How 'Fat Leonard' infiltrated the US Navy's floating headquarters in Asia
By CRAIG WHITLOCK | The Washington Post | Published: February 1, 2018
As the flagship for the Navy's 7th Fleet, the USS Blue Ridge plays a critical role in national security by overseeing all U.S. maritime operations in Asia and the western Pacific. The venerable warship is the Navy's second-oldest active-duty vessel and has survived the Vietnam War, the Cold War and tensions with China and North Korea.
But there is one foreign threat against which the Blue Ridge proved utterly defenseless for many years: a 6-foot-3, 350-pound tugboat owner known as "Fat Leonard."
In a case that ranks as the worst corruption scandal in Navy history, the Justice Department has charged 15 officers and one enlisted sailor who served on the Blue Ridge with taking bribes from or lying about their ties to Leonard Glenn Francis, a Singapore-based tycoon who held lucrative contracts to service Navy ships and submarines in Asian ports.
For the better part of a decade, as part of a massive scam to defraud the Navy, Francis systematically infiltrated the Blue Ridge to a degree that is only now coming into focus, more than four years after the defense contractor's arrest, according to the documents from federal court and the Navy, as well as interviews with Navy officials and associates of Francis.
Prosecutors say nine sailors from the 7th Fleet flagship leaked classified information about ship movements and other secrets to Francis, a Malaysian citizen, making the Blue Ridge perhaps the most widely compromised U.S. military headquarters of the modern era.
The Navy is investigating dozens of others who served on the ship, which is based in Japan, for possible violations of military law or ethics rules, according to documents and interviews.
Between 2006 and 2013, Francis doled out illicit gifts, hosted epicurean feasts and sponsored sex parties for Blue Ridge personnel on at least 45 occasions, according to federal court records and Navy documents obtained by The Washington Post under the Freedom of Information Act.
Officers from the Blue Ridge consumed or pocketed about $1 million in gourmet meals, liquor, cash, vacations, airline tickets, tailored suits, Cuban cigars, luxury watches, cases of beef, designer handbags, antique furniture and concert tickets - and reveled in the attention of an armada of prostitutes, records show.
Although Francis offered bribes and freebies to hundreds of Navy personnel assigned to other U.S. warships, bases and embassies in Asia starting in the early 1990s, the Blue Ridge was his primary target.
Staff officers on the Blue Ridge had the clout to intervene on behalf of Francis's company, Glenn Defense Marine Asia, because they managed operations, logistics and intelligence for the entire 7th Fleet. Of paramount importance to Francis was the officers' access to the classified itineraries of all U.S. ships and submarines transiting the region.
A master recruiter, Francis methodically assembled a network of informants to feed him the secret itineraries, court documents show. Wielding remarkable influence for a foreigner, he then prodded his moles on the Blue Ridge to reroute aircraft carriers and other vessels to ports controlled by his firm so he could more easily overcharge the Navy for fuel, other supplies and services.
Francis, 53, has pleaded guilty to bribery and defrauding the military of $35 million, although some officials think the monetary losses sustained by the Navy are far greater. He has been in jail in San Diego since his arrest in 2013 and is cooperating with authorities as he awaits sentencing. One of his attorneys, Ethan Posner, declined to comment.
The case has snowballed into an epic embarrassment for the Navy, which has struggled to explain how so many officers on the Blue Ridge succumbed so easily to the prostitutes, extravagant meals and expensive gifts that Francis dangled as temptations.
It also has raised questions about the extent to which admirals in the 7th Fleet and the rest of the Navy knew of what was happening under their command but did not intervene.
More than 60 admirals have come under investigation by the Justice Department and the Navy for their interactions with Francis and his company. Two admirals have been charged in federal court and six others have been censured or disciplined by the Navy. Authorities have publicly identified only a handful of the others so far.
Cmdr. Mike Kafka, a Navy spokesman, said the service takes the ongoing criminal investigation "very seriously" and that it is working closely with the Justice Department to hold Navy personnel accountable.
"The criminal activity of Leonard Francis has changed how we conduct our . . . contracting services worldwide," Kafka said in an email. "It is evident that Leonard Francis specifically targeted personnel from the USS Blue Ridge, the flag ship for the Seventh Fleet, due to that staff's ability to impact other ship schedules and port visit locations."
The Navy advertises the 634-foot-long Blue Ridge, named after a range in the Appalachian Mountains, as the most capable command ship ever built.
It was commissioned in 1970. Among the Navy's active-duty vessels, only the wooden-hulled USS Constitution, which was launched in 1797 and is preserved as a museum, is older.
The Blue Ridge boasts little firepower. But as the floating headquarters for the 7th Fleet, it is packed with advanced communications gear so that it can track and command the fleet's formidable assets: about 60 warships and submarines, manned by a combined 20,000 sailors, performing missions in the Pacific and Indian oceans.
The 7th Fleet is led by a three-star admiral supported by a command staff of about 200 personnel assigned to the Blue Ridge. The ship itself is skippered by a captain with a separate crew. It spends about half the year docked at its home port in Yokosuka, Japan, and the rest making the rounds in Asia.
For years, when it arrived in a port, the Blue Ridge would be welcomed by a familiar sight on the pier: a beaming Leonard Francis, flanked by a black sport-utility vehicle or limousine and an entourage of comely young women.
His company, Glenn Defense, held Navy contracts to provide everything the crew might need while in port, including fuel, food, fresh water, tugboats, security guards and ground transportation. But Francis, also known within Navy circles as "Leonard the Legend," was renowned for the perks that he provided off the books.
Besides paying for meals at Asia's fanciest restaurants, he was famed within the Navy for the prostitutes and strippers he had on call from China, Indonesia, Malaysia, Mongolia, the Philippines, Russia, Thailand and Vietnam.
Organizing the sex workers into what he dubbed "elite SEAL teams," he would fly them from their countries to whatever port the Blue Ridge might be visiting.
Blue Ridge officers were repeatedly instructed that none of this was permissible. The Navy, like other federal agencies, has strict rules against accepting anything of monetary value from people seeking to do business with the government.
Gifts are prohibited unless they are worth $20 or less. There is also a $50 annual limit on accepting gifts from a single source.
Yet officers on the Blue Ridge routinely conspired with Francis to undermine the regulations, according to federal prosecutors.
In February 2006, as the Blue Ridge prepared to visit Hong Kong, a military lawyer sent an ethics alert to senior officers on the ship: Beware defense contractors who might try to bribe you.
Instead of complying, Capt. David Newland, the 7th Fleet chief of staff, immediately leaked the message to Francis so that Francis could cover his tracks, according to an indictment filed last year in federal court in San Diego.
Prosecutors said Newland was one in a long line of Blue Ridge officers who had been on the take from the contractor.
The next day, the Blue Ridge docked in Hong Kong for a 72-hour visit. Newland and other officers dined and drank at Francis's expense at a swanky French restaurant, racking up a $20,000 tab; then they spent the night at the Shangri-La Hotel, where Francis covered much of the cost, the indictment states.
Steve Barney, a retired Navy captain who wrote the 2006 ethics alert when he was serving as the 7th Fleet's top lawyer, said he was shocked by the allegations of his former shipmates flagrantly disregarding the rules.
"There was a continuous drumbeat on ethics," he said. "Anybody who was on the staff, if they took the time to read it, would have been on notice about what the ethics rules were."
Three weeks after Barney posted his ethics warning, the flagship arrived in Singapore for another port visit - and another party.
On March 9, 2006, at least seven officers from the Blue Ridge attended a twilight cocktail hour held by Francis on the helipad atop the 73-story Swissôtel the Stamford, one of the tallest hotels in Southeast Asia, according to court documents and photographs of the event obtained by The Post.
Afterward, the group dined in a private room at Jaan, the hotel's Michelin-starred restaurant, where they savored foie gras terrine, oxtail soup and duck-leg confit followed by a degustation of baby lamb, according to a copy of the menu from that evening.
For dessert: dark Manjari chocolate gelee, with cacao nib foam, poached rhubarb and passion fruit sorbet. The officers drank Hennessy Paradis Extra cognac at $2,000 a bottle and smoked Cuban Cohiba cigars worth $2,000 a box, records show.
If there was any doubt about who was paying for it, the menu proclaimed in large type that the hosts for the evening were Mr. and Mrs. Leonard G. Francis.
Photographs show Francis being toasted by Newland, the 7th Fleet chief of staff. Also in attendance were Col. Enrico DeGuzman, the Marine Corps liaison to the 7th Fleet, and Lt. Cmdr. Edmond Aruffo, another 7th Fleet staff officer.
Newland and DeGuzman were indicted in March on bribery and conspiracy charges, along with seven other former officers from the Blue Ridge and the 7th Fleet staff. All have pleaded not guilty.
Joseph Mancano, an attorney for Newland, called the allegations against him "simply unproven" and said that his client "looks forward to being vindicated at trial."
A lawyer for DeGuzman acknowledged that the Marine Corps officer had accepted favors from Francis but denied that he gave anything in return or knew that Glenn Defense was overbilling the Navy.
"While Colonel DeGuzman may have accepted a handful of dinners and hotel rooms paid for by the defense contractor Francis, [his] decisions and actions were never based even in part on these unsolicited gratuities, but rather were made based on the best interests of the safety and security of the Marines and sailors under his command," said Birney Bervar, the attorney.
Aruffo, who was hired by Francis to work at Glenn Defense after retiring from the Navy, pleaded guilty in 2014 to conspiracy to defraud the United States. His sentence is pending. His attorney did not respond to requests for comment.
Others present for the March 2006 Singapore dinner included the Blue Ridge's commanding officer, Capt. Jeff Bartkoski, and the 7th Fleet chaplain, Capt. William Devine, who posed for a photo with a thick cigar in his mouth.
Bartkoski, who retired from the Navy in 2014, declined to comment.
In an interview, Devine, a Catholic priest who has since retired from the military, said he "vaguely" remembered the dinner. "I didn't sense there was any inappropriateness," he added.
Devine said he recalled discussing the ethics alert with the 7th Fleet's top lawyer at the time it was issued. But he was at a loss to explain why he decided to go to Francis's soiree anyway.
"I guess in my naivete I never saw that as going against any rules," said Devine, who now serves as the pastor of a parish in Bridgewater, Mass. "I guess I didn't make that connection at the time. Shame on me."
Over time, Francis's corruption of the Blue Ridge's wardroom became progressively decadent, court records show.
During a port visit in February 2007, he threw a sex party involving multiple prostitutes, Newland and other officers at the five-star Manila Hotel, where Gen. Douglas MacArthur lived when he served as military adviser to the government of the Philippines in the late 1930s, according to the indictment. During the party, "historical memorabilia" related to MacArthur were used in sexual acts, the indictment states.
A year later, during a return visit to Manila, Francis spent more than $50,000 to stage "a raging multi-day party" for Blue Ridge officers in the Presidential Suite of the Makati Shangri-La Hotel, the court records show.
Prosecutors say Francis hired a "rotating carousel of prostitutes" for the party. The group guzzled the hotel's entire supply of Dom Pérignon and swapped sex partners in the suite, according to the indictment and a person familiar with the bacchanalia.
"I finally detoxed myself from Manila," Cmdr. Stephen Shedd, a 7th Fleet planning officer, emailed Francis a week later. "That was a crazy couple of days. It's been a while since I've done 36 hours of straight drinking!!!"
Over the next six years, some Blue Ridge officers who swallowed Francis's bait grew hungry for more than their steady diet of multicourse meals and romps with prostitutes.
Capt. Donald Hornbeck, the 7th Fleet's deputy chief of staff for operations, persuaded Francis to arrange a culinary internship for one of his relatives at the posh Chalet Suisse restaurant in Kuala Lumpur and cover $13,000 of her living expenses, according to the indictment. His attorney, Benjamin Cheeks, declined to comment.
Cmdr. Jose Luis Sanchez, a deputy logistics officer for the 7th Fleet, pleaded guilty to accepting between $30,000 and $120,000 worth of cash, paid sex, travel and other favors. Prosecutors say he pocketed at least $100,000 in cash.
Vincent Ward, an attorney for Sanchez, said the Navy officer could not comment because he has not been sentenced. He said Sanchez "has taken full responsibility for his mistakes" and "looks forward to the day when the truth about his role . . . is accurately portrayed to the public."
Even the wife of one of the Blue Ridge's former skippers had her hand out, court records show.
Carol Lausman, the spouse of Capt. David "Too Tall" Lausman, accepted an $8,400 Versace purse while on a 2011 visit to Hong Kong, according to an indictment against her husband. "Leonard gave me a lovely gift," she emailed a Glenn Defense staff member before complaining that the gold insignia on the purse had cracked.
Glenn Defense sent her a new Versace purse as a replacement.
Carol Lausman has not been charged with a crime and did not respond to requests for comment. But court records show that Francis considered her someone he could exploit to corrupt the Blue Ridge's commanding officer.
During an earlier visit by the flagship to Thailand, Francis told his staff in an email to pay for Carol Lausman to stay at a beach resort with her husband and for other perks.
"Fast track and VIP service. Best room at Sheraton," Francis instructed. "Arrange Market trip and tour for shopping in Bangkok. She wants to make silk pants. Cheap price. We pay ha ha."
David Lausman has pleaded not guilty to charges of bribery, conspiracy and obstruction of justice. His attorney did not respond to requests for comment.
Other spouses allegedly received their share, too. In 2007, Francis gave a pair of Ulysse Nardin watches, worth $25,000, to Shedd and his wife, according to the indictment.
A few months later, Shedd emailed Francis to ask whether he would mind paying for the couple and two children to vacation in Singapore and Malaysia. "Spank me hard if I'm out of line," Shedd added.
Francis covered their expenses, which totaled $30,000 for the week-long vacation, according to the indictment.
A few months later, Shedd allegedly came back for a bigger favor. He was broke. He emailed Francis a spreadsheet listing his personal debts and asked for emergency help in paying them off.
"I've got about 10 days before I'm in big trouble and I really, really appreciate your assistance," Shedd wrote. "I'll get you whatever information you need."
Tired of Shedd's requests for handouts, Francis responded with a demand of his own. He wanted classified details of upcoming ship visits to the South Pacific. "The info is required by tomorrow," he ordered in a brusque email.
The Navy officer obeyed right away, according to the indictment. Francis had his secret ship schedules within eight hours.
Five days later, however, Shedd still had not received the money he needed. Unsure whether he had been duped, he sent Francis a beggarly email: "I was wondering if you have reached a decision on my Shedd Bailout/Rescue Loan proposal."
Whether Francis came through in the end, the indictment does not say. Shedd's attorney did not respond to requests for comment.
The Justice Department investigation has raised questions about whether the admirals in charge of the 7th Fleet were aware of Francis's illicit business practices or should have suspected he was infiltrating their headquarters.
Federal prosecutors have suggested as much. "Francis was able to leverage his way to the top in plain view of generations of senior Naval Officers and Admirals," they wrote in a sentencing memo for Capt. Daniel Dusek, a former 7th Fleet operations officer on the Blue Ridge who is serving a four-year prison sentence.
Although it is common for senior Navy leaders to interact with contractors, Francis went to unusual lengths to rub elbows with admirals. Former associates said he knew that if he could create the impression that he was cozy with the 7th Fleet commander, subordinates would think twice about challenging Glenn Defense's inflated invoices.
Whenever he met with the brass, even for brief encounters, he made sure an employee tagged along with a camera. He solicited official letters from senior 7th Fleet officers praising Glenn Defense, then published them as endorsements in the company's promotional brochures.
Six vice admirals held the job of 7th Fleet commander between 2002 and Francis's arrest in 2013. None has been charged by the Justice Department. The Navy will not say whether it has investigated any of them for possible violations of military law or ethics rules.
Five of the former 7th Fleet commanders - Robert F. Willard, Jonathan W. Greenert, John M. Bird, Scott R. Van Buskirk and Scott H. Swift - declined to comment about their relationships with Francis or did not respond to interview requests from The Post. All except Swift have retired from the Navy.
The only one who agreed to an interview was W. Douglas Crowder, a retired vice admiral who led the 7th Fleet from 2006 to 2008. He said he had been "uneasy" with Francis ever since he met him at a dinner in Hong Kong in 2004 but declined to elaborate.
Crowder said that on the day he took over as the 7th Fleet commander, after the swearing-in ceremony, he walked into his official residence for the first time at the U.S. Navy base in Yokosuka, Japan. He glanced into the back yard and, much to his surprise, saw Francis standing there with a young Navy officer.
Crowder said he summoned the officer inside. "What is Fat Leonard doing in my back yard?" he demanded. "You brought Fat Leonard into my residence? My 15-year-old daughter lives here. My wife lives here. You get Fat Leonard out of my back yard."
The admiral said he fired the officer - Lt. Cmdr. Edmond Aruffo, who years later would plead guilty to corruption charges - from his position and ordered his staff to keep Francis at arm's-length.
But the contractor was hard to dodge, Crowder said. Francis would wangle VIP invitations to 7th Fleet ceremonies and wait patiently for a chance to approach the admiral and shake his hand.
Crowder said he tried to avoid having his photo taken with Francis at such events, with limited success. "When he comes through a receiving line in Manila, three people behind the president of the Philippines, what are you going to do? Cause a scene?"
He said he was "flabbergasted" by how many former 7th Fleet officers, including several who worked for him, have been charged with taking bribes.
Crowder said he has not been questioned by investigators. "If I'd have done anything wrong, I'd be before someone by now," he added. "I'm satisfied with my ethical conduct."
Asked whether he or other senior Navy leaders should have detected what was going on, he paused.
"I don't know how to answer that," he said. "Most of us, we spend our lives, you see something wrong, you take action. The other side of the coin is that you trust people."