SAN DIEGO -- A retired Navy admiral and eight other current and former military officers were bribed with sex, trips and other lavish perks, according to an indictment unsealed Tuesday in a burgeoning scandal involving a Malaysian defence contractor nicknamed "Fat Leonard."
Retired Adm. Bruce Loveless, 53, and the others were accused of accepting the services of prostitutes and other bribes from Leonard Francis in exchange for classified information that helped his company, Glenn Defence Marine Asia.
The indictment says Francis once rented the MacArthur Suite at the Manila Hotel, where memorabilia of Gen. Douglas MacArthur was used for sex acts with prostitutes.
Francis also is accused of paying for meals that cost as much as $12,000 and included foie gras, ox tail soup, expensive wine and cigars worth $2,000 a box.
Prosecutors say the defendants called themselves the Lion's King Harem, Brotherhood, Wolfpack and other names as they worked to recruit others for the scheme. They were accused of using fake names and foreign email service providers to cover their tracks.
Prosecutors say Francis, whose nickname comes from 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 out the competition and in some instances commanders steered ships to ports in the Pacific where his company could charge fake tariffs and fees, prosecutors said.
It was the latest indictment in the three-year-old case that has produced charges against more than 20 former or current Navy officials and marks one of the worst Navy corruption scandals in history. Loveless is the second admiral charged in the case. It is extremely rare for an admiral to face criminal proceedings.
Adm. John Richardson, the Navy's top officer, vowed to repair damage caused by the scandal.
"This behaviour 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 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,
In the military, Loveless was responsible for collecting foreign intelligence for the Navy's Seventh Fleet, Patrick Hovakimian, an assistant U.S. attorney, told the judge.
"Far from doing that, over the course of many years, this defendant participated in wild sex parties," Hovakimian said. "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 immediately respond to a request for comment.
Five defendants were arrested Tuesday in Texas, Pennsylvania, Florida, Colorado and Virginia. None had attorneys listed in court documents.
"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 Alana W. Robinson.
She added that "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 defence contractor, and not those of their own country."
Francis has pleaded guilty to fraud and is awaiting sentencing.
Twenty of the defendants are current or former U.S. Navy officials and five are executives of the Singapore-based company of Francis.
To date, 13 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.
