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Navy commanders accused of taking bribes for contracts in fraud scandal

November 27, 2013 at 12:00 AM EDT
A Malaysian businessman, known as "Fat Leonard," was arrested this fall for recruiting moles in the U.S Navy in order to inflate lucrative naval contracts. Allegations claim top commanders received bribes in exchange for contracts worth up to $200 million. Jeffrey Brown talks to Washington Post's Craig Whitlock for the latest.
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GWEN IFILL: It could be the biggest fraud scandal to hit the Navy in years, involving allegations that top commanders received cash, prostitutes and other favors for inflated contracts that cost the Pentagon hundreds of millions of dollars.

Jeffrey Brown has the story.

JEFFREY BROWN: For decades, Leonard Francis, known as “Fat Leonard” for his imposing girth, has been well-connected in top U.S. Navy circles, perhaps too connected.

His company, Glenn Defense Marine, provided logistics support to U.S. warships at ports in East Asia. Since 2011, the company has won more than $200 million in Navy contracts, contracts that federal investigators now charge are at the center of an elaborate criminal conspiracy involving bribery, fraud and more.

Last month, The Washington Post reported that Francis plied top Navy commanders with prostitutes, cash, luxury hotel rooms…

(CHEERING AND APPLAUSE)

JEFFREY BROWN: … even tickets to a Lady Gaga concert in Thailand. In return, officials at the Justice Department say, Francis received classified information on ship deployments. He also allegedly pressured commanders to steer ships to ports where his company would then overcharge for services like sewage disposal and tugboats.

In September, the Justice Department arrested Francis and two Navy commanders, as well as a top agent in the Naval Criminal Investigative Service who allegedly fed him information. Two admirals, including the director of naval intelligence, have been placed on leave and lost their security clearances.

For more on all this, I’m joined by Craig Whitlock. He broke the story for The Washington Post.

Craig, welcome back.

CRAIG WHITLOCK, The Washington Post: Thanks, Jeff.

JEFFREY BROWN: So, first, describe the alleged schemes here. What kind of contracts are we talking about?

CRAIG WHITLOCK: Well, it’s really the nuts and bolts of keeping the Navy ships serviced and supplied in Asia. So, most of the Navy ships are in the Pacific.

And this company, Glenn Defense Marine, would — they would supply the ships when they would come to port. They would give them a tugboat to bring them in if they needed it. They would provide the gangway, security, food resupplies. They would pump out the bilge and the sewage. Anything they needed when they came to port , this company was supposed to provide those services.

JEFFREY BROWN: Presumably a competitive business, at least normally.

CRAIG WHITLOCK: A very competitive business, that’s right.

JEFFREY BROWN: Now, the man at the heart of this is a — he’s got the nickname, but he’s a colorful character in many ways.

CRAIG WHITLOCK: Well, he is a colorful character, but he’s an extremely well-known in Navy circles.

His nickname in the Navy is Fat Leonard because he’s a very large guy. His attorney in court the other day sort of jokingly referred to him as big Leonard. And his competition, they just known him as Leonard. So, in all of Asia, you talk to people in this industry and you mention Leonard, they immediately know who you’re talking about.

He would dress in tuxedos. He would lavish gifts on people in port. He would — he lived the high life. He had a mansion in Singapore with Christmas lights everywhere. He was at all sorts of parties. So, he definitely was a character.

JEFFREY BROWN: And I gather that he bragged about his — his connections to top Naval brass.

CRAIG WHITLOCK: Well, that’s right.

And as you saw in your report, he had pictures with his arm around or shaking hands at appearances. And that wasn’t uncommon to go to events like that. But he would. Even — to the papers filed by prosecutors in this case, people would warn him, his moles inside the Navy. They would say, you need to watch out. They’re on to you about this or that or they’re asking questions.

And he would brag that, don’t worry, I got it covered. And what prosecutors allege is he had a mole in the Naval Criminal Investigative Service that would feed him inside information about the scope and process of the investigation.

JEFFREY BROWN: Well, OK. So, in addition to the moles, what else are the Naval officers accused of, in terms of the bribery and getting him information?

CRAIG WHITLOCK: Well, they would steer his ship — steer Navy ships to ports in Southeast Asia where he had a leg up, where he could allegedly charge a lot more for basic services, or fake invoices or make fraudulent claims.

He would say, hey, baby, send that aircraft carrier to my port in Malaysia. And that’s where he would control things. And he knew in those places how he could submit fake bills to the Navy, whereas, if he went to other major ports in Singapore, it was a little harder for him to get away with it.

So, these Navy officers, some of them, they would try — he would lean on them to steer the ships to his ports, where he could control things and he could overcharge the government.

JEFFREY BROWN: And, in exchange, we heard some of the things they — they are alleged to have received.

CRAIG WHITLOCK: Well, the basic temptations of life.

He would provide prostitutes, according to the government. He would provide cash. He’d provide travel. He’d set them up in luxury hotel rooms throughout Asia. In one case, he gave Lady Gaga tickets, “Lion King” tickets, and even travel for family members of these Navy officers.

So, he knew how — what — what would work with them.

JEFFREY BROWN: The two admirals that I mentioned who have been placed on leave, what is thought to be their involvement? It’s for before they were made admirals; is that correct?

CRAIG WHITLOCK: That’s right.

These are not just admirals. One of them is a three-star admiral who is the director of Naval intelligence, so an extremely sensitive position, and one of his deputies who is also in Naval intelligence. They aren’t accused of doing anything in their current jobs, but previously they both served in the Pacific. And the Navy is saying it’s some sort of personal misconduct connected with this investigation.

We don’t what kind of personal misconduct. That hasn’t come out yet. But for the Navy to suspend or to put on leave two admirals of that rank in that kind of position, it’s a very serious matter.

JEFFREY BROWN: Is there supposed to be some kind of oversight of this kind of these contracts, or are these the very people that are supposed to be overseeing them?

CRAIG WHITLOCK: Well, there is supposed to be lots of oversight. This is a competitive business. These contract goes out for bid. They’re supposed to be picked over, all these companies’ bids, who has the comparative advantage, who would do the best job.

They’re supposed to be reviewed constantly. And that’s something the investigators are looking at is, how did Leonard and his company get these contracts over time, despite some clear problems with some of the services he was providing, how — and the fact that they had been under investigation for some years, and yet they kept getting more contracts.

JEFFREY BROWN: Well, that’s what I was wondering about.

There were all kinds of red flags, apparently, along the way. There have been — this guy has been looked at for a long time. Is the thinking now that it wasn’t taken seriously enough or that they just didn’t have enough evidence?

CRAIG WHITLOCK: Well, that’s a really good question.

The Navy says they didn’t have enough evidence, and that they were thwarted in their investigation by these moles…

JEFFREY BROWN: Oh, the moles.

(CROSSTALK)

CRAIG WHITLOCK: … who would enable him to stay a step ahead.

But there were so many red flags that it does raise questions. Why would they keep giving him contracts, additional contracts? As recently as this past July, they gave him a no-bid contract for more port services, even though he was still under investigation. So that’s definitely a very — a major question in this case.

JEFFREY BROWN: Is — I guess another big question is whether this is a very specific type of example, bad example, or is it — does it signify some larger systemic problem that the Navy or perhaps other — the rest of the military has?

CRAIG WHITLOCK: Well, I think the military in general does have a problem.

We see this kind of case come up not infrequently, where — contract fraud, people overcharge the government. It’s a very chummy business with retired Navy or military officers. Leonard had retired Navy officers on his payroll. And so I don’t think this is an isolated case. And I think we may see some more investigations into this kind of business with the Navy, not just his company, but others as well.

JEFFREY BROWN: And Leonard Francis himself remains in jail.

CRAIG WHITLOCK: He’s still in jail, in federal prison in San Diego. He was revoked — he tried to get bond and the judge said, no, he was too much of a flight risk.

JEFFREY BROWN: And just briefly, what happens next? What — what’s the — which case comes next?

CRAIG WHITLOCK: We don’t know which would go to trial yet. They have still been suspending and charging so many, that I think they’re still trying to get to the bottom of it and see how far it goes.

The Navy has been very open that they expect more officers to be implicated, and that this is not the end of it.

JEFFREY BROWN: Oh, we have not seen the end of this?

CRAIG WHITLOCK: No, I don’t think so.

JEFFREY BROWN: All right. All right.

Craig Whitlock of The Washington Post, thanks so much.

CRAIG WHITLOCK: Thanks, Jeff.