Sunday, March 19, 2017
U.S. Navy Admiral and Eight Other Officers Indicted for Trading Classified Information in Massive International Fraud and Bribery Scheme
Retired U.S. Navy Rear Admiral Bruce Loveless and eight other high-ranking Navy officers are charged in a federal indictment
with accepting luxury travel, elaborate dinners and services of prostitutes from foreign defense contractor Leonard Francis, the former Chief Executive Officer (CEO) of Glenn Defense Marine Asia (GDMA), in exchange for classified and internal U.S. Navy information.
Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Alana W. Robinson of the Southern District of California, Director Dermot F. O’Reilly of the Defense Criminal Investigative Service (DCIS) and Director Andrew L. Traver of the Naval Criminal Investigative Service (NCIS) made the announcement.
Including today’s defendants, a total of 25 named individuals have been charged in connection with the corruption and fraud investigation into GDMA, a defense-contracting firm based in Singapore. Of those charged, 20 are current or former U.S. Navy officials and five are GDMA executives. To date, 13 have pleaded guilty while several other cases are pending.
“The defendants in this indictment were entrusted with the honor and responsibility of administering the operations of the U.S. Navy’s Seventh Fleet, which is tasked with protecting our nation by guarding an area of responsibility that spanned from Russia to Southeast Asia and the Indian Ocean,” said Acting Assistant Attorney General Blanco. “With this honor and awesome responsibility came a duty to make decisions based on the best interests of the Navy and the 40,000 Sailors and Marines under their care who put their lives at risk every day to keep us secure and free. Unfortunately, however, these defendants are alleged to have sold their honor and responsibility in exchange for personal enrichment.”
“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 Acting U.S. Attorney Robinson. “The alleged conduct amounts to a staggering degree of corruption by the most prominent leaders of the Seventh Fleet – the largest fleet in the U.S. Navy - actively worked together as a team to trade secrets for sex, serving the interests of a greedy foreign defense contractor, and not those of their own country.”
“The allegations contained in today’s indictment expose flagrant corruption among several senior officers previously assigned to the U.S. Navy’s Seventh Fleet. The charges and subsequent arrests are yet another unfortunate example of those who place their own greed above their responsibility to serve this nation with honor,” said Director O’Reilly. “This investigation should serve as a warning sign to those who attempt to compromise the integrity of the Department of Defense that DCIS and our law enforcement partners will continue to pursue these matters relentlessly.”
“Naval Criminal Investigative Service, in concert with our partner agencies, remains resolved to follow the evidence wherever it leads, and to help hold accountable those who make personal gain a higher priority than professional responsibility,” Director Traver. “It's unconscionable that some individuals choose to enrich themselves at the expense of military security.”
Nine defendants were arrested today on various charges including bribery, conspiracy to commit bribery, honest services fraud, obstruction of justice and making false statements to federal investigators when confronted about their actions. Four of the defendants are retired captains: (1) David Newland, 60, of San Antonio, Texas, (2) James Dolan, 58, of Gettysburg, Pennsylvania, (3) David Lausman, 62, of The Villages, Florida, and (4) Donald Hornbeck, 56, a resident of the United Kingdom. The other defendants arrested today included: (5) Colonel Enrico Deguzman, 48, of Honolulu, Hawaii, (6) retired Chief Warrant Officer Robert Gorsuch, 48, of Virginia Beach, Virginia (7) retired Rear Admiral Bruce Lovelace, 48, of San Diego, California, (8) active duty Lieutenant Commander Stephen Shedd, 48, of Colorado Springs, Colorado and (9) active duty Commander Mario Herrera, 48, of Helotes, Texas.
The defendants were arrested early this morning in California, Texas, Pennsylvania, Florida, Colorado and Virginia. The United States will seek to move all of these cases to federal court in San Diego, California. Admiral Loveless was taken into custody at his home in Coronado and was expected to make his first appearance in federal court this afternoon.
According to the indictment, the Navy officers allegedly participated in a bribery scheme with Leonard Francis, in which the officers accepted travel and entertainment expenses, the services of prostitutes and lavish gifts in exchange for helping to steep lucrative contracts to Francis and GDMA and to sabotage competing defense contractors. The defendants allegedly violated many of their sworn official naval duties, including duties related to the handling of classified information and duties related to the identification and reporting of foreign intelligence threats. According to the indictment, the defendants allegedly worked in concert to recruit new members for the conspiracy, and to keep the conspiracy secret by using fake names and foreign email service providers. According to the indictment, the bribery scheme allegedly cost the Navy – and U.S. taxpayers – tens of millions of dollars.
In addition to the nine defendants charged today, the 11 Navy officials charged so far in the fraud and bribery investigation are: (1) Admiral Robert Gilbeau, (2) retired Captain Michael Brooks, (3) Commander Jose Luis Sanchez, (4) Captain Daniel Dusek, (5) former Department of Defense civilian employee Paul Simpkins, (6) Commander Michael Misiewicz, (7) Lieutenant Commander Gentry Debord, (8) Lieutenant Commander Todd Malaki, (9) Petty Officer First Class Daniel Layug, (10) Naval Criminal Investigative Service Supervisory Special Agent John Beliveau and (11) Commander Bobby Pitts.
Gilbeau, Brooks, Sanchez, Dusek, Simpkins, Misiewicz, Debord, Malaki, Layug and Beliveau have pleaded guilty. Gilbeau, Brooks, and Sanchez await sentencing. On March 25, 2016, Dusek was sentenced to 46 months in prison and ordered to pay a $70,000 fine and $30,000 in restitution to the Navy. On Dec. 2, 2016, Simpkins was sentenced to 72 months in prison. On April 29, 2016, Misiewicz was sentenced to 78 months in prison and ordered to pay a $100,000 fine and $95,000 in restitution to the Navy. On Jan. 12, 2017, Debord was sentenced to 30 months in prison and ordered to pay a $15,000 fine and $37,000 in restitution to the Navy. On Jan. 29, 2016, Malaki was sentenced to 40 months in prison and ordered to pay a $15,000 fine and $15,000 in restitution to the Navy. On Jan. 21, 2016, Layug was sentenced to 27 months in prison and a $15,000 fine. On Oct. 14, 2016, Beliveau was sentenced to 12 years in prison and ordered to pay $20 million in restitution to the Navy. Pitts was charged in May 2016 and his case is pending.
Additionally, to date, five GDMA executives have been charged: (1) Alex Wisidagama, (2) Francis, (3) Edmund Aruffo, (4) Neil Peterson and (5) Linda Raja. Three have pleaded guilty: Wisidagama, Francis and Aruffo. On March 18, 2016, Wisidagama was sentenced to 63 months in prison and ordered to pay $34.8 million in restitution to the Navy. Francis and Aruffo await sentencing. Peterson and Raja were extradited to the United States from Singapore in September 2016 and their cases remain pending.
The charges and allegations contained in an indictment are merely accusations. The defendants are presumed innocent unless and until proven guilty.
DCIS, NCIS and the Defense Contract Audit Agency are investigating the case. Assistant Chief Brian R. Young of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Mark W. Pletcher and Patrick Hovakimian of the Southern District of California are prosecuting the case.