Virginia Beach Naval officer among 9 indicted in bribery case

SAN DIEGO (AP/WAVY) — Officers in a burgeoning Navy bribery scandal called themselves the Lion King’s Harem, the Wolfpack, the Cool Kids and the Brotherhood. They scouted for others who might also accept sex, trips and other lavish perks from a Malaysian defense contractor known as “Fat Leonard” in exchange for classified information.

Allegations outlined in an indictment unsealed in San Diego on Tuesday give more details in the three-year-old scandal that had appeared to be fading before re-emerging even bigger and more sordid than before.

Nine current and former military officers were charged in the latest indictment, including Chief Warrant Officer Robert Gorsuch of Virginia Beach as well as a recently retired rear admiral who collected foreign intelligence for the Navy’s Seventh Fleet.

It gives an extensive list of bribes to the officers from 2006 to 2012 from Leonard Francis in exchange for classified shipping schedules and other information to help his company, Glenn Defense Marine Asia. In one example, a party with prostitutes at the Manila Hotel’s MacArthur Suite during a 2007 port call to the Philippines included sex acts using historic MacArthur memorabilia.

One meal during a 2006 port visit to Hong Kong cost $20,435. A dinner during a port call to Singapore that year featured foie gras, oxtail soup, cognac that cost about $2,000 a bottle and cigars at $2,000 a box.

Prosecutors say Francis, who is nicknamed Fat Leonard for his wide girth, bilked the Navy out of nearly $35 million, largely by overcharging for his company’s services supplying Navy ships in the Pacific with food, water, fuel and other necessities.

Navy officers provided classified information to Francis that helped him beat competitors and, in some instances, commanders steered ships to ports in the Pacific where his company could charge fake tariffs and fees, prosecutors said.

The latest indictment raises the number of current and former officials charged to 20 in one of the Navy’s worst corruption scandals. Bruce Loveless, who recently retired, became the second admiral charged in the investigation.

Adm. John Richardson, the Navy’s top officer, vowed Tuesday to repair damage caused by the scandal.

“This behavior is inconsistent with our standards and the expectations the nation has for us as military professionals,” he said. “It damages the trust that the nation places in us, and is an embarrassment to the Navy.”

Loveless, 53, made no substantive comments during a brief hearing hours after his arrest at his Coronado home near San Diego. Magistrate Judge Mitchell Dembin entered a not guilty plea on his behalf and ordered him released without bail. He did not yet have an attorney,

Loveless was an assistant chief of staff, responsible for assessing foreign intelligence in the Seventh Fleet’s area of responsibility, which includes Southeast Asia and Australia.

“Far from doing that, over the course of many years, this defendant participated in wild sex parties,” Patrick Hovakimian, an assistant U.S. attorney, told the judge. “He has shown callous disregard for his duties.”

The judge also entered a not guilty plea on behalf of Enrico DeGuzman, a former Marine colonel, and allowed him to remain free. His attorney didn’t respond to a request for comment.

Five other defendants were arrested Tuesday in Texas, Pennsylvania, Florida, Colorado and Virginia. None had attorneys listed in court documents.

The indictment describes how defendants collaborated to expand their group. A 2007 email from Robert Gorsuch, a chief warrant officer, to Francis says they were developing “personality profiles” on potential recruits. A 2008 email to Francis from Lt. Cmdr. Stephen Shedd says he and another defendant assessed whether an officer was corruptible and concluded, “We still need to be cautious with his participation in events.”

Five executives of Francis’ company also have been charged. Francis has pleaded guilty to fraud and is awaiting sentencing.

“This is a fleecing and betrayal of the United States Navy in epic proportions, and it was allegedly carried out by the Navy’s highest-ranking officers,” said Alana W. Robinson, the acting U.S. attorney in San Diego.

To date, 13 defendants have pleaded guilty, including another admiral who was sentenced in June and is believed to be the first active-duty Naval flag officer charged in federal court. Other cases are pending.

Defendants

  • Chief Warrant Officer Robert Gorsuch, 49 | Virginia Beach, Virginia
    Seventh Fleet’s Flag Administration Officer, responsible for providing administrative support to the Seventh Fleet Commander and other senior officers on the Seventh Fleet staff
  • Captain David Newland, 60 | San Antonio, Texas
    Chief of Staff to the Commander of the Seventh Fleet
  • Colonel Enrico DeGuzman, 58 | Honolulu, Hawaii
    Fleet Marine Office of the Seventh Fleet, responsible for coordinating the missions of the U.S. Marine Corps with the Seventh Fleet; and Assistant Chief of Staff of Operations for U.S. Marine Corps Forces, Pacific
  • Captain James Dolan, 58 | Gettysburg, Pennsylvania
    Assistant Chief of Staff for Logistics for the Seventh Fleet, responsible for meeting the logistical needs of every ship within the Seventh Fleet’s area of responsibility
  • Captain Donald Hornbeck, 56 | United Kingdom
    Deputy Chief of Staff for Operations for the Seventh Fleet, responsible for directing the operations of all combatant ships in the Seventh Fleet area of responsibility
  • Rear Admiral, Retired, Bruce Loveless, 53 | Coronado, California
    Previously a Captain and Assistant Chief of Staff for Intelligence for the Seventh Fleet, responsible for assessing and counteracting foreign intelligence threats within the Seventh Fleet’s area of responsibility
  • Captain David Lausman, 62 | The Villages, Florida
    Executive Officer of the aircraft carrier U.S.S. Abraham Lincoln; Commanding Officer of U.S.S. Blue Ridge; Commanding Officer of U.S.S. George Washington
  • Lt. Commander Stephen Shedd, 43 | Colorado Springs, Colorado
    Seventh Fleet’s South Asia Policy and Planning Officer, responsible for identifying ports that U.S. Navy ships would visit; and once promoted to Commander, served as Executive Officer and Commanding Officer of the U.S.S. Milius
  • Commander Mario Herrera, 48 | Helotes, Texas
    Fleet Operations and Schedules Officer for the Seventh Fleet, responsible for scheduling the port visits for ships and submarines in the Seventh Fleet’s area of responsibility (Herrera was previously charged in February 2017 via complaint)

Summary of Charges

  • Conspiracy to Commit Bribery | Maximum Penalty: Five years in prison, a $250,000 fine, or twice the gross pecuniary gain or twice the gross pecuniary loss, whichever is greater
  • Bribery | Maximum Penalty: 15 years in prison, a $250,000 fine or twice the gross pecuniary gain or gross pecuniary loss from the offense, or three times the monetary equivalent of the thing of value, whichever is greater
  • False Statements | Maximum Penalty: Five years in prison, a $250,000 fine
  • Obstruction of Justice | Maximum Penalty: 20 years in prison, a $250,000 fine
  • Conspiracy to Commit Honest Services Wire Fraud | Maximum Penalty: 20 years in prison, a $250,000 fine

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