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Firm says U.S. Navy suspension related to old billing dispute

By David Alexander

WASHINGTON (Reuters) - A maritime services company that had millions of dollars in contracts suspended by the U.S. Navy this week says the action stemmed from a billing dispute probed by the Justice Department several years ago, and it hopes to resolve the issue quickly.

The Navy said on Wednesday it had suspended all contracts with British-based Inchcape Shipping Services Holding Ltd, a unit of Dubai World, because of questionable conduct.

The firm is the main maritime services agent used by the U.S. Fifth Fleet in the Middle East.

The suspension of Inchcape Shipping's contracts came as the Navy is dealing with a widening corruption scandal involving a separate maritime services firm, Glenn Defense Marine Asia, that has resulted in the suspension of its contracts as well as charges against two Navy officers and a Navy investigator.

The Navy has taken action against four other officers linked to the probe, including two senior intelligence officials who were put on temporary leave and had their access to classified data suspended due to allegations of "inappropriate conduct."

A U.S. Navy official said on Friday the action against Inchcape Shipping was unrelated with Glenn Defense Marine Asia. He said the Navy was comfortable with the decision to suspend Inchcape due to conduct that called into question the firm's business integrity.

"We took the action we deemed most appropriate," said Rear Admiral John Kirby, a Navy spokesman.

Another Navy official said Inchcape had failed to report credible evidence of significant contract overpayments and engaged in conduct that raised questions about its ability to continue working as a government contractor.

Sheila Armstrong, a spokeswoman for Inchcape Shipping, said in an email that the Navy action related to supply work involving a small number of ships between 2005 and 2008, an issue that was investigated by the Justice Department in 2010.

The company has been working with the Justice Department to resolve outstanding issues and conducted an independent audit in 2009 to provide "full answers to all of the questions raised," Armstrong said.

"We will continue to engage with the DoJ and the U.S. Navy and hope this matter can be resolved swiftly," she said.

The Navy said the suspended contracts with Inchcape Shipping had a potential value of up to $243 million, but U.S. government spending records show the Navy has actually only been paying the firm an average of $9 million annually since 2005.

(Reporting by David Alexander; editing by Christopher Wilson)

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