Photo Gallery: 'A National Embarrassment'

Michael Ein, The Press of Atlantic City / AP Atlantic City Mayor Bob Levy, seen here in 2006, is under federal investigation for making false claims that he served with the Green Berets in Vietnam. Since the probe was launched, Levy hasn't shown up for work.

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A spokesman issued a 36-word statement saying the mayor was going on indefinite medical leave. That was a week and a half ago. Aides say he is in a hospital, but they won't say where, why or for how long.

The mystery and the gathering scandal over Levy 's military record have worried civic leaders in this seaside casino resort, which has a long history of corruption, with four of the last eight mayors busted on graft charges and one-third of last year's nine-member City Council in prison or under house arrest.

"It's a national embarrassment," said City Councilman Bruce Ward, who asked a judge Friday to declare the mayor's seat officially vacant and clear the way for the council to name a replacement.

"We have entertainment companies that are considering investing billions of dollars in Atlantic City. They need to know there is stability in Atlantic City. And we have 40,000 residents here who need to be protected."

Last fall, The Press of Atlantic City investigated Levy 's accounts of his wartime service and used military records to verify that Levy was a 20-year Army veteran with two Bronze Stars and two tours of duty in Vietnam. But the newspaper found he was not a member of the storied Green Berets, as he had claimed.

Shortly afterward, Levy , former head of Atlantic City's lifeguards, admitted misrepresenting his record.

"I'm sorry for having this happen at all," Levy told The Associated Press in November. "It's something I should have corrected 40 years ago. It is what it is, and I apologize for the embarrassment I've created for myself and my family."

But now, federal authorities are looking into whether the 64-year-old Levy made the false claims with the intention of bumping up his veteran's benefit payments, an official with knowledge of the investigation said Thursday, speaking on condition of anonymity.

Specifically, investigators want to know whether Levy was properly awarded a Combat Infantryman's Badge that was used to obtain about $25,000 (euro17,685) more in military benefits than he otherwise would have been entitled to, the official said.

Levy spokesman Nicholas Morici and the mayor's attorney, Edwin Jacobs, did not return messages over the past few days. Aides will not say anything about the mayor's condition, citing medical privacy laws. But close aide Domenic Cappella said Levy will remain on sick leave for the next few weeks.

About two dozen demonstrators gathered outside City Hall on Friday afternoon to protest the stalemate.

Even before word of his embellishments became known, Levy was frequently absent from City Hall. Levy , who took office more than a year and a half ago and makes about $100,000 a year, took a leave several months ago because of what he said were back problems.

Before his disappearance, political opponents had begun gathering signatures to force a recall election, in part because of his sporadic attendance, along with his political affiliation with disgraced former City Council president Craig Callaway, who is serving a nearly 3 1/2-year federal prison term for bribery.

As for other Atlantic City politicians, one councilman is under indictment on charges of helping to set up another councilman who was lured to a motel room and filmed having sex with a prostitute.

Still another councilman is facing charges he drunkenly drove his city-owned car across the Boardwalk and onto the beach in the wee hours. He was on his way home from a party celebrating the arrests in the sex-and-video case.

"Atlantic City has become, `Do what you want, when you want,"' said Jim McDonell, a retired truck driver. "There's no professionalism or competence here."

Cappella, who is the city's business administrator and has filled in before when Levy was unable to serve, told The Press that Levy called him from home on Sept. 26, sounding groggy, and turned over power to Cappella.

At a news conference earlier this week, Cappella said Atlantic City government is doing just fine in the mayor's absence.

"Police are still working, fire is still working, trash is still being collected, and public works is out there sweeping the streets," he said.

The casino industry, whose taxes account for about 82 percent of Atlantic City's municipal budget, is clearly concerned.

"Our industry generally looks for stability," said Joseph Corbo, president of the Casino Association of New Jersey. "While the current state of affairs is obviously is not ideal, we are hopeful that it will be a short-term situation."