A Malaysian defense contractor pleaded guilty Thursday in a corruption scandal of epic proportions, admitting that he bribed “scores” of U.S. Navy officials with $500,000 in cash, six figures’ worth of sex from prostitutes, lavish hotel stays, spa treatments, Cuban cigars, Kobe beef, Spanish suckling pigs and an array of other luxury goods.
Leonard Glenn Francis, a businessman who charmed a generation of Navy officers while resupplying their ships in Asia, admitted in federal court in San Diego to presiding over a decade-long corruption scheme involving his Singapore-based firm, Glenn Defense Marine Asia.
The investigation has steadily escalated into the biggest corruption case in the Navy’s history, with Francis admitting that he bilked the service out of tens of millions of dollars by overcharging for food, fuel and basic services. Five current and former Navy officials have pleaded guilty so far, and prosecutors have made it clear they are targeting others.
The Navy has also stripped security clearances from two admirals, including the chief of naval intelligence, for their alleged involvement with Francis, although they have not been charged with a crime.
Known in Navy circles as “Fat Leonard” for his girth, Francis, 50, agreed to forfeit $35 million in ill-gotten proceeds and could face up to 25 years in prison. But the most severe impact may turn out to be the blow to the Navy’s reputation, given the array of evidence that so many officers were corrupted so easily by a foreign defense contractor.
“It is astounding that Leonard Francis was able to purchase the integrity of Navy officials by offering them meaningless material possessions and the satisfaction of selfish indulgences,” said Laura Duffy, the U.S. attorney for the Southern District of California, whose office has led the investigation. “In sacrificing their honor, these officers helped Francis defraud their country out of tens of millions of dollars. Now they will be held to account.”
The criminal investigation has spanned eight states and eight Asian countries, with more than 100 law enforcement agents involved, court records show.
In his plea agreement, Francis admitted that he and his firm defrauded the Navy by overcharging for hundreds of Asian port visits by U.S. ships and submarines. To ensure he didn’t get caught, he plied Navy officials with an array of temptations, including lavish meals, “top-shelf” alcohol, designer handbags, fountain pens, ornamental swords, computers, furniture and handmade ship models.
Federal prosecutors disclosed Thursday that Francis has provided evidence against two more Navy officials who have yet to be charged: a lieutenant commander and a contract specialist whose names have not been made public.
The unnamed contract specialist, a female civilian official based in Singapore for 20 years, was given a bottomless travel expense account, which she used to visit Bali, Bangkok, Dubai, Turkey and Greece, according to Francis’s plea agreement. In exchange, she worked as a mole for Glenn Defense Marine, handing over proprietary contracting information and advocating on the firm’s behalf.
The scandal erupted into public view in September 2013, when federal agents lured Francis to a San Diego hotel and arrested him in a sting operation.
The Navy says that it began scrutinizing Francis in May 2010 but that he was repeatedly able to thwart criminal investigators by bribing a senior agent with the Naval Criminal Investigative Service, who fed him sensitive files and helped to cover his tracks.
Although Francis initially fought the charges against him, he agreed to cooperate with prosecutors in recent weeks.
“Today Mr. Leonard Francis has taken accountability for his actions. He looks forward to a brighter future,” said Ethan M. Posner, one of his attorneys.
Navy leaders have condemned the unethical behavior of officers involved in the case and have acknowledged that the scandal could grow even worse. Navy Secretary Ray Mabus has pledged to set up a special disciplinary process, led by a four-star admiral, to review allegations against Navy personnel who avoid federal criminal charges but may have run afoul of ethical regulations.
“The Navy holds its personnel to the highest standards and those who fall short are held accountable,” Rear Adm. Dawn Cutler, a Navy spokeswoman, said in a statement. “NCIS uncovered the criminal activity associated with this case and continues to cooperate with the Justice Department.”
Hours before Francis pleaded guilty Thursday, federal prosecutors won another conviction when a Navy captain, Daniel Dusek, admitted to disclosing military secrets to Francis and his firm in exchange for prostitutes, cash and visits to luxury hotels in Hawaii, Hong Kong and the Philippines.
According to a copy of his plea agreement, Dusek provided classified information about Navy ship schedules dozens of times to Glenn Defense Marine, which held contracts worth more than $200 million to supply Navy vessels throughout Asia.
Dusek’s attorney, Douglas L. Applegate, did not respond to a phone call seeking comment.
The Navy announced in October 2013 that it had relieved Dusek of command of the Bonhomme Richard for his alleged involvement in the scandal, but his appearance in court Thursday was the first sign that he had been under criminal investigation.
According to court records, in October 2010, Dusek persuaded the Navy to send an aircraft carrier, the USS Abraham Lincoln, and its strike group to visit a port in Malaysia that was largely controlled by Glenn Defense Marine. As a result, the company was able to easily inflate invoices and overcharge the Navy for a variety of services.
Dusek, then working as deputy director of operations for the 7th Fleet, provided the contractor with classified information about ship movements on dozens of occasions, further aiding the company in its scheme to gouge the Navy during port visits, the records show.
Francis prized the arrangement so much that he called Dusek “a golden asset” in an e-mail to another company executive, noting that he could “drive the big decks” — or aircraft carriers — “into our fat revenue” ports, according to the records.