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Monday
Jan252016

Navy petty officer is first of nine defendants sentenced in Fat Leonard bribe scandal

A U.S. Navy Petty Officer First Class was sentenced to 27 months in prison for accepting cash, electronic gadgets, and travel expenses from a Singapore-based defense contractor in exchange for providing classified U.S. Navy information.

Dan Layug, 27, pleaded guilty in May 2014 to one count of conspiracy to commit bribery. He's the first defendant sentenced in the sprawling bribery case involving Glenn Defense Marine Asia (GDMA).

The company provided port services to U.S. Navy ships in the Asia Pacific region.

GDMA owner and CEO Leonard Glenn Francis -- also known as Fat Leonard -- and other GDMA employees paid bribes to obtain classified ship schedules and other sensitive Navy information. The company allegedly used the information to manipulate ports of call to where GDMA operated. It then overcharged the Navy under its contracts and submitted bogus invoices for port services.

The DOJ alleged that GDMA won more than $20 million in contracts tainted by bribery.

In his plea agreement, Layug admitted taking a $1,000 per month allowance from GDMA, plus luxury hotel stays for himself and others in Malaysia, Singapore, Indonesia, Hong Kong, and Thailand, the DOJ said Thursday. Layug also asked GDMA for an iPad 3, a Nikon digital camera, an iPhone5, a Samsung S4, a Blackberry, a VAIO computer, and PSP and Wii gaming units.

According to the plea agreement, Layug used his position as a logistics specialist at a U.S. Navy facility in Yokosuka, Japan to access classified U.S. Navy ship schedules. He then passed the information to GDMA’s vice president of global operations.

Layug admitted he also provided pricing information from one of GDMA’s competitors.

Judge Janis Sammartino ordered Layug to surrender to the U.S. Bureau of Prisons on April 1. She said to him: “You put the Navy at risk. You put your colleagues at risk. And you put our country at risk…I think our security and safety were all at risk.”

So far, nine defendants have been charged in the case; seven of them have pleaded guilty. 

Captain Daniel Dusek and Commander Jose Luis Sanchez were charged with bribery conspiracies involving GDMA and have pleaded guilty. Sanchez admitted accepting money, gifts, travel, and prostitutes.

In December 2013, NCIS Special Agent John Beliveau pleaded guilty to conspiracy and bribery charges for regularly tipping Fat Leonard about the status of the government’s investigation into GDMA.

In January 2015, Francis reportedly changed his plea to guilty in an appearance in federal court in San Diego. He's been held without bail since his arrest in California in September 2013. The Malaysian national was charged with conspiracy to commit bribery.

Two defendants, Commander Michael Vannak Khem Misiewicz and former Defense Department civilian employee Paul Simpkins, are waiting for their trials. 

Three rear admirals including the commander of naval forces in Japan announced their retirements in early 2015 after the secretary of the Navy censured them for the bribery scandal.

Naval Forces Japan commander Rear Adm. Terry Kraft and rear admirals Michael Miller and David Pimpo received censure letters from Secretary Ray Mabus. The letters were intended to “document their failure of leadership” for the handling of Glenn Defense Marine Asia between 2006 and 2007. The three admirals aren't facing criminal charges at this time.

In December, prosecutors in Singapore charged a woman who worked for the U.S. Navy there with taking bribes of cash and hotel stays from GDMA, and passing classified information about ship movements to the company.

Gursharan Kaur, 55, a Singapore citizen who served as a lead contract specialist with the Navy from 2006 to 2009, was also charged with money laundering. She used some of the bribe money to buy an insurance policy and an option to buy a condominium, prosecutors said.

In the U.S., the DOJ said Thursday it is continuing the investigation.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.