meeting the standards that CYBERCOM has set forth.  We’ve really worked hard to get after that, to set up some of our own training, our own workflows for both our cyber defenders but also our offensive cyber operators.  Because you need to be able to do both, operate defensively and offensively, in this new warfighting environment.

ADM. FOGGO:  Fantastic.  Let me fast forward.  

We’ll go back to your NAVPLAN for America’s warfighting Navy and your Project 33 targets for a North Star for the Navy and the ability to achieve and sustain by 2027 an 80 percent combat surge-ready posture for ships, submarines, and aircraft.  

So last night we had Admiral Houston and Admiral Gaucher addressing a crowd of about 55 people – some of the folks in this room – and so it’s good they’re here with us here today.  They talked about that 80 percent North Star and they said when you’ve challenged the fleet they stood up, saluted, said, yes, ma’am, and they were moving out smartly, and they had some brilliant ideas on how to get there.  It’s really, really tough with the supply chain.

That said, in your first major speech you called for more players on the field.  You’ll think this is funny – I don’t think I had a chance to share this with you, but I spent some time in the Pentagon and I had the opportunity to spend an hour with Russell R. Rumbaugh, the comptroller, the Honorable.  He’s a great – you know, he’s – for an Army guy, he’s a great guy – (laughter) – and very conversant.  

We spent over an hour talking.  Of course, I told him:  Hey, you got to get another command ship to replace Mount Whitney.  You know how I am about that.  And he’s like, yeah, yeah, you’re, like, the one leading the charge on that.

Anyway, so he said the brightest moment for the secretary of the Navy in the previous six months was when you came in and told him you wanted more ready players on the field.  He just thought that was great, and, you know, Secretary Del Toro had a great day that day and that was because of that phrase.  

So it’s challenging.  You’re bringing back the Ticonderogas but you still have all the challenges of readiness and maintenance, and Admiral Gaucher talked about getting the SSNs, the 688s, and the Virginias out of the yards.  

Is there a tradeoff here?  Do we have to sacrifice new construction for getting more ready players on the field and getting people out of maintenance or can we do both?  What are your thoughts on that and how do you want to move forward? 

ADM. FRANCHETTI:  Well, I think it’s a yes and a yes.  We do need to do both things, and when I think about more ready players on the field I think there’s a lot of ways that I think about getting them.

First is, as you mentioned, new construction.  We’ve got about 85 ships on contract right now so we need to get those ships delivered.  We’ve got to get them delivered on time, on contract, on budget.  That’s really important.  So that’s just one way, though, to get more players – more ready players on the field.  

The second way is to get them in and out of maintenance on time, and I’m talking now submarines.  I’m talking ships.  We’re also talking aircraft.  You know, it is really important, and I think the quickest way to get more players on the field is to get them out of maintenance on time and, again, on cost.  

I will just – I’ll go through a couple other areas.  Then I want to circle back on the maintenance piece.

ADM. FOGGO:  Sure.  

ADM. FRANCHETTI:  So another way is to integrate robotic and autonomous systems.  Those are players also.  I have a whole target in my Project 33 targets to be able to integrate those robotic and autonomous systems into our Navy and, again, we’ve got three orbits of Triton right now, the replacement for the EP-3, one operating in the Indo-Pacific, one in the EUCOM, and one in the Middle East.  So I’m very proud of that.  Again, that’s more players on the field.  

The other way is to use what we have differently.  So, again, our sailors are super creative and innovative with the platforms that we have so how could we repurpose them and use them for different missions that we hadn’t thought about before.

And the last one is to leverage allies and partners.  So there is a lot of ways to get more players on the field and we do need a full court press on all of those efforts.  On the maintenance one, though, I think that is the one that is really showing the most promise because we have had a focused effort on this using perform-to-plan processes.  Again, just like aviation did we scaled that out in the submarine and into the surface communities, and we’re really starting to see progress there.  

And I’m looking at the metric of on-time completion of maintenance availabilities.  If you look at – in FY 2022, 36 percent finished on time.  In FY ’24, almost 67 percent finished on time.  

So we know that using a data-driven approach, understanding the metrics, understanding what are the drivers of delays in maintenance.  Is it poor planning?  Is it don’t have the materiel available when you need it?  Is it work stoppages that result from that?  Then how do we get after those things? 

So we’ve locked in planning our availabilities at, you know, the date minus a hundred and twenty days to make sure everybody can plan for the availability.  We’ve actually invested in a lot of rotatable pool spare parts so we don’t have to do so many cannibalizations and we can actually have the parts and materiel.  

We always have this just in time approach – (clears throat) – excuse me, for materiel but now it’s a just in case approach.  We’ve got to have it on hand.  We’ve got to have all the materials to be able to start the job.  We want everything ahead of time.  

And, again, this is a lot of effort.  I have to – I see Admiral Gaucher out there, you know, is our single accountable individual over there for submarine maintenance and getting them in and out on time.  People are being very creative.  

I think when I talked about the recruiting operations center and the aviation operations center, subs and surface have that now, too.  So it’s a daily drumbeat of accountability, of understanding where we are, and how are we going to get more players on the field.  

So we need them, new ones.  We need to get them in and out of maintenance on time.  And we got to do those other three things I said, too.  And with that, we will have and we do have a lot of ready players on the field.

ADM. FOGGO:  Amen.  And that’s really the focus of the conference today for the rest of the day.  I’m conscious of your time.  We have five minutes.  I want to try to get to two more questions.  

I know you’ve traveled down to Australia, as have Admiral Houston and Admiral Gaucher, and we’ve got Rear Admiral Ian Murray coming in this afternoon, the Australian defense attaché.  Rear Admiral Tim Woods, a friend and the U.K. attaché, and then Captain Jon Ahlstrom, who’s our rep – the Navy rep up at the National Security Council.  Jon’s an Olmsted scholar and I’ve mentored him since he was a lieutenant.  He’s a fantastic guy and he’s been super.

So we’re going to talk about AUKUS.  I just wanted to get your thoughts on that.  It represents a significant shift on how allied nations cooperate.  Admiral Houston last night talked about a graduate of Navy Nuclear Power School in Australia who finished number two in his class and he said thank God because if he’d finished number one I’d be really mad, you know – (laughter) – we didn’t get an American in the number-one position.  And that guy drove USS Hawaii into port at HMAS.  Were you there for that? 

ADM. FRANCHETTI:  No, but I met him.  

ADM. FOGGO:  Oh, you met him?  Yeah.  So, I mean, this is really a quantum leap forward in allies and partners, and you and I did a lot in Europe to generate goodwill with allies and partners.

 So what are your thoughts on AUKUS phase one, phase two, for the rest of the Indo-Pacific?  Is it making a difference?  Are we taking a dent out of the Chinese army with this thing?  I think they’re pretty scared about the whole thing.  

But, you know, how was your trip and the future of AUKUS?  How are we doing that?

ADM. FRANCHETTI:  Thanks.  Well, I did.  I had a really good trip down to Perth.  I had a chance to meet down there with my Royal Navy counterpart Ben Key and Australian counterpart Mark Hammond, and really it was to get eyes on for all three of us on Perth, on the place where our submarine will be homeported and where the future submarines for Australia will be homeported out of.

And so it was a great opportunity to see our maintainers already working together in the machine shop, and all of the housing, all the facilities, all of the different things that will be supporting our team down there.  So it was a really good visit because I think, you know, we were just seeing it on PowerPoint slides, and when you get down there and you have a chance to talk with the people it makes it more real and more exciting.  

So I could not be more excited about AUKUS.  You know, I have for the last 39 years worked alongside amazing allies and partners and the Royal Australian Navy, the Royal Navy, they are two incredible partners.  For over a hundred years we’ve been working together all across the globe and I think that the relationship between the three nations is so strong and it’s only going to be stronger thanks to this.  

I think AUKUS gives us a chance to really knit together the industrial bases, the innovation bases, and the amazing people of those three nations, and that is really going to be able to accelerate things both in pillar one and in pillar two for AUKUS.  

And when you just think about the submarine piece of it, having another nation who can share part of that burden of the patrols, of the work, of the investments in the industrial base that we need to be able to build the submarines at the rate this is really – as you said, it’s a way that we haven’t done things before.  

So it’s this shared commitment to delivering this capability in the Indo-Pacific where it really counts and it really will make a difference because think about having all those submarines forward deployed all the time cutting down the transit time.  It’s a really amazing capability.  It gives us more agility and more flexibility.  

I think when you think about – oh, and I will say, you know, we are making good progress.  You talked about the graduates.  They’re all doing really well.  We just had a submarine tendered maintenance period down there where the Frank Cable went down, why it went down.  We had an opportunity to do that maintenance because it’s not only about operating the submarine but part of it is about maintaining the submarine and that stewardship of nuclear power which is really important to us.

And then you go to pillar two.  That’s where I think we’re going to see the quickest returns on investment.  When you think about the work that three nations can do together in cyber, electronic warfare, hypersonics, there’s a whole component of undersea lethality that’s under pillar two.  I’m really excited about that and, again, I’ve had multiple opportunities to talk with my counterparts about how we’re going to deliver really important capabilities in those areas together.  

So, again, I think it’s a great opportunity and, again, it just reflects the strength of the United States and the relationships and the partnerships that we really have all over the world.  These are deep, longstanding relationships based on shared values, and when you look at adversaries that may be creating new relationships right now those are transactional – what’s in it for them.

That’s not what we’re about.  We’re about shared commitment, shared understanding, and shared values.

ADM. FOGGO:  Outstanding.  Thank you for that commentary, especially about your trip and about AUKUS.  We’re big believers in AUKUS and big proponents here.  Whatever we can do to help.

Last question.  So you’ll recall that during the fourth battle of the Atlantic, which is still raging out there right now, the Severodvinsk, which is the submarine – Russian submarine SSGN – very quiet, very lethal, who is sometimes giving us fits.  

Admiral Richardson came over, and you talked about a scorecard.  He loved that.  He goes, yeah, tell me what the scorecard is.  How are we doing against them?  What are they doing better?  What are we doing better?  And then you ask him for the dream team and he gave us, like, tons of reserve sailors to come in.  

So, again, brilliant ideas coming from you that you’re now extending and you’ve seen on tour.  So I’m going to ask you for your scorecard on America’s warfighting Navy and your plan for warfighters, warfighting, and foundation.  How do you think you’re doing based on the goals that you set out in Project 33 and how do you achieve a balance and what changes are you going to make in the future? 

By the way, are you planning another update to the NAVPLAN sometime during your tour?  Because you’re very early on so we’re going to see you for another three years.  

ADM. FRANCHETTI:  Well, thank you, and I’ll start with the last first.  

You know, the short answer to that is I’m not planning on an update to the NAVPLAN.  You know, the Navy is a big ship, and it takes a long time for ideas to percolate all the way from the Pentagon down to the deck plate.

And, you know, I’m very excited when I go around.  People understand America’s warfighting Navy.  They know that we’re all about warfighting, which is delivering decisive combat power, they know that we’re focused on warfighters, which is strengthening the Navy team, and they know that we’re focused on the foundation that supports both of them by building relationships, improving our critical infrastructure.  Those are – they know that.

And so I want to build on that knowledge and that understanding and their connection to the Navy in that way.  So I don’t plan on putting out another NAVPLAN because that’s a good foundation, and then now that we have our targets – our big, hairy audacious goals, our big stretch goals – we really need to get after these and this is going to take all our efforts.  So I’m focused on the NAVPLAN as it is.

From a scorecard perspective, you know, I would say that I think we’re making good progress in all three areas.  And in the warfighting piece, I think you could talk about the Red Sea and a lot of the firsts that we’ve seen there, but those are really – it’s the culmination of about 10 years of investment training in our warfare development centers, whether it’s in – on the, you know, aviation, submarines, surface, information warfare and being able to be a learning organization where we understand what’s going on, we get the data, we create new tactics, new TTPs, and we move along like that.  

So if you think about things that we’ve been able to do there – knocking down the first anti-ship ballistic missile used in combat, anti-ship cruise missiles using SM-2, SM-6 in combat, you know, shooting a Hellfire at a USV, flying the F-35C in combat – you know, these are things that we haven’t done before.  You saw also at RIMPAC launching the air-launched SM-6.  

So we are delivering combat-credible power every single day.  So I give myself a(n) up in that one.  We are making good progress in that area.

You know, on the warfighter piece I can turn a little bit to – we already talked about recruiting, retention – but all the progress that we’re making in quality of service.  

One investment I didn’t talk about too much is, you know, really investing in our warfighters in their warfighting capability, whether it’s through live virtual constructive training, more realistic training based on scenarios we’re seeing.  We are a learning organization and we’re really working on building that warfighter competency every single day.  

I think the last one, the foundation, I kind of divided into two categories.  I think in our relationship building and the trust building we’ve done a lot of work both with our sailors, their families, but also with Congress, with industry, with our other stakeholders.  

I think we’re out pounding the pavement, telling the Navy story and listening, and I think that is building that trust that’s part of the foundation.  On the latter part, which is really our infrastructure, treating our bases like aircraft carriers that don’t get underway – they generate the force, they sustain the force – we have a lot of work to do there.  

I am – we did not invest in that infrastructure for many, many years so we are going to take an approach where we are steadily investing and improving, getting after our biggest challenges first, the things we really need to do now, things like Guam and making some repairs there after the Typhoon malware.  

We’ve got to get after those things and then, again, we’ve got to look at where do we need to make those investments over time and then stick with it.  That’s what I’m committed to.  

So I think we’re doing well in all three areas.  I’m not ever going to be satisfied with that.  That’s why we have these big stretch goals and why we’re going after them.  

You talked a little bit about the NAVPLAN.  My plan for the NAVPLAN assessment, you know, is that I have data-driven metrics for each one of the targets, and then I owe a scorecard back to our Navy flag (order ?) on how we’re doing when we start – when we hit NFOSES in March.

ADM. FOGGO:  Great.

ADM. FRANCHETTI:  So we’re building those metrics.  We’re going to hold me accountable for doing what I said I was going to do and we’re going to see if we’re on plan/off plan, and we need to adjust and we’re going to get after it.

ADM. FOGGO:  Outstanding, ma’am.  We think you’re doing an outstanding job so please keep it up taking care of our sailors and our officers and our chiefs.  It’s been a delight to have you here today.  I know your schedule is tight.  You’re also headed over to the Stimson Center.  You’re going to go to another one of these today.  So – 

ADM. FRANCHETTI:  Admiral Howard.

ADM. FOGGO:  Yeah, that’s right, and with Admiral Howard.

ADM. FRANCHETTI:  All of my mentors.

ADM. FOGGO: Yeah.  Fantastic.  Well, please tell Michelle I said hello.  I’ve worked for her three times.  

And, ladies and gentlemen, a round of applause for CNO Franchetti.

Defense News: Navy Office of Community Outreach Releases its 2025 Navy Week Schedule

Source: United States Navy

The cities include:

Tucson, AZ Feb. 17-23        
Sacramento, CA  March 17-23
American Samoa April 14-20
Huntsville, AL April 21-27  
Richmond, VA May 12-18 
Anchorage, AK June 16-22  
Duluth, MN June 30- July 6
Milwaukee, WI July 14-20
Sioux Falls, SD  Aug. 4-10
Columbus, OH  Aug. 18-24
Springfield/Branson, MO    Aug. 25-31
Wichita Falls, TX  Sept. 15-21
Hartford, CT/Springfield, MA Sept. 22-28 
Eugene, OR Oct. 20-26
Santa Fe, NM Nov. 10-16  

Among the 15 areas, NAVCO will visit six locations for the first time in the program’s 20-year-history: American Samoa, Anchorage, Huntsville, Wichita Falls, Hartford and Eugene. The 2025 Navy Weeks also coincide with the Navy’s 250th birthday celebration, during which the Navy will host numerous worldwide leadership outreach events, multilateral exercises and community engagements.

“We are thrilled to visit these 15 locations next year to showcase the unique ways our Navy operates from seabed to space,” said Cmdr. Julie Holland, NAVCO’s director. “Since most of our Navy’s assets and personnel are strategically located on the coasts, NAVCO’s outreach efforts reach Americans in cities without a high naval presence. During Navy Weeks, Americans will learn firsthand from exemplary Sailors what the Navy is like and how their Navy has promoted prosperity and security, deterred aggression and protected the American way of life for the past 250 years.”

During a typical Navy Week, 50-100 Sailors interact directly with the public in approximately 75 community relations events such as volunteering at non-profits and visiting local schools. Other highlights of Navy Weeks include free live music by the U.S. Navy Band and performances by the U.S. Navy Ceremonial Guard.

“Navy Weeks highlight our talented Sailors and create opportunities for public discussions on the Navy’s pivotal role in fighting for our freedoms,” said Lt. Cmdr. Miranda Williams, the Navy Week program manager. “Every day, Navy personnel are training and operating with the most advanced ships, submarines, aircraft and weapons systems to ensure they are ready to protect America’s interests around the world when called. We are excited to bring some of those talented Sailors directly to Americans during the 2025 Navy Week season.”

Over the past two decades NAVCO conducted over 300 Navy Weeks in 95 different U.S. markets.

For more information on the 2025 Navy Weeks, visit https://outreach.navy.mil/navy-weeks/ or contact Lt. Cmdr. Miranda Williams at miranda.v.williams.mil@us.navy.mil. To learn more about NAVCO programs, visit www.outreach.navy.mil. Follow Navy Outreach on Instagram (@navy.outreach); Facebook, YouTube, and LinkedIn (@navyoutreach); and #NavyWeek.

Justice Department and Consumer Financial Protection Bureau Reinforce Federal Protections for Servicemembers in Letter to Financial Services Providers

Source: United States Department of Justice Criminal Division

The Justice Department and Consumer Financial Protection Bureau (CFPB) issued a joint letter today reiterating financial services providers of their responsibility to recognize interest rate protections that exist for servicemembers, recent veterans and their spouses under the Servicemembers Civil Relief Act (SCRA).

Under the SCRA, servicemembers have additional rights and protections because of the unique financial challenges that often emerge as a result of their service. One provision of the SCRA limits the amount of interest that banks, credit cards and other financial services providers may charge on certain financial obligations that the servicemember incurred before military service to no more than 6% per year, including most fees.

“Servicemembers make great sacrifices to serve our nation and protect our democracy,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “Financial services providers must ensure that servicemembers are afforded their rights and benefits under the law.”

“Many military families have been hit hard by high interest rates on credit cards, mortgages and auto loans, even though they are entitled to an interest rate cap,” said CFPB Director Rohit Chopra. “Financial firms shouldn’t be price gouging those who serve in uniform.”

Recently, the CFPB has published reports on the rising interest rates in both the credit card and mortgage markets. The CFPB’s 2022 analysis estimated that less than 10% of eligible auto loans and 6% of personal loans to activated members of the National Guard and Reserves were receiving interest rate reductions, resulting in nearly $10 million a year in estimated lost savings. With current interest rates on car loans and even mortgages well above 6% for many borrowers, more servicemembers would now benefit from a reduction than in prior years.

Today’s letter ensures that financial services providers are aware of the provision within the SCRA that protects servicemembers against violations of interest rate benefits. If servicemembers make a proper request, a creditor must forgive and not defer any interest greater than 6%. The letter also includes recommendations for financial services providers to further help servicemembers, such as automatically applying the interest rate cap to all eligible accounts held at that institution if a servicemember invokes protections for a single account.

The Justice Department’s Servicemembers and Veterans Initiative coordinates federal resources to build a comprehensive legal support and protection network focused on serving servicemembers, veterans and their families. Since 2011, the department has obtained over $481 million in monetary relief for over 147,000 servicemembers through its enforcement of the SCRA. For more information, visit www.justice.gov/servicemembers.

Servicemembers who are covered by this law are likely eligible for military legal assistance and can contact their local legal assistance office for help. See legalassistance.law.af.mil/ for a list of office locations. If servicemembers are not eligible for military legal assistance services, they may request that the Justice Department review their claim by submitting a complaint at civilrights.justice.gov/report/.

The CFPB provides educational resources to military families, monitors complaints and coordinates with federal partners on matters related to consumer protection for the military community. Additionally, the CFPB has authority to enforce the Military Lending Act, as well as the ability to take legal action to address unfair, deceptive or abusive acts or practices related to consumer financial products or services for all members of the public, including servicemembers, under the Consumer Financial Protection Act.

Consumers encountering problems with interest rates can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372). The CFPB encourages employees who believe their companies have violated federal consumer financial protection laws to send information about what they know to whistleblower@cfpb.gov.

President and CEO of Las Vegas-Based Company Sentenced for Role in Investment Fraud Scheme Where He Stole Millions in Victim Investor Funds

Source: United States Department of Justice Criminal Division

A Nevada man was sentenced yesterday to 51 months in prison and ordered to pay $6.1 million in restitution stemming from his role in a years-long fraud scheme.

According to court documents, Mykalai Kontilai, formerly Michael Contile, 55, of Las Vegas, facilitated an investment fraud scheme involving his company, Collector’s Coffee Inc., doing business as Collector’s Café (Collector’s Coffee), a company incorporated in California and headquartered in Las Vegas. From 2012 to 2018, Kontilai made or caused to be made numerous materially false and misleading representations to induce victims to invest in Collector’s Coffee — a company he claimed was on the verge of launching an online auction house for third-party owned collectibles, such as Hollywood and sport memorabilia. As a result of Kontilai’s numerous false and misleading statements, including that investor funds would be used for legitimate business purposes, that Kontilai had personally invested millions of his own money in the company, and that he did not take a salary, Kontilai successfully raised approximately $23 million from Collector’s Coffee investors. However, rather than using the proceeds as represented, Kontilai stole approximately $6.1 million for his own personal use, including for the purchase of luxury goods, apartments, and vehicles.

The U.S. Securities and Exchange Commission (SEC) began investigating Kontilai for misappropriating investor funds in or around 2017. Kontilai obstructed the investigation by forging documents that he caused to be transmitted to the SEC and lied under oath to the SEC. Kontilai was charged in connection with this conduct both in the present case on June 3, 2020, and in a separate case in the District of Colorado on March 10, 2020. While under investigation but prior to charging, Kontilai fled to Russia and was ultimately arrested on an Interpol Red Notice in Germany in 2023. He was extradited back to the United States to face the pending charges in May.

On Nov. 21, Kontilai pleaded guilty to one count of wire fraud. As part of the plea agreement in this case, the government has moved to dismiss the Colorado case.

Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division; U.S. Attorney Jason M. Frierson for the District of Nevada; Special Agent in Charge Spencer L. Evans of the FBI Las Vegas Field Office; and Special Agent in Charge Carissa Messick, IRS Criminal Investigation (IRS-CI)’s Phoenix Field Office made the announcement.

FBI and IRS-CI investigated the case. The Justice Department’s Office of International Affairs provided significant assistance in securing the extradition from Germany of Kontilai.

Trial Attorneys Brandon Burkart and Sara Hallmark of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jessica Oliva for the District of Nevada prosecuted this case. Former Fraud Section Trial Attorney Emily Scruggs provided valuable assistance. 

McKinsey & Company Africa to Pay Over $122M in Connection with Bribery of South African Government Officials

Source: United States Department of Justice Criminal Division

McKinsey and Company Africa (Pty) Ltd (McKinsey Africa), which operates in South Africa as a wholly owned and controlled subsidiary of international consulting firm McKinsey & Company Inc. (McKinsey), will pay over $122 million to resolve an investigation by the Justice Department into a scheme to pay bribes to government officials in South Africa between 2012 and 2016. The guilty plea of a former McKinsey senior partner who participated in the bribery scheme was also unsealed. The Justice Department’s resolution is coordinated with prosecutorial authorities in South Africa.

McKinsey Africa entered into a three-year deferred prosecution agreement (DPA) with the department in connection with a criminal information filed in the Southern District of New York charging the company with one count of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). Vikas Sagar, a former senior partner of McKinsey who worked in McKinsey Africa’s South Africa office, previously pleaded guilty to one count of conspiracy to violate the FCPA.

According to court documents and admissions, McKinsey Africa, acting through a senior partner and for the benefit of McKinsey, agreed to pay bribes to then-officials at Transnet SOC Ltd. (Transnet), South Africa’s state-owned and state-controlled custodian of ports, rails, and pipelines, and at Eskom Holdings SOC Ltd. (Eskom), South Africa’s state-owned and state-controlled energy company. Between at least 2012 and 2016, McKinsey Africa obtained sensitive confidential and non-public information from Transnet and Eskom regarding the award of lucrative consulting contracts and submitted proposals for multimillion-dollar consulting engagements, while knowing that South African consulting firms with which McKinsey Africa had partnered would pay a portion of their fees as bribes to officials at Transnet and Eskom. As a result of the bribery scheme, McKinsey and McKinsey Africa earned profits of approximately $85,000,000.

“McKinsey Africa bribed South African officials in order to obtain lucrative consulting business that generated tens of millions of dollars in profits,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “As a consequence, McKinsey Africa has agreed to pay a criminal penalty of more than $122 million. The resolution announced today — the department’s third coordinated resolution with South African authorities in only two years — is evidence that our International Corporate Anti-Bribery (ICAB) initiative, which we announced in November 2023, is bearing fruit. Through the ICAB, the Criminal Division remains committed to strengthening its international partnerships, including in South Africa, to combat corruption.”

“McKinsey Africa participated in a yearslong scheme to bribe government officials in South Africa and unlawfully obtained a series of highly lucrative consulting engagements that netted McKinsey Africa and its parent entity McKinsey & Company approximately $85 million in profits,” said U.S. Attorney Damian Williams for the Southern District of New York. “The scheme was carried out by a senior partner at McKinsey and allowed McKinsey Africa to repeatedly get awarded consulting contracts through corruption and bribes at two different state-owned entities in South Africa. This office and our law enforcement partners will continue our fight against American companies that seek to gain an unfair business advantage by supporting corrupt political officials overseas, no matter the industry, no matter the country, and no matter how prominent or profitable those companies may be.”

“This settlement underscores our unwavering commitment to holding companies accountable that willfully engage in corrupt activities around the world,” said Assistant Director Chad Yarbrough of the FBI Criminal Investigative Division. “McKinsey Africa engaged in a serious and long-running bribery scheme to secure contracts by corrupting government officials. This misconduct is a blatant violation of law and a breach of public trust. No matter what country the crime occurs in, the FBI will always work closely with our international partners to root out corruption.”

“McKinsey Africa will pay over $122 million, a clear indication that corruption comes at a significant cost,” said Inspector in Charge Eric Shen of the U.S. Postal Inspection Service (USPIS) Criminal Investigations Group. “The resolution of this case underscores that justice has no borders, and those who engage in bribery and conspire to commit crimes will be held accountable. The Postal Inspection Service is committed to ensuring that government resources and international partnerships serve the public good and are never exploited for personal or corporate gain.”

Pursuant to the DPA, McKinsey Africa has agreed to pay a criminal penalty of $122,850,000. The Justice Department has agreed to credit up to one-half of the criminal penalty against amounts McKinsey pays to authorities in South Africa in related proceedings. In addition, both McKinsey and McKinsey Africa have agreed to, among other things, continue cooperating with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of New York in any ongoing or future criminal investigation arising during the term of the DPA. McKinsey and McKinsey Africa have also agreed to enhance their compliance program where necessary and appropriate and to report to the government regarding remediation and implementation of their enhanced compliance program.

The Justice Department reached this resolution with McKinsey Africa based on a number of factors, including, among others, the nature and seriousness of the offense. McKinsey Africa received credit for its cooperation with the department’s investigation, which included (i) immediately and proactively cooperating from the inception of the department’s investigation; (ii) making numerous factual presentations to the department over the course of its investigation, derived from information obtained through the company’s internal investigation; (iii) collecting, reviewing, and producing voluminous records, including those located abroad, in response to requests from the department; (iv) promptly reporting the discovery of document-deletion efforts by the McKinsey partner involved in the conduct found during its internal investigation, taking additional investigative steps to uncover information and evidence regarding those efforts, and producing such information and evidence to the department; (v) reporting, in real time, newly discovered information and documents that allowed the department to preserve and obtain evidence as part of its independent investigation; (vi) tracing complex internal accounting money-flows and currency exchange-information in response to requests from the department; (vii) preserving, collecting, and producing to the department documents located abroad, and engaging a third-party forensics consultant to analyze key electronic devices and providing to the department the results of that analysis; (viii) collecting and producing to the department personal email and bank account information of the McKinsey partner involved in the conduct relevant to the department’s investigation; (ix) engaging with the department in response to a deconfliction request to preserve the integrity of the department’s investigation; and (x) making company officers and employees available for interviews.

McKinsey and McKinsey Africa also engaged in timely remedial measures, including: (i) putting the McKinsey partner involved in the criminal scheme on leave when it learned of the partner’s role in the scheme, subsequently separating that partner from McKinsey after discovering his deletion activity, and requiring that partner’s continued cooperation post-separation; (ii) conducting additional anti-corruption training for employees in South Africa and elsewhere in Africa, and ceasing work with all state-owned enterprises (SOEs) for a period of time while it conducted its internal investigation; (iii) enhancing due diligence processes for third-party partners, including instituting controls to ensure that due diligence is completed before work begins on an engagement and imposing a more rigorous risk-review for public sector clients; (iv) carrying out an enhanced review process for all sole-source work that requires advance-approval before the engagement can begin; and (v) voluntarily repaying, in 2018 and 2021, all revenues that McKinsey and McKinsey Africa received from potentially tainted contracts to the SOEs in South Africa from which they received contracts as a result of the criminal scheme.

In light of these considerations as well as McKinsey’s prior history, the criminal penalty calculated under the U.S. Sentencing Guidelines reflects a 35% reduction off the fifth percentile of the otherwise applicable guidelines fine range.

FBI’s Los Angeles International Corruption squad and USPIS are investigating the case.

Trial Attorneys William E. Schurmann and Alexandra P. Swain of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Andrew K. Chan and Nicholas Chiuchiolo for the Southern District of New York are prosecuting the case.

The Justice Department’s Office of International Affairs and authorities in South Africa provided assistance in this matter.

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting FCPA and Foreign Extortion Prevention Act matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.