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High-ranking Navy officers charged with trading secrets for sex parties

Group referred to themselves as "The Cool Kids"
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Posted at 4:09 PM, Mar 14, 2017
and last updated 2017-03-14 20:26:27-04

SAN DIEGO (KGTV) - Ten high-ranking U.S. Navy officers have been charged with acting as a "team of moles" for a foreign defense contractor, trading military secrets for "sex parties" and costing the Navy and U.S. taxpayers tens of millions of dollars.

The Office of the U.S. Attorney Southern District of California said Tuesday the ten Naval officials worked together to help Singapore-based defense contractor Leonard Glenn Francis, also known as "Fat Leonard," and his company, Glenn Defense Marine Asia (GDMA), gain military secrets in exchange for luxury travel, extravagant dinners, and sex parties with prostitutes.

The charges are part of the larger "Fat Leonard" fraud scheme investigation, which has already taken down 14 other Navy officials. 

RELATED: Navy admiral pleads guilty to lying in bribery probe

“The allegations contained in today’s indictment expose flagrant corruption among several senior officers previously assigned to the U.S. Navy's Seventh Fleet," Dermot F. O'Reilly, Director, Defense Criminal Investigative Service said. "The charges and subsequent arrests are yet another deplorable example of those who place their own greed above their responsibility to serve this nation with honor‎."

The officers were arrested early Tuesday morning in California, Texas, Florida, Colorado, and Virginia. The U.S. will seek their removal to face charges in San Diego.

Named to the indictment are 53-year-old retired Navy Rear Admiral Bruce Loveless of Coronado, chief of staff to the Commander of the Navy's Seventh Fleet David Newland, Captains David Newland, James Dolan, Donald Hornbeck and David Lausman; Marine Corps Colonel Enrico DeGuzman; Commander Mario Herrera; Lt. Commander Stephen Shedd and Chief Warrant Officer Robert Gorsuch.

Loveless was previously a Captain and Assistant Chief of Staff for Intelligence for the Seventh Fleet, and was responsible for assessing and counteracting foreign intelligence threats, according to the Navy.
 
The defendants face various charges including bribery, conspiracy to commit bribery, honest services fraud and obstruction of justice, and making false statements to federal investigators.

"The indictment is a veritable 78-page list of allegations in which Francis spent tens of thousands of dollars on bribing the defendants and the actions the officers took to reciprocate," according to the Navy. "Francis plied the officers with things like foie gras terrine, duck leg confit, ox-tail soup, $2,000 boxes of cigars and $2,000 bottles of rare cognac, plus wild sex parties in fancy hotels."

The Navy alleges the defendants committed the following acts of bribery:

  • During the U.S.S. Blue Ridge’s port visit to Sydney Australia on June 17, 2007, Francis hosted and paid for a dinner event at the Altitude Restaurant within the Shangri-La Hotel. Some of the defendants dined on saute of scallops, foie gras, and beef loin for a cost of $11,898. During dinner, defendant Gorsuch handed Francis two floppy disks containing classified port visit information for many U.S. Navy ships, according to the indictment.
  • In March 2007, Francis hosted and paid for a multi-course dinner for several of the defendants at the Oak Door in Tokyo, Japan. The menu included foie gras, Lobster Thermidor, Sendai Tenderloin, and for dessert, Liberte Sauvage, the winning cake of the 10th Coupe du Monde de la Patisserie 2007, followed by cognac and cigars. Each course was paired with fine champagne or wine. Attendees posed for photographs wearing custom-made GDMA neckties that Francis had given them as gifts.
  • During one port visit in Singapore on March 9, 2006, Francis seduced the leaders of the Seventh Fleet with foie gras terrine, duck leg confit, ox-tail soup, roasted Chilean sea bass, paired with expensive wine and champagne, followed by digestifs and cigars. The extravagance included $600-a-bottle Hennessy Private Reserve, $2,000-a-bottle Paradis Extra and $2,000-a-box Cohiba Cigars.

The group reportedly referred to themselves as "the Cool Kids," "the Band of Brothers," "the Brotherhood," "the Wolfpack," "the familia," and "the Lion King’s Harem."

"The officers tried to conceal their corrupt relationships by using fictitious names to create email addresses using foreign-based email services," the Navy alleges. "This is the first time multiple officers are charged as working all together in a multi-layered conspiracy, pooling their individual and collective resources and influence on behalf of Francis."

Five GDMA executives are also charged in the indictment. Three have already pleaded guilty.

The defendants are accused of working in concert with Francis and GDMA to win and retain defense contracts to provide port services to U.S. Navy ships, to redirect ships to ports controlled by Francis in southeast Asia (in order to overbill the Navy for supplies and services), to sabotage competing defense contractors, to recruit new leaders coming into the Seventh Fleet, and to keep the conspiracy secret through the use of code names and foreign email services.

Francis' company reportedly overbilled the Navy $34 million in food, fuel, and other services according to court documents.