Lunday has held the service's top leadership post in an acting role since Trump fired Adm. Linda Lee Fagan in January.
Rear Adm. Kevin Smith was relieved of his duties “due to a loss of confidence” based on a complaint substantiated by a Naval IG investigation.
The acting leader of the service was announced as President Donald Trump's pick to fill the top Coast Guard post permanently.
Kevin DiFalco faces charges of sexual abuse of a child, indecent conduct, giving false testimony and possession of child pornography, among others.
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