The Singapore company accused of defrauding the United States Navy is sinking into deeper trouble.
A fourth man - and second senior employee of Glenn Defense Marine Asia (GDMA) - has been charged over the alleged subterfuge in which the US Navy suffered millions of dollars in losses.
According to the latest court documents filed on Oct 11 and obtained by The Sunday Times after the end of the US federal shutdown last week, GDMA's country manager for Thailand - who was not named - had admitted to being cognisant of the scam.
She told investigators that senior management wanted to make GDMA's prices appear low, even though it had jacked up rates. As a result, GDMA's general manager for global government contracts Alex Wisidagama, believed to be a Malaysian, was charged this month. He and chief executive officer Leonard Glenn Francis, a 58-year-old Malaysian, are now in US custody.
In 2009, GDMA was awarded a one-year contract to provide the US Navy with "husbanding" services in South-east Asia, with a possible extension of up to four years for a total of US$125 million (S$155 million).
"Husbanding" involves procuring services - from tugboats to food and fuel, and even trash removal - needed by ships when they port.
Francis had allegedly identified some ports to be more lucrative due to their lack of regulatory scrutiny, terming them "pearl ports".
GDMA was contractually bound to get at least two competitive quotes and to disclose any profits or mark-ups for services rendered. But it submitted purportedly higher quotes from its competitors, or stated that the competitors could not provide certain services that were requested.
Francis appeared aware of the pitfalls of this arrangement in an e-mail sent in September 2011 to his associates, regarding a port visit to Kota Kinabalu, Malaysia.
He said: "It's time we become more savvy and get real quotes from (Singapore's) PSA and other reputable tug companies?
"I have told you all for months to prepare and not use this kind of 'Ali Baba tugs' responses."
But no one seemed to listen. For US Navy visits to Laem Chabang, Sattahip and Phuket in Thailand from September 2011 to June last year, hundreds of false bids and separate fraudulent quotes were submitted, resulting in losses to the US Navy of at least US$2.3 million.
Under the contract, fuel must be procured from the host nation. If this was not possible, GDMA must secure competitive quotes. Otherwise, an open-market purchase programme, called "SEAcard", could be used by the US Navy.
In Thailand, GDMA had allegedly gamed the system by asserting that it could not use local fuel, claiming it contained a biodiesel content mix that would not meet US Navy needs.
This implied it would have to import fuel from its own stocks. But investigations have shown this to be false. Rather, it had allegedly bought fuel from local suppliers, and then artificially inflated costs.
For a port visit to Laem Chabang in July last year, Wisidagama advised Francis: "If we stay silent too long, they (US Navy) may just try their luck via SEAcard?"
For five fuel purchases in Thailand in the autumn of 2011, GDMA allegedly overcharged the Navy by more than US$3 million.
Also, GDMA was contractually bound to use services from official port authorities, when available.
Even so, it allegedly managed to circumvent the system by creating phoney port authorities through which inflated bills were invoiced.
In one example, for a 13-day USS Mustin visit to Laem Chabang in October 2011, GDMA submitted invoices purportedly from a Laem Thong East Services Co, which has been found to have no employees or assets.
Invoices purportedly from Laem Thong East charged GDMA US$293,935.29 for the visit. But investigations revealed that the true port authority - Hutchison - had billed GDMA only about US$35,000.
The more than 100 fraudulent invoices from shell companies resulted in losses estimated at about US$4 million for Laem Chabang and Phuket alone.
The scandal has also led to the indictment of US Navy Commander Michael Vannak Khem Misiewicz, 46, and Naval Criminal Investigative Service supervisory special agent John Bertrand Beliveau II, 44.
They are accused of accepting Francis' bribes, such as luxury travel and women, and giving him classified information that allowed him to profit from his dealings with the US Navy.
A motion hearing has been scheduled before US District Judge Janis L. Sammartino on Nov 8 in a California court, when trial dates are expected to be set.