US Navy officers investigated in ‘Fat Leonard’ scandal

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The Financial Times  /  May 28, 2016

Admirals among those investigated over allegations of bribes, prostitutes and military secrets

US investigators are probing three dozen senior navy officers to determine if they were connected with a scandal that involved top US brass exchanging military secrets for cash, lavish meals and prostitutes.

Investigators from the Department of Justice and the Navy Criminal Investigative Service are probing the officers — who are either admirals or captains in line for promotion to admiral — as part of a multiyear investigation into a Malaysian contractor known as “Fat Leonard” who used his connections with the US Navy to bilk the service out of millions of dollars.

The Washington Post on Friday published an investigation into the scandal, which revealed how the contractor, a wealthy Malaysian whose real name is Leonard Glenn Francis and who was caught in a sting in California in 2013, had cultivated senior officers in the seventh fleet which operates in the Pacific. 

Fat Leonard, weighing 350lbs at the time of his arrest, pleaded guilty to fraud in California last year. He admitted to routinely overcharging the US Navy for services such as refuelling at ports across Asia where his company, Glenn Defense Marine Asia, had contracts with the US and other western navies. 

One US military official confirmed that criminal investigators were looking into the cases of officers who had served in the Pacific during the years that the bribery had occurred to work out if they were involved in what is seen as the worst national security scandal to hit the US Navy in decades. 

The navy suffered a damaging scandal called “Tailhook” in 1991, which involved widespread sexual harassment. But the Fat Leonard case is seen as more serious since it involves the passing of military secrets to a man operating in a region where the US faces a rising challenge from China. 

The probe has drawn in approximately 10 per cent of the roughly 280 admirals in the US Navy. The military official said that while investigators were looking at a large number of top brass, some were only being scrutinised because they had served in the region during the period when the bribery occurred. 

According to the Washington Post, Fat Leonard liked to use photos of himself with senior navy officers to impress junior officers or suggest that he had influence that meant they should not question his activities.

According to the Washington Post story, Fat Leonard used the allure of sex with prostitutes as a potent bribe. On one occasion, he videotaped a navy officer having sex with twin Vietnamese prostitutes in a hotel in Singapore. On other occasions, he procured prostitutes from escort services to entertain officers at parties after official events. 

The justice department declined to comment on the details, but said “the investigation into those involved in this long-running corruption scheme continues apace, uncovering substantial wrongdoing”. 

On Friday, a court in California unsealed an indictment of Michael George Brooks, a former US naval attaché in Manila, on charges of conspiracy to commit bribery and criminal forfeiture in relation to the case.

Mr Brooks was accused of providing Fat Leonard’s company with internal navy documents, obtaining diplomatic clearance for Glenn Defense Marine vessels to enter Philippine harbours and even allowing the contractor to ghost write its own annual evaluation. 

According to the indictment, Mr Brooks was accused of receiving gifts of expensive hotel rooms, meals, and prostitutes, which he referred to in coded emails as “shakes” or “chocolate shakes” over a two-year period from the middle of 2006. Mr Brooks referred to Fat Leonard in their email exchanges as “boss”, while the contractor warned his employees to be circumspect in their dealings with the naval officer, saying: “we are surrounded by vipers.” 

The Washington Post reported that Admiral John Richardson, head of US naval operations, recently told 200 admirals in Washington that roughly 30 of them were under investigation. The military official told the Financial Times that Adm Richardson held another routine meeting last week during which the scandal was again discussed. 

Before that meeting, Adm Richardson sent a memo to senior navy officials, in which he reminded them of the need to uphold the values of the navy, which traditionally has been one of the toughest services in terms of discipline. “We share a professional and moral obligation to continuously examine our motivations and personal conduct, and, where required, adjust our behaviours back in line with our values,” the admiral wrote in the memo. 

More than 10 officers and contractors connected with the case have pleaded guilty over the scandal, which has sent shockwaves through the navy. It has affected the running of the navy as officers under any suspicion cannot be promoted, which complicates personnel management.

The same California court unsealed a second indictment later on Friday of Bobby Pitts, a former US Navy commander who ran a logistics command in Singapore. It accused him of providing Fat Leonard with a copy of an NCIS report on its investigation along with an internal email showing that officials planned to ask the Thai government if the contractor had billed the navy for force protection services that the Thais had provided for free. In return, Mr Pitts received paid entertainment, including the services of prostitutes, the indictment alleges.

A third criminal complaint unveiled on Friday accused Lieutenant Commander Gentry Debord, a logistics officer, of giving Fat Leonard internal navy documents, including pricing details on his competitors, and paid invoices he knew were inflated. According to the complaint, Cmdr Debord and his family were treated to stays at luxury resorts in Thailand, Indonesia and the Philippines while he enjoyed trysts with prostitutes. In coded emails with an employee of Fat Leonard, he requested prostitutes, which he called “cheesecakes” and “bodyguards”. One Glenn Marine email referred to the officer as “sex-crazy Debord.” He is accused of conspiracy to commit bribery over a five-year period ending in early 2013.

 

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Fat Leonard: The man who seduced the Navy's 7th fleet and the sting that revealed the trail of corruption

The Washington Post  /  May 30, 2016

For months, a small team of Navy investigators and federal prosecutors secretly devised options for a high-stakes international manhunt. Could the target be snatched from his home base in Asia and rendered to the United States? Or held captive aboard an American warship?

Making the challenge even tougher was the fact that the man was a master of espionage. His moles had burrowed deep into the Navy hierarchy to leak him a stream of military secrets, thwarting previous efforts to bring him to justice.

The target was not a terrorist, nor a spy for a foreign power, nor the kingpin of a drug cartel. But rather a 350-pound defense contractor nicknamed Fat Leonard, who had befriended a generation of Navy leaders with cigars and liquor whenever they made port calls in Asia.

Leonard Glenn Francis was legendary on the high seas for his charm and his appetite for excess. For years, the Singapore-based businessman had showered Navy officers with gifts, epicurean dinners, prostitutes and, if necessary, cash bribes so they would look the other way while he swindled the Navy to refuel and resupply its ships.

In the end, federal agents settled on a risky sting operation to try to nab Fat Leonard. They would lure him to California, dangling a meeting with admirals who hinted they had lucrative contracts to offer.

He took the bait. On Sept. 16, 2013, Francis was arrested in his hotel suite overlooking San Diego's harbor. It was the opening strike in a sweep covering three states and seven countries, as hundreds of law enforcement agents arrested other suspects and seized incriminating files from Francis's business empire.

A 51-year-old Malaysian citizen, Francis has since pleaded guilty to fraud and bribery charges. His firm, Glenn Defense Marine Asia, is financially ruined.

But his arrest exposed something else that is still emerging three years later: a staggering degree of corruption within the Navy itself.

Much more than a contracting scandal, the investigation has revealed how Francis seduced the Navy's storied 7th Fleet, long a proving ground for admirals given its strategic role in patrolling the Pacific and Indian oceans.

In perhaps the worst national-security breach of its kind to hit the Navy since the end of the Cold War, Francis doled out sex and money to a shocking number of people in uniform who fed him classified material about U.S. warship and submarine movements. Some also leaked him confidential contracting information and even files about active law enforcement investigations into his company.

He exploited the intelligence for illicit profit, brazenly ordering his moles to redirect aircraft carriers to ports he controlled in Southeast Asia so he could more easily bilk the Navy for fuel, tugboats, barges, food, water and sewage removal.

Over at least a decade, according to documents filed by prosecutors, Glenn Defense ripped off the Navy with little fear of getting caught because Francis had so thoroughly infiltrated the ranks.

The company forged invoices, falsified quotes and ran kickback schemes. It created ghost subcontractors and fake port authorities to fool the Navy into paying for services it never received.

Francis and his firm have admitted to defrauding the Navy of $35 million, though investigators believe the real amount could be much greater.

"I ask, when has something like this, bribery of this magnitude, ever happened in this district or in our country's history?" Robert Huie, an assistant U.S. attorney in San Diego, said during a court hearing last year. "Mr. Francis's conduct has passed from being merely exceptional to being the stuff of history and legend."

Today, the Navy remains in the grip of overlapping civilian and military investigations that are slowly unraveling long skeins of misconduct.

Four Navy officers, an enlisted sailor and a senior agent with the Naval Criminal Investigative Service have pleaded guilty to federal crimes and are already behind bars or are facing prison time. So have Francis and two other Glenn Defense executives.

On Friday, three more current and former Navy officers were charged in federal court with corruption-related offenses. Charges are pending against two former Navy contracting officials who were arrested last year. Many others remain under investigation.

Exactly how many is a mystery. When he pleaded guilty, Francis admitted to bribing "scores" of Navy officials with cash, sex and gifts worth millions of dollars – all so he could win more defense contracts and overcharge with impunity.

A federal prosecutor hinted at the extent of the case last year when he said in court that more than 200 "subjects" were under investigation.

A striking portion of the Navy's senior brass could be tarnished. In December, Adm. John Richardson, the chief of naval operations, summoned about 200 admirals to a special gathering in Washington.

Without naming names, he revealed that about 30 of them were under criminal investigation by the Justice Department or ethical scrutiny by the Navy for their connections to Francis, according to two senior Navy officials with direct knowledge of the meeting.

The damage to the Navy could match the toll from the Tailhook scandal of the early 1990s, when 14 admirals were reprimanded or forced to resign over an epic outbreak of sexual assault at a naval aviators' convention.

Because all but five of the 14 defendants charged in the Fat Leonard case have pleaded guilty and no trials have taken place, only a small fraction of the evidence has been made public so far.

This account of how Francis corrupted the Navy is based on interviews with more than two dozen current and former Navy officials, as well as hundreds of pages of court filings, contracting records and military documents obtained under the Freedom of Information Act.

Ethan Posner, an attorney for Francis, declined to comment. The Navy declined interview requests and referred questions to the Justice Department.

The investigation has mushroomed partly because Glenn Defense was a pillar of U.S. maritime operations for a quarter-century. The 7th Fleet depended on the firm more than any other to refuel and resupply its vessels.

"The Soviets couldn't have penetrated us better than Leonard Francis," said a retired Navy officer who worked closely with Francis and spoke on the condition of anonymity to avoid reprisal. "He's got people skills that are off the scale. He can hook you so fast that you don't see it coming. … At one time he had infiltrated the entire leadership line. The KGB could not have done what he did."

In his dealings with the Americans, Francis went to great lengths to ingratiate himself with senior officers, recognizing that they often cared more about high-quality service than how the bill would be paid.

Whenever a Navy vessel arrived in port, the odds were high that Francis would be waiting at the pier. Like a five-star concierge, he would arrange for shopping trips, sightseeing tours and concert tickets. A limousine and driver would be reserved for the ship's commander.

Select sailors would be invited to an extravagant banquet, featuring cognac and whiskey, Cohiba cigars from Cuba, and platters of Spanish suckling pig and Kobe beef. Francis would sometimes fly in a band of pole dancers, which he called his Elite Thai SEAL Team, for X-rated shows, court records show.

In another display of panache, he purchased an aging, decommissioned British warship, the RFA Sir Lancelot. He refurbished and renamed it the Glenn Braveheart.

The vessel became the flagship of his fleet, and it would often deploy alongside the USS Blue Ridge, the 7th Fleet's flagship. When in port, Francis would sometimes turn the Braveheart into a giant party boat, with prostitutes in the wardroom to entertain U.S. officers, according to court records and interviews.

Even when he didn't offer anything illicit, Francis earned a reputation as a reliable and responsive businessman who was eager to help the Navy in unfamiliar locales.

Soon enough, senior officers were dashing off ebullient thank-you notes known as Bravo Zulus, a Navy term meaning "well done."

Glenn Defense also would dispense its largesse under the guise of charity. The firm became a leading sponsor of the Navy League of the United States, a civilian nonprofit group that advocates on behalf of the Navy.

Francis didn't hesitate to exploit his connections, especially when lower-ranking officers challenged his exorbitant bills, according to several current and former Navy officers and court documents.

David Schaus, a junior officer assigned to the Navy's Ship Support Office in Hong Kong, became livid after receiving a huge invoice from Glenn Defense in 2004. Schaus said it charged the Navy for pumping 100,000 gallons of sewage from a destroyer that spent four days in port – an impossible amount, because the ship's tanks held just 12,000 gallons and were serviced only once a day.

Schaus told The Post that he summoned Francis for an explanation. "He became furious, accusing me of calling him a liar. And I told him, 'I am calling you a liar.' He said, 'Lieutenants don't tell me what to do. Do you know who I am?' He was being profane and banging on the table."

Afterward, Schaus said he was told by other Navy officials to back off, something that he said invariably happened when he raised questions about Glenn Defense.

The company "was rotten from the first day I worked with them in 2004, and everyone knew they were rotten," Schaus said. "If you tried to rock the boat, you got squashed."

Later that year, on Christmas Eve, the aircraft carrier USS Abraham Lincoln and three other warships arrived in Hong Kong.

Francis threw a Christmas party for the visiting officers at the Island Shangri-La, a five-star hotel. They were treated to filet mignon, lobster and Dom Pérignon champagne, and they mingled with female escorts dressed as Santa's little helpers, according to Schaus and a second officer who was present in port.

A handful of senior officers were invited to an after-party with the escorts, whom Francis had dubbed the "Santa Niñas," or Santa's girls, according to a third individual who was present.

The next day, Francis boarded one of the warships and delivered a $600,000 sewage bill, according to the second officer, who spoke on the condition of anonymity because he remains on active duty and wasn't authorized to speak to a reporter.

Eighteen months later, the cycle repeated itself when another aircraft carrier visited Hong Kong.

Rear Adm. Michael H. Miller, commander of the USS Ronald Reagan carrier strike group, knew Francis well. In early 2006, he emailed the contractor to say he'd be coming to Asia soon, that he looked forward to renewing their friendship and could use some shopping advice, according to Navy documents obtained under the Freedom of Information Act.

The Reagan and three other ships in the strike group docked in Hong Kong on June 10. The next day, at Miller's request, Francis arranged a splendid banquet for officers at the Island Shangri-La, this time at Petrus, a swanky French restaurant with views of Victoria Harbor.

One week earlier, when the strike group had visited Malaysia, Francis took them to the Chalet Suisse restaurant in Kuala Lumpur. Before that, in Singapore, he arranged for dinner at Jaan, ranked as one of Asia's 50 best restaurants.

To comply with ethics rules, Miller and two other senior officers wrote personal checks to reimburse Francis. They estimated the fair market value at between $50 and $70 per meal.

In fact, the dinners actually cost more than 10 times that much: about $750 per person, according to the findings of a Navy disciplinary investigation that was completed last year.

After the meals, Miller and other officers showered Francis with Bravo Zulu messages.

"You are as much a member of the U.S. Navy team as any of us, and we are all proud to call you 'Shipmate,' " Miller wrote to Francis two days after he left Hong Kong.

The Navy investigation found Miller's note amounted to an official endorsement of Glenn Defense, a violation of ethics rules. He was formally censured by the Navy last year and retired soon after. He declined to comment.

Schaus, the ship support officer, said he suspected at the time that Glenn Defense was overcharging the Navy for the Reagan's visit. He alerted NCIS and asked for a criminal inquiry.

An NCIS agent assigned to the Reagan interviewed him, he said. But the case went nowhere and only provoked a backlash. "Everybody on the ship hated me," Schaus said.

He resigned his Navy commission a few months later. He said he left for many reasons but "the endemic corruption I observed during my short tenure of working within the supply world was certainly a major factor."

Around the same time, Francis planted a couple of moles in the Navy's regional contracting office in Singapore.

Starting in 2006, Sharon Gursharan Kaur, a Singapore national who worked for the Navy, leaked confidential contract information to Francis for about $100,000 in cash and luxury vacations in Bali and Dubai, according to the Singapore Corrupt Practices Investigation Bureau.

Kaur has been charged with corruption and money-laundering offenses in Singapore. Her case is pending. Her attorney did not respond to emails seeking comment.

Also in 2006, Francis began a relationship with Paul Simpkins, an American civilian who worked in Singapore as a Navy contract supervisor.

Over the course of several surreptitious meetings in a Singapore hotel bar, Francis offered Simpkins $50,000 to rig the bidding for Navy contracts in Thailand and the Philippines, according to a federal indictment of Simpkins.

Prosecutors allege Simpkins demanded more and ultimately received $450,000 in cash and payments wired to foreign bank accounts controlled by his wife.

In addition to allegedly rigging the Navy contracts for Francis, Simpkins served as a secret fixer in other matters for Glenn Defense, according to the indictment.

For example, when a Navy official in Singapore flagged questionable bills from the company related to a port visit by the USS Decatur, a guided missile destroyer, Simpkins nipped the inquiry in the bud, prosecutors said.

"Do not request any invoices from this ship," Simpkins ordered his colleague in an email, according to court records. "Do not violate this instruction. Contact the ship and rescind your request."

Prosecutors also allege that in 2007, Simpkins ordered the Navy's Hong Kong office to stop using flow meters to measure the amount of sewage that Glenn Defense pumped from ships, making it easier for the firm to gouge the Navy for the service.

Simpkins has pleaded not guilty and is awaiting trial. His attorney did not respond to requests for comment.

Francis's most audacious achievement was his penetration of 7th Fleet headquarters in Japan. Four officers and an enlisted sailor who worked there have pleaded guilty to taking bribes.

In each case, court records show, Francis or his executives carefully groomed their targets, befriending them while searching for weak points: money or marital problems, alcohol, loneliness, lust, low self-esteem.

Lt. Cmdr. Todd Malaki, a logistics planner for the 7th Fleet, said he was introduced by his commander to Francis in 2004 at one of the contractor's famous parties.

"He was charming, personable and incredibly influential," Malaki recalled in a confessional letter to a federal judge. "As we drank together, he convinced me into believing that we were friends and he was a mentor. I'm ashamed to admit that I wanted to believe we were equals."

Before long, Malaki was handing over classified ship schedules and proprietary information about Glenn Defense's competitors. In turn, Francis gave him about $3,000 in cash, paid for him to stay in hotels around Asia and provided him with a prostitute after a night at a Malaysian karaoke club.

Malaki was sentenced in January to a 40-month prison term.

In 2010, Glenn Defense executives hooked Dan Layug, a petty officer who worked in logistics for 7th Fleet, initially by bribing him with a free cellphone, court records show.

Over the next three years, as Layug leaked competitors' secrets and classified ship schedules to the firm, it rewarded him with more electronic gadgets, including video-game consoles, cameras and tablet computers. The company also provided free hotel rooms in ports across Asia to him and his friends.

Eventually, Layug worked his way up to an allowance of $1,000 a month. According to prosecutors, he'd drive to the Glenn Defense offices in Japan, roll down his window in the parking lot and exchange classified material for a cash-filled envelope.

He was sentenced to 27 months in prison.

Capt. Daniel Dusek, who served as deputy director of operations for the 7th Fleet, said in court papers that a mentor introduced Francis to him in 2010 as "a great friend of the Navy."

Within months, Glenn Defense began supplying him with prostitutes, alcohol and stays at luxury hotels. In turn, Dusek handed over classified ship schedules and steered aircraft carriers to "fat revenue ports" controlled by Glenn Defense.

Dusek was sentenced in March to 46 months in prison. He declined to comment for this article.

Perhaps the most effective bribe Francis offered was sex.

He was choosy about his prostitutes and worked with trusted escort agencies in several countries. He kept meticulous notes about the physical desires of Navy officials, such as who liked Thai girls, or group sex.

Sometimes, he would debrief the hookers afterward, looking for scraps of information he could exploit, according to court records and an individual familiar with his methods.

Once, he personally videotaped a Navy officer having sex with twin Vietnamese prostitutes in a hotel room in Singapore, according to two people familiar with the incident.

In 2010, Glenn Defense executives began targeting Cmdr. Michael Misiewicz, another married officer who was moving to 7th Fleet headquarters.

Edmond Aruffo, a retired Navy officer who headed Glenn Defense’s operations in Japan, took Misiewicz out to dinner. Then he paid for the commander and his family to attend a production of “The Lion King” in Tokyo.

“We gotta get him hooked on something,” Francis told Aruffo in an email entered into court records.

Within weeks, Aruffo discovered that Misiewicz had a fondness for Japanese prostitutes, liked fancy hotels and needed to pay for international travel for his extended family. The contractor obliged repeatedly on all counts, and soon Misiewicz was funneling classified material to the company.

“We got him!!:)” Aruffo emailed Francis.

Misiewicz and Francis emailed, phoned and texted each other thousands of times, according to prosecutors. In a court filing, they said the officer became Francis’s “trained bulldog” in 7th Fleet headquarters and fed him highly sensitive military secrets, including information about ballistic missile defense operations in the Pacific.

Misiewicz was sentenced in April to 6½ years in prison.

In 2010, Glenn Defense's fraudulent tactics finally began to draw serious attention from the Navy. NCIS opened two separate criminal investigations into the company for its billing practices in Thailand and Japan.

But Francis had another ace in the hole: a turncoat law enforcement agent.

John Beliveau II, an NCIS agent based in Singapore and later at Quantico, Va., had known Francis for at least two years. In exchange for prostitutes, cash and other favors, he tapped into an NCIS database as the cases unfolded and fed Francis raw material from investigators' notes and interviews.

According to prosecutors, the information enabled Francis to cover his tracks and intimidate witnesses. His NCIS spy proved so reliable and so valuable that Francis became giddy.

"I have inside Intel from NCIS and read all the reports," Francis boasted in a 2011 email to another one of his moles. "I will show you a copy of a Classified Command File on me from NCIS ha ha."

In the end, Francis's overconfidence led to his downfall.

Navy officials eventually realized that Francis had infiltrated NCIS. Cybersecurity teams discovered that Beliveau had been downloading hundreds of files about Francis from the law enforcement database, even though the NCIS agent wasn't assigned to the case.

In July 2013, they planted false information in the database, stating that all investigations against Glenn Defense had been closed and no charges would be filed.

Two months later, thinking he was in the clear, Francis flew to San Diego to attend another change-of-command ceremony and to drum up business from the Navy's Global Logistics Support Command.

Instead, he fell into the Navy's trap. After giving a PowerPoint briefing to two admirals about ways that he said Glenn Defense could save the Navy money, he returned to his hotel and was arrested.

Beliveau was arrested the same day in Washington. He has pleaded guilty to bribery charges and is awaiting sentencing.

Francis has been locked up in San Diego since his 2013 arrest. He is awaiting sentencing and faces a maximum of 20 years in prison. When he pleaded guilty last year, court papers show he promised to cooperate in a bid for leniency.

Authorities have identified only a few of the 30 admirals under investigation.

The Navy announced in November 2013 that two admirals in charge of the service's secrets – Vice Adm. Ted "Twig" Branch, the director of naval intelligence, and a deputy, Rear Adm. Bruce Loveless – were under criminal investigation by the Justice Department.

Since then, the two officers have been mired in limbo, neither charged nor cleared. Navy and Justice officials have disclosed no other details. Branch and Loveless declined to comment.

In a previously undisclosed case, NCIS agents are also investigating Rear Adm. Robert Gilbeau, a supply and logistics officer, according to a senior Navy official and two people who have been questioned.

Reached by phone, Gilbeau confirmed he was under investigation but declined to comment further.

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