Nominee To Head Navy In Hot Water Senator Challenges Admiral’s Role With Insurance Company

Within hours of his nomination to head the troubled Navy, Adm. Jay L. Johnson resigned Wednesday as a $33,000-a-year director of an insurance company after a Senate committee chairman questioned whether active-duty military officers should serve in paid corporate positions.

President Clinton formally nominated Johnson, 50, to succeed the late Adm. Jeremy Boorda as chief of naval operations, saying Wednesday that it was a “crucial time” for the Navy. Boorda committed suicide three weeks ago, just before he was supposed to meet with reporters about allegations that he improperly wore combat decorations on his uniform.

By late afternoon, the nomination appeared to have hit a snag. Sen. Strom Thurmond, chairman of the Senate Armed Service Committee, said he was concerned about Johnson’s role as a director of insurance giant USAA.

Shortly after Thurmond’s statement, Johnson announced he was resigning from USAA’s board and the boards of two affiliated companies.

“I would not want it to remain an issue of concern for the Armed Services Committee in connection with my nomination to become chief of naval operations,” he said.

In a statement released by his office, Johnson said his service on USAA’s board had been “appropriately reported” on financial disclosure forms and cleared by Navy and Defense Department ethics counselors. He said his work for USAA was done only while on leave from his military duties.

The developments did not appear to affect Johnson’s standing at the White House. Aides said the Navy has known about his position for years and had cleared him of any conflicts. “We were not blindsided by this,” said one White House aide.

And an Armed Services Committee staffer, who spoke on condition of anonymity, said that while members were concerned, Johnson’s nomination did not appear to be in jeopardy. The armed services panel will make its crucial recommendation on Johnson’s nomination to the full Senate after holding public hearings.

USAA, an insurance giant based in San Antonio, Texas, offers homeowners, auto, life and casualty insurance and a range of other financial services including credit cards, mutual funds and banking. With $6.6 billion in revenue last year, the company has more than 2.9 million customers, most of them members of the U.S. military and their families.