07272017Headline:

US Navy, Fat Leonard, & America’s Military Corruption Conspiracy of the Century

Bayard & Holmes

~ Piper Bayard & Jay Holmes

The US Navy is currently caught in the throes of the greatest known American military corruption conspiracy of this century to date.

After a three-year investigation, the story first broke in November, 2013 with the accusation that Director of Naval Intelligence Vice Admiral Ted “Twig” Branch and four other naval officers accepted bribes of cash, prostitutes, and expensive trips in exchange for steering US Navy contracts for port services to a company named Glen Defense Marine Asia (“GDMA”). Indictments started coming down.

 

Leonard Glenn “Fat Leonard” Francis
Image by US Navy, public domain,
via Defense News

 

Several naval officers and civilians were arrested at that time on charges of Conspiracy and Bribery. Among those arrested was the apparent mastermind, one Leonard Glenn “Fat Leonard” Francis, a Malaysian businessman who is the owner and CEO of GDMA. He is a port service kingpin in the South Pacific region with alleged connections to Communist China. According to the US Justice Department prosecutors, “This is the first time multiple officers are charged as working all together in a multi-layered conspiracy, pooling their individual and collective resources and influence on behalf of Francis.” It is a multi-layered conspiracy with countless cost to our nation.

One of the indictments was unsealed on March 14, 2017, and its 78 pages reveal just how extensive this maze of betrayal, greed, debauchery, and arguably even treason had become, involving at least twenty US Navy officers including a Vice Admiral, five Rear Admirals, a Marine Colonel, five Navy Captains, six Navy Commanders, two Navy Lt. Commanders, and a Navy Warrant Officer, along with several top GDMA employees. Some officers even drew their wives into this proven criminal conspiracy.

It began in January of 2006 when Navy Contract Supervisor Paul Simpkins, a Department of Defense civilian employee, contacted Fat Leonard and offered to throw Navy ship docking service contracts to GDMA in exchange for cash.

One month later the cash—our taxpayer dollars—started flowing. GDMA signed a $929,000 contract with the US Navy for docking services. Not only was this the first contract of many, but the Navy now estimates that it paid more than double the normal rate for the services provided. In exchange, Simpkins received $50k in US cash from Fat Leonard’s hands.

In short time, Simpkins and Fat Leonard pulled several naval officers into their dealings—senior officers who were responsible for coordinating missions, directing operations, directing ship movements, and scheduling port visits to service the ships and submarines of our US Navy 7th Fleet, which is the US Far Eastern Fleet. One conspirator was even the commanding officer of the nuclear aircraft carrier, USS George Washington.

Soon, these senior US Navy officers were using their position and influence to direct business to Fat Leonard’s facilities throughout the Far East. Not only that, some of the officers regularly sent the Malaysian classified ship schedules and helped protect GDMA from investigations by the Naval Criminal Investigative Service (“NCIS”). In return, the officers received lavish dinners, time with prostitutes, expensive gifts, travel expenses, and luxury hotel accommodations for themselves and their families.

The recently unsealed indictment best indicates the jaw-dropping extent of the criminal activities undertaken by these conspirators, not to mention their sheer stupidity. It includes charges of Conspiracy, Bribery, False Statements, and Obstruction of Justice, and Conspiracy to Commit Honest Service Fraud—a laundry list of what NOT to do as a naval officer.

As you read this, please keep in mind that it is highly illegal for any government employee, military or civilian, to receive expensive meals and gifts, much less prostitutes and travel expenses, from defense contractors or any other influencers. Also remember that Fat Leonard is a Malaysian national operating a multi-million-dollar business throughout the Far East, including facilities in Hong Kong.

You know, Hong Kong? That place controlled by Communist China, the hostile country that spies on the US at every possible opportunity? Yeah. That Hong Kong. Because a Malaysian criminal defrauding the US government is certainly going to be too moral and ethical to trade or sell our classified information to his host country of China, right?

Let’s look at the list of allegations included in the indictment:

  • Repeated incidents of officers sending Fat Leonard classified information on planned US Navy ship movements via private email and Facebook.

One of numerous examples from the recently unsealed indictment:

“On or about January 25, 2008 at 12:25 a.m., SHEDD, using his cooltoad.com account, emailed Francis [Fat Leonard] multiple classified ship schedules. During this exchange, SHEDD confirmed a change to the schedule of the U.S.S. Fitzgerald to accommodate Francis.”

  • Repeated incidents of officers using their position and influence to steer contracts to GDMA in full knowledge of the fact that GDMA was charging the US approximately twice the going rate for port services.

  • Repeated incidents of officers using their position and influence to re-direct US Navy ships to GDMA’s facilities, often at Fat Leonard’s request. (See quote above.)

  • Repeated incidents of officers actively suppressing GDMA competition for contracts.

  • Repeated incidents of officers using their position and influence to suppress NCIS investigations into GDMA’s overbilling practices.

  • Repeated incidents of officers warning Fat Leonard of investigations and helping to destroy evidence and otherwise obstruct said investigations.

  • Repeated incidents of officers and even their wives “shaping” contacts. “Shaping” is the espionage term of art for courting someone into a conspiratorial ring.

From the indictment:

“In a further effort to recruit AB, the FISC official, into the conspiracy, DEGUZMAN, his wife, Aruffo, Francis and others developed and implemented a ‘shaping op[eration].’ On March 30, 2007, DEGUZMAN wrote to Aruffo: “Ed san, Domo [thank you] for the tuna. Got the other tuna to [AB’s wife] for ‘shaping.’” Aruffo forward the email to Francis, adding, “Beginning our ‘shaping’ OP, dropped off a chunk of tuna that I bought in General Santos [City] for DEGUZMAN’s wife to drop off with [AB’s wife].””

Using wives this way is not uncommon in conspiracies. Sending wives to other wives with expensive gifts is a low risk way to test the waters before inviting new co-conspirators into schemes.

  • Repeated incidents of officers recruiting their successors to continue these criminal activities on behalf of Fat Leonard and GDMA.

  • At least one incident of an officer requesting that Fat Leonard pay off his personal debts, to which Fat Leonard requested and received classified information on planned US Navy ship movements.

  • At least one incident of an officer using his position to influence staffing levels in a Ship Support Office in Hong Kong at the request of and on behalf of Fat Leonard and GDMA.

  • Repeated incidents of officers requesting employment from GDMA for their post-service lives. As a point of interest, none were hired by GDMA.

  • Repeated incidents of officers destroying evidence, making false statements, and obstructing justice once they, themselves, came under investigation.

In return for these actions on his behalf, Fat Leonard provided the officers and many of their wives with lavish meals valued at tens of thousands of dollars, entertainment, travel and hotel expenses, gifts, cash, and the services of prostitutes. The recently unsealed indictment is a laundry list of things US Navy officers should NOT be receiving from smarmy defense contractors.

  • Repeated incidents of officers requesting and receiving travel expenses and lodging accommodations for themselves and their families.

  • Repeated incidents of officers and their wives receiving lavish meals costing tens of thousands of dollars.

From the indictment:

“On or about March 24, 2007, NEWLAND, DEGUZMAN, HORNBECK, and Aruffo attended a multi-course dinner hosted by Francis at the Oak Door in Tokyo, Japan, during which was served, at Francis’s expense, foie gras, Lobster Thermidor, and Sendai Tenderloin, and for dessert, “Liberte Sauvage,” the winning cake of the 10th Coupe du Monde de la Patisserie 2007, followed by cognac and cigars. Each course was paired with fine champagne or wine.”

  • Repeated incidents of officers and their wives receiving expensive gifts from Fat Leonard.

  • Repeated incidents of Fat Leonard arranging and paying for debauchery with prostitutes.

From the recently unsealed indictment:

“On or about May 22 – 25, 2008, during a port visit by the U.S.S. Blue Ridge to Manila, Philippines, HORNBECK, DOLAN, LOVELESS, LAUSMAN, SHEDD, and Sanchez stayed at Francis’s expense at the Makati Shangri-La in Manila, Philippines, where for himself and the U.S. Navy attendees, Francis booked the Presidential Suite. In this venue, Francis hosted a raging multi-day party, with a rotating carousel of prostitutes in attendance, during which the conspirators drank all of the Dom Perignon available at the Shangri-La. Room and alcohol charges born by Francis exceeded $50,000 USD.”

Two of the conspirators emailed Francis to thank him for his hospitality from the private cooltoad.com accounts the group used to communicate regarding their criminal activities.

 


This photo of Presidential Suite, Makati Shangri-La Manila, sans prostitutes, is courtesy of TripAdvisor.

The investigation, opened in 2010, is ongoing, and the indictments continue to flow.

Most of the defendants have not yet gone to trial, and some that had already been convicted have yet to be sentenced. For those readers whose stomachs can endure a more detailed description, the US Justice Department indictments that have been released are available at both the Justice Department web page and the US Naval Institute web site.

The US Justice Department took and kept the lead in this long investigation, and it is pursuing prosecutions in Federal Court. However, if any of the accused officers should miraculously escape the wrath of the federal judges, the US Navy retains the right to re-arrest and charge them under military law with that great catchall “Conduct Unbecoming an Officer.” Some of the minor players have already pleaded out and have, in some cases, received punishments proportional to their crimes.

This Fat Leonard Conspiracy has dealt inestimable damage to our national security on multiple levels:

  1. When the details of deployments and ship schedules are known to our potential enemies, those ships are then more vulnerable to well-planned attacks, including terrorist attacks. That’s why ship schedules are classified in the first place.

  1. Ship deployments are supposed to be determined by our national security interests. When ships are diverted from the locations where they most benefit our national security, that damages our national security in strategic terms.

For example, strategic realities might have indicated that on a particular day, a particular aircraft carrier and her escorting cruiser and destroyers would have been ideally located off the coast of Japan. But because these officers were selling out our country for Lobster Thermidor and blow jobs, those same ships might have been instead in a port in Singapore or Malaysia. But hey, why let national security get in the way of free prostitutes?

  1. The service employees of GDMA, a corporation owned and operated by a criminal, had access to our US Navy vessels and the highly sensitive systems they carry.

We don’t know to what extent Fat Leonard or any of the implicated GDMA employees are involved with the communist Chinese government or with individuals that are involved with the Chinese communist government. By exposing our ships to service employees from foreign docking and ship services that were operated by a criminal, these US Navy conspirators unduly exposed our technology to those who would do us damage, and possibly on behalf of Communist China.

We may never know if the communist Chinese government received classified information about the highly sensitive systems on our US Navy vessels, but it would be an unusual misstep for the Chinese if they did not.

  1. Congress gives money to the US Navy on the assumption that the Navy is not wasting it. The next time the Navy goes to Congress for money, Congress will rightfully ask, “Is that price with or without the hookers?”

The US Navy, the Pentagon, and the current US administration hope to be able to contain any physical conflict with China to the Western Pacific, as opposed to Los Angeles or downtown Kansas City. That requires very expensive ships, very expensive maintenance on those very expensive ships, and the very expensive recruiting of skilled, patriotic young men and women to maintain and operate those very expensive ships. When US Navy officers engage in criminal financial malfeasance, they make it more difficult for the US Navy, the Pentagon, and the president to convince the taxpayers that they should all willingly pay more taxes to modernize the fleet.

It’s hard enough explaining the $13 billion going into the construction of our first of class USS Gerald Ford supercarrier. How can the taxpayers not question building and manning such a ship when they are wondering if and when another Fat Leonard Conspiracy will occur, or if there is even another one ongoing? How can the US taxpayers not wonder if the USS Gerald Ford will be in the hands of trustworthy leaders? How can we all not wonder if the extremely expensive new technologies on that aircraft carrier will end up being exposed to the ongoing, robust espionage efforts of Communist China and Putinesque Imperial Russia?

  1. Such criminal malfeasance on the part of officers at the very top of the US Navy undermines the entire military culture.

Repeatedly throughout the active years of the conspiracy, junior officers objected and made recommendations that their superiors shot down. In a chain of command, junior officers and enlisted service men and women can raise concerns, but they don’t get to question orders. Implicit in that is that the officers at the top can be trusted to be serving our nation and not themselves. When those at the bottom don’t or cannot trust the people at the top, there is a breakdown in authority and effective functioning.

These conspirators, ranging in rank from First Class Petty Officer to Vice Admiral set a horrific example for the US Navy and all military branches with their criminal behavior. Our best young people are not inspired to stay in the Navy and do their best job for their country when their senior leaders are stabbing them in the back. It’s bad enough that our enlisted men and women risk their lives serving at such low wages to defend our country when our politicians so infrequently display any sense of patriotism or selflessness. Having their own senior officers, whose judgments their lives depend on, betray them so coarsely makes it that much harder for those young Americans to continue serving our country selflessly.

There may be much more that we will never know about the Fat Leonard Conspiracy, but there are two known and glaring facts worthy of our attention.

  1. That such a broad conspiracy involving so many people could continue for at least five years speaks poorly of US Navy financial oversight, Navy security oversight, Navy counter-intelligence efforts, and the US Navy’s culture and leadership in general.

  1. That senior Navy officers and Navy Criminal Investigation Division agents willingly helped schedule and then attended wild parties in Hong Kong, Malaysia, and the Philippines, where they were serviced by prostitutes procured by GDMA indicates a frighteningly amateurish level of conduct by trained professionals. Did the Communist Chinese government conduct honeypot operations against these Navy officers with the help of GDMA? We can’t say for certain, but it’s entirely plausible and a good bet. If Holmes were Chinese, he certainly would not have missed the opportunity for such an easy intelligence coup.

The biggest question in all of this is to what degree the US Navy will improve its oversight and its promotion selection process. So far, the changes have been minor. The US Navy needs to conduct a serious investigation not just into these crimes, but into the culture that allowed them to occur.

This problem may seem far removed from our daily lives, but it touches all of us.

We are not helpless. We can let our elected officials in our home districts know that we are revolted by this criminal malfeasance that has bilked we taxpayers of untold millions, and we can demand an investigation into how these crimes went on for so long. This web site has complete instructions on how to reach each representative and senator—How to Contact Your Elected Officials.

These politicians might not care much about our US Navy or our national security, but they all care a great deal about being re-elected. They want our votes. Let’s make them earn those votes for a change. No government will ever be any better than we, the people, force it to be.

*   *   *   *   *   *   *   *   *   *   *   *   *

Bayard & Holmes Official Photo

Piper Bayard is an author and a recovering attorney. Her writing partner, Jay Holmes, is an anonymous senior member of the intelligence community and a field veteran from the Cold War through the current Global War on Terror. Together, they are the bestselling authors of the international spy thriller, THE SPY BRIDE.

Watch for their upcoming non-fiction release, CHINA — THE PIRATE OF THE SOUTH CHINA SEA.

 

cover-3-china-the-pirate-of-the-south-china-sea

Keep in touch through updates at Bayard & Holmes Covert Briefing.

You can contact Bayard & Holmes in comments below, at their site, Bayard & Holmes, on Twitter at @piperbayard, on Facebook at Bayard & Holmes, or at their email, BH@BayardandHolmes.com.

©2017 Bayard & Holmes. All content on this page is protected by copyright. If you would like to use any part of this, please contact us at the above links to request permission.


We Fund Your Projects! We have Off Market Closed Sale Properties and Revenue Generating Businesses for Sale! kellencapital.com


Get the Funding Your Business Needs! AmeriFunding.Net Get Business Cash Now! amerifunding.net



Comments

comments

What Next?

Related Articles