Fat Leonard and the U.S. Navy

US Navy USS Freedom

Image courtesy of U.S. Navy

Fat Leonard and the U.S. Navy
| Published March 20, 2014 |

By Earl H. Perkins
Thursday Review associate editor

At least six Naval officers have been implicated in a scheme to bilk the U.S. Navy out of millions of dollars, and the manager of a Singapore-based company pleaded guilty in the case Tuesday (March 18), according to the Associated Press.

It's no secret this country has been steadily paying “special fees” to certain corporations and key government officials so we may have the privilege of pursuing wars in foreign nations. Our recent adventures in Afghanistan cost us $300 million per day, give or take a couple F-22 Raptors. You may recall the high-tech stealth weapon joined our military fleet in 1997, and it's known as the world's most expensive fighter jet, sucking $77.4 billion from the US Air Force's budget. Lockheed Martin's twin engine supersonic jewel has been so stealthy in our defense that its only use was in 2007 when a couple Raptors monitored two Russian jets that strayed near Alaskan air space.

The new F-35 “Lightning” has now become the most expensive weapons system ever, and the engineers and developers are no closer to debugging the plane’s extensive software than they were 12 months ago. (See: Battles Over Military Spending; Alan Clanton; Thursday Review; February 25, 2014).

I feel safer already, unlike my wallet. The Air Force has been involved in three simultaneous major combat operations, but our leaders decided this incredible shining example of air superiority should be held in abeyance. Its additional capabilities may include ground attack, electronic warfare and signals intelligence. Or maybe not—possibly they're beginning to realize that money could be shooting down a bottomless rat hole.

But I digress. Let's wander back to the story of Fat Leonard's cousin. I kid you not—I am not making this stuff up. Alex Wisidagama, former general manager of global government contracts for Glenn Defense Marine Asia Ltd. (GDMA), has admitted knowing his company submitted fictitious claims to the US Navy exceeding $20 million. The false billings were for services supposedly performed on our Pacific Fleet.

In federal court Tuesday, Wisidagama pleaded guilty to one count of conspiracy to defraud the United States. His cousin is Leonard Glenn Francis, GDMA's CEO, also known by the nom de guerre Fat Leonard.

They were arrested last year after being lured to San Diego, where a sting operation had been set up by Laura E. Duffy, US Attorney for Southern California. Francis evidently offered pricey vacations and prostitution services to Naval officers if they would give him information and advice which would allow his company to overbill the Navy.

Francis pleaded not guilty to the charges and will remain in custody. His cousin could face ten years behind bars, along with being forced to pay restitution, following his June 13 sentencing. Wisidagama's attorney, Knut Johnson, said the plea is in his client's best interest because convictions on all charges could have sent him to prison for decades. He may ask for a transfer closer to his family in Singapore, where he has a child. Of course, the lawyer would not say if his client was cooperating with the prosecution, but he did say "I would think that would be an emotional issue and not an easy one to make."

The prosecution has alleged the Navy officials changed shipping routes to ports where the company could easily succeed in misleading the Navy, and then gladly accepted the 'goodies.'

At least six naval officers have been implicated, but only two commanders have been arrested and charged. Two admirals lost security clearances, and two other Navy officials have been relieved of their duties, although they have not been charged. Navy Cmdr. Jose Luis Sanchez and Cmdr. Michael Vannak Khem Misiewicz have pleaded not guilty.

Wisidagama knew his company submitted hundreds of false bids, allegedly from competitors for items ranging from fuel to trash collection to the Navy. However, he was also aware the company inflated fuel prices and submitted invoices for tariffs from non-existent port authorities, according to the Navy's complaint.

John Beliveau II, an agent with the Naval Criminal Investigative Service, had already pleaded guilty to bribery charges last year. He acknowledged keeping Francis informed concerning the lengthy fraud investigation NCIS was conducting into GDMA. Beliveau, 44, then gladly accepted plane tickets, hotel accommodations and prostitutes, which had been paid for by Francis. That gives a whole new meaning to the statement that GMDA had been servicing the Navy for more than two decades in Asia. The company was awarded contracts worth more than $200 million since 2009.

Navy Secretary Ray Mabus recently said he expected more damning revelations are forthcoming from the ongoing investigation, according to the website Military.com.

“It’s fair to say there will be more disclosures coming” and more top officers coming under suspicion in the contracting for port services for Navy ships worldwide, Mabus said at a Pentagon briefing. “I certainly don’t think we’ve seen the end of it…I expect to continue to see headlines,” he said.

“I would rather get bad headlines than let bad people get away.” Mabus condemned the fraud, but hailed the Navy’s response. Mabus is unsure how much Francis profited by overcharging the Navy, nor could he hazard a guess as to how much is spent annually on husbanding services–the supply of fuel, food and other necessities for ships in port. Ships’ commanders had been complaining that contractors overcharged for far more waste water taken off Navy ships than actually occurred, according to Mabus. Flow meters were installed. "Now we know how much water is being removed.”

The scope of the contracting problem is next to impossible to describe, because there are approximately 350,000 separate contractor transactions worth $75-$95 billion, according to Elliott Branch, deputy assistant Navy Secretary for Acquisition and Procurement.

The cost for husbanding services is a small percentage of the total contracting amount, and the temptation to defraud is difficult to resist when the government is involved, Mabus said.

“We go after people,” he said, but “anytime you’ve got this kind of money (involved), you’ve got people trying to steal.

“This not only goes against all the ethics rules we have” in the Navy, Mabus said, “this goes against everything we learned at home. Everybody knows it’s wrong to take a bribe.”

The government claims Francis bribed Navy officers with everything from cash to Lady Gaga tickets for information on where ships were headed. The investigation led the Navy to study other firms providing husbanding services, and it is suspending its association with Britain-based Inchcape Shipping Services.

“The suspension prevents Department of the Navy (DON) and all other federal departments and agencies from entering into any new contracts” with Inchcape or its affiliates, Rear Adm. John F. Kirby, then the Navy’s chief of Information, said in a statement.

According to court records from civil fraud suits obtained by The New York Times, commissions were paid to subcontractors for major discounts on Navy work, but Inchcape pocketed the difference. GMDA and Inchcape were also involved in competitive bidding supposedly against each other servicing Navy ships in the Pacific.

And the government says those responsible will be vigorously punished, but it will almost certainly be business as usual. When a big boss in the military says heads will roll, that means a few higher ups may be asked to retire early and take a reduction in grade, which leaves a small dent in their humongous pensions. There have been very few ranking officers in this nation who were ever severely punished over criminal financial malfeasance.

The man who commanded the Pacific Fleet when Pearl Harbor was bombed comes to mind. And the government is certainly slow to respond when it's in the wrong. Go to Google and search for the USS Indianapolis, World War II and Captain Charles Butler McVay III. After a secret mission to deliver components for the atomic bomb, the Indianapolis was torpedoed by the Japanese.  The ship sank, and hundreds died of exposure, dehydration, hypothermia and sharks attacks.  Only a handful of the men had lifejackets, and even fewer access to lifeboats. Hundreds died in the water from exposure, only to have sharks swim away with the bodies. Despite evidence that radio U.S. radio operators heard a distress call but were drunk, and despite multiple foul-ups within the communication chain-of-command, only the captain was court martialed. The point: the disaster was not his fault, but the higher-ups in the Navy needed a fall guy. He waited until 1968 before he shot himself using his Navy revolver. A half century after the war, they decided they might have made an error in judgment.

But Fat Leonard and his friends are extremely small potatoes when compared to many other parts of the Navy. A Littoral Combat ship costs more to design and build than an Iowa Class Battleship, and either one of those programs dwarfs husbanding.

Related Thursday Review articles:

Battles Over Military Spending; R. Alan Clanton; Thursday Review; February 25, 2014.