Conspiracy | The Contracting Education Academy

November 16, 2018 By cs

Captain from Georgia is latest Navy officer caught in ‘Fat Leonard’ corruption

The 350-pound Leonard Glenn Francis — known in Navy circles as “Leonard the Legend” for his wild-side lifestyle — spent decades cultivating relationships with Navy officers, many of whom developed a blind spot to his fraudulent ways. In the past three years, 33 defendants have been charged and 22 have pleaded guilty, many admitting to accepting things of value from Francis — also known as “Fat Leonard” — in exchange for helping the contractor win and maintain contracts and overbill the Navy by millions of dollars.

On Tuesday, Nov. 13, 2018, another Navy captain pleaded guilty to criminal conflict of interest charges and a former Navy master chief was sentenced to 17 months in prison today on corruption charges. The defendants are among the latest U.S. Navy officials to plead guilty and be sentenced in the expansive corruption and fraud investigation involving foreign defense contractor “Fat Leonard” Francis and his Singapore-based ship husbanding company, Glenn Defense Marine Asia (GDMA).

Jeffrey Breslau of Cumming, Georgia pleaded guilty to one count of criminal conflict of interest before U.S. District Judge Janis Sammartino of the Southern District of California. Breslau was charged in September 2018. Retired Master Chief Ricarte Icmat David of Concepcion, Tarlac, Philippines, was sentenced by Judge Sammartino, who also ordered him to serve a year of supervised release and pay restitution of $30,000. David was charged in August 2018 and pleaded guilty in September to one count of conspiracy to commit honest services wire fraud.

According to admissions made as part of his guilty plea, from October 2009 until July 2012, Breslau was a captain in the U.S. Navy assigned as director of public affairs for the U.S. Pacific Fleet, headquartered in Pearl Harbor, Hawaii. As part of his duties, Breslau was involved in devising the Navy’s public affairs communications strategy, and provided public affairs guidance to Pacific Fleet components and other Navy commands. From August 2012 until July 2014, Breslau was assigned to the commanding officer for the Joint Public Affairs Support Element in Norfolk, Virginia, where he was responsible for leading joint crisis communications teams.

Breslau admitted that from March 2012 until September 2013, while serving in the Navy, he provided Francis with public relations consulting services, including providing advice on how to respond to issues and controversies related to Francis’s ship husbanding business with the Navy. These included issues related to port visit costs, allegations of malfeasance such as the unauthorized dumping of waste, disputes with competitors, and issues with Pacific Fleet and contracting personnel. During the course of his consulting agreement with Francis, Breslau authored, reviewed or edited at least 33 separate documents; authored at least 135 emails providing advice to Francis; provided at least 14 instances of “talking points” in advance of meetings between Francis and high ranking Navy personnel; and “ghostwrote” numerous emails on Francis’s behalf to be transmitted to Navy personnel. During the course of this consulting agreement, Francis paid Breslau approximately $65,000 without Breslau disclosing the agreement to the Navy, Breslau admitted.

As part of his guilty plea, David admitted that he was assigned various logistics positions with the Navy’s Seventh Fleet, including with the Fleet Industrial Supply Center in Yokosuka, Japan from June 2001 to July 2004; on the USS Essex from July 2004 to August 2007; on the USS Kitty Hawk from September 2007 to August 2008; and on the USS George Washington from September 2008 to July 2010. In these positions, David was responsible for ordering and verifying goods and services for the ships on which he served, including from contractors during port calls. Throughout this period, David received from Francis various things of value, including five star hotel rooms during every port visit, he admitted.

David further admitted that he repeatedly facilitated fraud by allowing Francis and GDMA to inflate the husbanding invoices to bill for services never rendered. For example, David instructed Francis to inflate invoices for the USS Essex’s anticipated November 2007 port visit to the Philippines. As David transitioned to a new position aboard the nuclear aircraft carrier USS Kitty Hawk, on or about May 8, 2008, Francis’s company paid approximately 84,637.00 Hong Kong Dollars (HKD) for hotel reservations at the Grand Hyatt Hong Kong for Navy personnel assigned to the USS Kitty Hawk including 10,396 HKD for David’s four-night stay in a Harbor View Room, David admitted.

Francis pleaded guilty in 2015 to bribery and fraud charges, admitting that he presided over a massive, decade-long conspiracy involving “scores” of U.S. Navy officials, tens of millions of dollars in fraud and millions of dollars in bribes and lavish gifts, including luxury travel, airline upgrades, five-star hotel accommodations, top-shelf alcohol, the services of prostitutes, Cuban cigars, Kobe beef and Spanish suckling pigs.

The case was investigated by DCIS, NCIS and the Defense Contract Audit Agency.

For earlier reports on this scandal, see: https://contractingacademy.gatech.edu/?s=fat

Source: https://www.justice.gov/opa/pr/former-us-navy-captain-pleads-guilty-and-former-master-chief-petty-officer-sentenced-sweeping

September 12, 2018 By cs

Turkish man charged with conspiracy to defraud DoD of $7 million, violating Arms Export Control Act

A Turkish man who owns a New Jersey defense contracting business has been charged in a scheme to fraudulently acquire lucrative manufacturing contracts with the U.S. Department of Defense (DoD), and for conspiring to export military technical drawings to Turkey without a license from the State Department, the Justice Department announced last week.

Ferdi Murat Gul, a/k/a “Fred Gul,” of Turkey, was indicted by a federal grand jury on Sept. 5, 2018, on one count of conspiracy to commit wire fraud, six counts of wire fraud, one count of conspiracy to violate the Arms Export Control Act, and one substantive count of violating the Act. He is believed to be currently at large in Turkey.

According to the indictment:

Gul is the principal owner, chief executive officer, and general manager of two companies located in the United States: Bright Machinery Manufacturing Group Inc. (BMM), a defense contracting company located in Paterson, New Jersey; and FMG Machinery Group (FMG), a purported manufacturing company in Paterson and Long Island City, New York. Gul also maintains an ownership interest in HFMG Insaat (HFMG), a manufacturing company in Turkey.
Over approximately five years, BMM fraudulently obtained hundreds of contracts with the DoD by falsely claiming that the military parts it contracted to produce would be manufactured in the United States. From October 2010 through June 2015, the value of the contracts fraudulently awarded to BMM was approximately $7 million.
Gul routinely submitted electronic bids for DoD contracts that contained false representations about BMM’s purported domestic manufacturing operations. He falsely submitted quotes claiming that BMM would provide military goods manufactured in the United States, when in fact the company relied almost exclusively on Gul’s Turkish-based production facilities. In acquiring contracts, Gul routinely and unlawfully exported drawings and technical data, some of which was subject to U.S. export control laws, in order to secretly manufacture military parts in Turkey. Gul and his conspirators then fraudulently supplied those foreign-made parts to unwitting DoD customers in the United States.
Gul and his conspirators concealed their illicit manufacturing activities and ongoing fraud by routinely submitting forged certifications and fabricated information by e-mail to DoD representatives in New Jersey. They falsely represented that BMM and its U.S.-based subcontractors performed necessary quality control procedures in their purported domestic manufacture of military parts.

BMM fraudulently acquired 346 contracts from the DoD to domestically manufacture military parts, including parts for torpedoes for the U.S. Navy, bomb ejector racks and armament utilized in U.S. Air Force aircraft, and firearms and mine clearance systems used by U.S. military personnel abroad. Testing by the DoD revealed that some parts had numerous design flaws and non-conformities and were unusable.

The wire fraud counts each carry a maximum penalty of 20 years in prison and a fine of $250,000. The Arms Export Control Act violations each carry a maximum penalty of 20 years in prison and a $1 million fine. The Arms Export Control Act prohibits the export of defense articles and defense services without first obtaining a license from the U.S. Department of States.

The charges and allegations in the indictment are merely accusations, and the defendant is considered innocent unless and until proven guilty.

Source: https://www.justice.gov/usao-nj/pr/owner-defense-firm-charged-conspiracy-defraud-department-defense-7-million-violate-arms

November 8, 2017 By cs

‘Fat Leonard’ probe expands to ensnare more than 60 admirals

The “Fat Leonard” corruption investigation has expanded to include more than 60 admirals and hundreds of other U.S. Navy officers under scrutiny for their contacts with a defense contractor in Asia who systematically bribed sailors with sex, liquor and other temptations, according to the Navy.

Most of the admirals are suspected of attending extravagant feasts at Asia’s best restaurants paid for by Leonard Glenn Francis, a Singapore-based maritime tycoon who made an illicit fortune supplying Navy vessels in ports from Vladivostok, Russia to Brisbane, Australia. Francis also was renowned for hosting alcohol-soaked, after-dinner parties, which often featured imported prostitutes and sometimes lasted for days, according to federal court records.

The 350-pound Francis, also known in Navy circles as “Leonard the Legend” for his wild-side lifestyle, spent decades cultivating relationships with officers, many of whom developed a blind spot to his fraudulent ways. Even while he and his firm were being targeted by Navy criminal investigators, he received VIP invitations to ceremonies in Annapolis and Pearl Harbor, where he hobnobbed with four-star admirals, according to photographs obtained by The Washington Post.

Keep reading this article at: https://www.washingtonpost.com/investigations/fat-leonard-scandal-expands-to-ensnare-more-than-60-admirals/2017/11/05/f6a12678-be5d-11e7-97d9-bdab5a0ab381_story.html

August 23, 2017 By cs

Active-duty Navy commander pleads guilty to conspiring with foreign defense contractor to defraud Navy

The latest development in the years-long “Fat Leonard” Navy contract corruption scandal is a guilty plea by an active-duty U.S. Navy commander in connection with his efforts to obstruct a federal criminal investigation of the owner and chief executive officer of a multi-national defense contracting firm headquartered in Singapore.

The plea was entered last week by Bobby Pitts who served as the officer in charge of the Navy’s Fleet Industrial Supply Command (FISC) in Singapore.

This development is the most recent in a string of guilty pleas, indictments and convictions – spanning more than three years – related to alleged fraudulent activities of Glenn Defense Marine Asia (GDMA) and its chief executive, Leonard Glenn “Fat Leonard” Francis. So far, 27 individuals have been charged in connection with the corruption and fraud investigation into GDMA. Of those charged, at least 20 are current or former Navy officials and five are GDMA executives. Several additional cases are pending. Francis’ reputation for corruption and bribery in recent years has led him to be nicknamed “Fat Leonard.” (For background, see The Washington Post article, “The Man Who Seduced the 7th Fleet,” here.)

Bobby Pitts, 48, of Chesapeake, Virginia, pleaded guilty to one count of conspiracy to defraud the U.S. in connection with the NCIS’s investigation of Francis. Pitts is set to be sentenced on December 1, by U.S. Magistrate Judge Bernard Skomal of the Southern District of California, who accepted his plea on August 15, 2017.

According to admissions made as part of his plea agreement, Pitts, as part of his duties in Singapore during the period August 2009 to May 2011, learned that the Naval Criminal Investigative Service (NCIS) and several civilian employees of the Navy were investigating whether Francis was over-billing the Navy on ship husbanding contracts. Pitts had access to internal Navy documents pertaining to investigative steps that the Navy was considering and admitted that he shared this information with Francis, with the intent to impede and obstruct the Navy’s oversight of its contracts with GDMA. On Nov. 23, 2010, for example, Pitts forwarded to a representative of GDMA an internal Navy email discussing FISC’s intention to contact officials with the Royal Thai Navy to determine whether GDMA had been billing the U.S. Navy for services in fact rendered by the Thai government.

In pleading guilty, Pitts admitted, among other things, to working with Francis and other foreign-defense-contractor personnel to help them cover up GDMA’s overcharging practices with respect to providing protection to U.S. Navy forces deployed in the Western Pacific.

So far, 18 of 27 defendants charged in the U.S. Navy bribery and fraud scandal have pleaded guilty. All defendants are presumed innocent unless and until convicted beyond a reasonable doubt in a court of law.

The case is being prosecuted by the Fraud Section of the Justice Department’s Criminal Division and Assistant U.S. Attorneys from the Southern District of California.

Source: https://www.justice.gov/opa/pr/active-duty-us-navy-commander-pleads-guilty-conspiring-foreign-defense-contractor-defraud-us

For more information on this prosecution, see: http://contractingacademy.gatech.edu/?s=fat

August 14, 2017 By cs

Singapore executives sentenced for fraud in international Navy corruption scandal

Two former executives of foreign defense contractor Glenn Defense Marine Asia (GDMA) were sentenced on August 12, 2107 for conspiring to submit bogus claims and invoices to the U.S. Navy in an effort to win contracts and overcharge the U.S. Navy by tens of millions of dollars as part of a years-long corruption and fraud scheme.

The case is the latest in a series of convictions spanning more than two years and involving Leonard Glenn Francis, the former CEO of GDMA, a defense contracting firm based in Singapore. Francis’ reputation for corruption and bribery in recent years has led him to be nicknamed “Fat Leonard.” (See The Washington Post article, “The Man Who Seduced the 7th Fleet,” here.)

In the latest conviction, Neil Peterson, 39, and Linda Raja, 44, both of Singapore, were sentenced to 70 and 46 months, respectively, by U.S. District Judge Janis L. Sammartino of the Southern District of California. Both worked as chief deputies for GDMA, which was owned by “Fat Leonard” Francis. Peterson served as the vice president for global operations for GDMA and Raja served as GDMA’s general manager for Singapore, Australia and the Pacific Isles.

Both defendants were arrested by authorities in Singapore at the request of the U.S. government and were extradited on Oct. 28, 2016. They each pleaded guilty in May 2017 to one count of conspiracy to defraud the United States with respect to claims.

According to admissions made as part of Peterson’s and Raja’s plea agreements, they and other members of GDMA’s management team created and submitted fraudulent bids that were either entirely fictitious, contained falsified prices supposedly from actual businesses, or fraudulently stated that the business shown on the letterhead could not provide the items or services requested. In this manner, Peterson, Raja and other members of GDMA’s core management team could ensure that GDMA’s quote would be selected by the U.S. Navy as the supposed low bidder. GDMA could thus control and inflate the prices charged to the U.S. Navy without any true, competitive bidding, as required, they admitted.

Peterson and Raja admitted that they and other members of the GDMA management team knowingly created and approved fictitious port authorities with fraudulently inflated port tariff rates, and approved the presentation of such fraudulent documents to the U.S. Navy. GDMA thus charged inflated prices to the U.S. Navy, rather than what GDMA actually paid to the bona fide port authorities.

For example, Peterson and Raja admitted that for the visit of the U.S.S. Bonhomme Richard to Kota Kinabalu, Malaysia, in or about October 2012, under the direction of Peterson and other members of GDMA’s core management team, false documents and inflated invoices were presented to the U.S. Navy. The full amount billed to the U.S. Navy for this visit was $1,232,858, of which approximately $877,413 was fraudulently inflated, Peterson and Raja admitted.

Peterson and Raja admitted that losses to the U.S. Navy exceeded $34,800,000 as a result of this scheme.

So far, 17 of 27 defendants charged in the U.S. Navy bribery and fraud scandal have pleaded guilty. All defendants are presumed innocent unless and until convicted beyond a reasonable doubt in a court of law.

The DCIS, NCIS and the Defense Contract Audit Agency are continuing to investigate.

See previous articles on this topic here: http://contractingacademy.gatech.edu/tag/fat-leonard/

The “Fat Leonard” corruption investigation has expanded to include more than 60 admirals and hundreds of other U.S. Navy officers under scrutiny for their contacts with a defense contractor in Asia who systematically bribed sailors with sex, liquor and other temptations, according to the Navy.

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