Prostitutes, luxury hotel stays: More US navy officials charged with corruption in new 'Fat Leonard' indictment

Leonard Glenn Francis, also known as Fat Leonard, who was behind a massive bribery scandal that has dogged the US Navy.
Leonard Glenn Francis, also known as Fat Leonard, who was behind a massive bribery scandal that has dogged the US Navy.PHOTO: INTERNET
The sun sets behind the USS Blue Ridge - the flagship for the Navy's 7th Fleet - during a port visit to Jakarta, Indonesia.
The sun sets behind the USS Blue Ridge - the flagship for the Navy's 7th Fleet - during a port visit to Jakarta, Indonesia.PHOTO: US NAVY

WASHINGTON (WASHINGTON POST, NYTIMES) - The Justice Department unsealed a fresh indictment on Tuesday (March 14) charging nine current and former Navy officials - including an admiral - with corruption and other crimes in the "Fat Leonard" bribery case, escalating an epic scandal that has dogged the Navy for the past four years.

Among those charged were Rear Adm. Bruce Loveless, a senior Navy intelligence officer based at the Pentagon, several Navy captains and a retired colonel from the Marine Corps. The charges cover a period of eight years, from 2006 through 2014. 

A total of 25 military officers and private-sector executives have now been prosecuted in one of the worst corruption scandals to hit the military in years.  To date, 13 have pleaded guilty while several other cases are pending.

The Navy personnel are accused of taking bribes in the form of lavish gifts, prostitutes and luxury hotel stays courtesy of Leonard Glenn Francis, a Malaysian businessman with a Singapore-based defence-contracting firm. He has already pleaded guilty to defrauding the Navy of tens of millions of dollars and faces up to 25 years in prison.

The latest indictment lists page after page of bribes allegedly consumed by the defendants - seven senior officers and one enlisted sailor - including US$25,000 (S$35,365) watches, US$2,000 boxes of Cohiba cigars, US$2,000 bottles of cognac and US$600-per-night hotel rooms.

According to the charging documents, Francis also frequently sponsored wild sex parties for many officers on the USS Blue Ridge, the flagship of the Navy's 7th Fleet, and other warships.

  • In numbers: Some alleged bribes

  • US$50,000 (S$70,730)

    Shopping, dining and luxury hotel rooms during a port visit to Singapore in February 2007

    US$50,000

    Multi-day party with prostitutes at the Shangri-La Hotel in Manila in May 2008 

    US$25,000

    Watches

    US$18,371

    Extravagant dinner in a private room at the Petrus Restaurant overlooking Hong Kong harbour. The eight-course meal featured black truffle soup, rock lobster salad, Osetra caviar, pan-seared duck liver with pear and sunchoke, Dover sole, grilled Wagyu beef tenderloin, fine cheeses and baked Alaska for dessert. Each course was paired with wine or Champagne. 

    US$13,000

    Culinary internship at the Chalet Suisse restaurant in Kuala Lumpur

    US$2,000

    Boxes of Cohiba cigars

    US$2,000

    Bottles of cognac 

    US$600-per-night

    Hotel rooms at J.W. Marriott in Hong Kong during a four-day visit in January 2008

    March 2007

    Meal at Oak Door restaurant in Tokyo included foie gras, lobster thermidor, Sendai tenderloin, cognac and cigars. For dessert: “Liberte Sauvage,” the winning cake at the Coupe du Monde de la Patisserie, a prestigious international baking contest.

 
 
 

During a port visit by the Blue Ridge to Manila in May 2008, for example, five of the Navy officers attended a "raging multi-day party, with a rotating carousel of prostitutes" at the Shangri-La Hotel, according to the indictment.

The group allegedly drank the hotel's entire supply of Dom Perignon champagne and rang up expenses exceeding US$50,000, which Francis covered in full.

On another port visit by the Blue Ridge to Manila in February 2007, Francis allegedly hosted another sex party for officers in the MacArthur Suite of the Manila hotel. During the party, "historical memorabilia related to General Douglas MacArthur were used by the participants in sexual acts," according to the indictment.

In exchange, according to federal prosecutors, the officials provided Francis with classified or inside information that enabled his firm, Glenn Defence Marine Asia, to gouge the Navy out of tens of millions of dollars.

Federal agents fanned out across six states  on Tuesday in a coordinated operation to arrest the defendants, authorities said.

Loveless, the retired admiral, was arrested at his home in Coronado, California. The Navy had announced in November 2013 that he was under scrutiny by the Justice Department and suspended his access to classified material. He was allowed to retire last fall.

Navy officials have said that about 30 admirals are under investigation, although only a handful have been named publicly.

Robert Gilbeau, a one-star admiral, was convicted last June after he pleaded guilty to making false statements to investigators about his contacts with Francis. He has since retired. He is scheduled to be sentenced next month in federal court.

Separately, the Navy has censured or disciplined three admirals for ethics violations after they accepted lavish meals and other gifts from Francis.

Others taken into custody on Tuesday included David Newland, 60, a retired captain from San Antonio; James Dolan, 58, a retired captain from Gettysburg, David Lausman, a retired captain from The Villages, Florida; and Donald Hornbeck, a retired captain who lives in Britain.

Agents also arrested were Enrico de Guzman, a retired Marine colonel from Honolulu; Lt. Cmdr. Stephen Shedd, an active-duty officer from Colorado Springs; Robert Gorsuch, 48, of Virginia Beach, a retired chief warrant officer; and active duty Commander Mario Herrera, 48, of Helotes, Texas.

None of the defendants could be reached for comment on Tuesday. The charges against them include bribery, conspiracy, obstruction of justice and making false statements to federal investigators.

All of the accused officers formerly held key positions on the command staff of the Japan-based 7th Fleet and were bribed by Francis because they could help steer business to Glenn Defence Marine Asia, according to court papers.

The case is being prosecuted by the US attorney’s office in San Diego with the assistance of the Naval Criminal Investigative Service and the Defence Criminal Investigative Service.

“This is a fleecing and betrayal of the United States Navy in epic proportions,” said Alana W. Robinson, the acting US attorney for the Southern District of California. She said the defendants “worked together as a team to trade secrets for sex, serving the interests of a greedy foreign defence contractor and not those of their own country.”

Prosecutors say the case is still unfolding and that more than 200 people have come under scrutiny.

The scandal is the worst corruption case in Navy history and has rocked the service since Francis was arrested in September 2013 in an international sting operation that lured him from Singapore to San Diego. Francis pleaded guilty to bribery and conspiracy charges two years ago. and court papers indicate he has been cooperating with authorities.

Over time, the investigation has revealed the ease with which the defence contractor was able to penetrate the senior ranks of the 7th Fleet and recruit moles to work on his behalf.

Court papers portray Francis as a master manipulator who persuaded Navy officials to feed him classified information about ship movements and confidential contract information that he used to undercut his competitors.

Corrupt Navy personnel have also pleaded guilty to leaking Francis sensitive law enforcement files that he exploited for years to thwart dozens of failed criminal investigations into his company.

Despite rising signs of widespread fraud, the Navy kept awarding business to Francis’s company to resupply its ships and submarines throughout Asia. In 2011, Glenn Defence won deals valued at US$200 million to service US vessels at ports stretching from the Russian Far East to Australia. The contracts were cancelled after Francis’s arrest in 2013.

While Francis was already legendary within the Navy for his hedonistic parties, the indictment unsealed  on Tuesday provided fresh details of how senior officers with the 7th Fleet allegedly became accustomed to living the high life at ports throughout Asia, at Francis’s expense.

In February 2007, for example, Francis splurged for US$50,000 worth of shopping, dining and luxury hotel rooms for Newland, de Guzman and others during a port visit to Singapore, prosecutors allege.

The next month, in Tokyo, the defence contractor allegedly took Newland, de Guzman, Hornbeck and others to the luxurious Oak Door restaurant, according to the indictment. The meal included foie gras, lobster thermidor, Sendai tenderloin, cognac and cigars.

For dessert: the “Liberte Sauvage,” the winning cake at the Coupe du Monde de la Patisserie, a prestigious international baking contest.

During a four-day visit by the Blue Ridge to Hong Kong in January 2008, Francis provided rooms for Dolan, Hornbeck, Loveless and Shedd at the J.W. Marriott hotel at a price of  US$626 per night, court papers say.

Then he took all of them – plus Lausman – out for an extravagant dinner in a private room at the Petrus Restaurant overlooking Hong Kong harbour, according to the indictment.

That eight-course meal featured black truffle soup, rock lobster salad, Osetra caviar, pan-seared duck liver with pear and sunchoke, Dover sole, grilled Wagyu beef tenderloin, fine cheeses and baked Alaska for dessert, court papers show.

Each course was paired with wine or Champagne. The total bill: US$18,371.

Afterward Hornbeck, who at the time served as the 7th Fleet’s deputy chief of staff for operations, emailed Francis a thank-you note, according to the indictment. “The food, music and wine were wonderful,” he wrote.

Hornbeck, who was preparing to retire from the Navy, also sounded out Francis to see if he might be willing to hire him. “If you are still considering opening an office in San Diego in the near-future, I would very much be interested in being a part of that,” he wrote.

The job never materialised. But court papers show that Francis showered the Navy captain with other gifts, including US$13,000 to pay for a culinary internship for a relative of Hornbeck’s at the Chalet Suisse restaurant in Kuala Lumpur, Malaysia.

Francis pleaded guilty to corruption charges in a federal court in San Diego in January 2015. As part of a deal reached with federal prosecutors, Francis and his company will forfeit US$35 million in property and other proceeds stemming from the alleged corruption.