Fielding a flurry of tips, complaints from commercial competitors and the concerns of Navy whistleblowers, federal agents ratcheted up their probes between 2009 and 2012 into the Malaysian tycoon nicknamed “Fat Leonard” and his company that services U.S. warships overseas.
For a quarter-century until his 2013 arrest during a sting operation in San Diego, the rotund Leonard Glenn Francis and his tugboats and fenders, security guards and sewage suckers, food suppliers and trash collectors had catered to the Navy’s vessels. He kept the cash flowing to his “pearl ports” by bribing top Navy officials with money, booze and prostitutes.
Federal prosecutors have indicted dozens of commissioned officers and civilian leaders, and the Navy continues an internal probe into 30 admirals and more than 200 sailors for corruption.
But this disciplinary activity is taking place years after the initial investigations began. How did Francis stay ahead of the law for so long? The answer involves a host of self-inflicted problems by federal investigators, along with a mole helping Francis.
That mole worked inside the U.S. Naval Criminal Investigative Service in faraway Quantico, Virginia. In exchange for envelopes stuffed with cash and prostitutes procured by Francis, NCIS Supervisory Agent John Bertrand Beliveau Jr. ratted out confidential informants, leaked secret law-enforcement files to the grifter and helped him evade arrest.
Federal investigators from the NCIS and other agencies churned out 10 criminal intelligence reports and kicked off 14 investigations between 2004 and 2012, but “the alleged criminal activity by (Francis’ company, Glenn Defense Marine Asia) was not interrupted,” according to an internal report completed by the Economic Crimes Department of NCIS on Feb. 10, 2014, two years after Beliveau was arrested.
A heavily redacted copy of that eight-page report was provided to The San Diego Union-Tribune following a Freedom of Information Act request.
It breaks into two categories the reasons why federal investigators failed to ferret out Fat Leonard’s crimes for nearly a decade: A series of missteps by NCIS and other agencies that scrutinized allegations of Glenn Defense wrongdoing, plus structural problems within NCIS itself that kept agents from zeroing in on both the grifters and their mole.
Most of the report was devoted to how federal agencies missed clues into Francis’ criminal activities, which also included overcharging the Navy, threatening both competitors and subcontractors, bribing foreign port officials, creating ghost services while failing to deliver goods and services, and mass corrupting of the Department of Defense procurement process.
With Francis at its center, Glenn Defense created a web of Navy personnel beyond the crooked NCIS agent who were able to “explain away allegations” and, when confronted about questionable billings, helped the company credit the Navy and thus “eliminating any monetary loss and the appearance of criminal intent,” the 2014 report stated.
In mid-2007, for example, the Navy’s inspector general passed along an anonymous letter alleging that Glenn Defense padded the bills for force-protection services in Southeast Asia.
But two unidentified Fleet Industrial Supply Center Detachment employees in Singapore reviewed invoices and payments made by the Navy container ship Stockham and failed to find any overcharges.
In 2009, an unnamed confidential informant alerted NCIS to questionable Glenn Defense billing for port services in Thailand. Contracting officers in the Marine Corps also alleged the contractor used the Indonesian military to thwart a rival. U.S. Fleet and Industrial Supply Center personnel also noted suspicious invoices for vehicles, sewage treatment, fuel and port tariffs, allegations apparently echoed by a late 2009 call to a Department of Defense hotline.
Yet the U.S. Department of Justice declined to prosecute Francis because of a “lack of definitive criminal violations.” And three years later, federal prosecutors declined a similar Glenn Defense case involving allegations of an unspecified conflict of interest.
Navy censors redacted 16 other investigations or leads in the 2014 internal report before turning it over to the Union-Tribune. Most of those entries apparently occurred between 2010 and 2013, when Glenn Defense became the Navy’s primary husbanding-services provider across the Pacific Ocean.
The top problem was the chronic lack of anti-corruption agents dedicated to ferreting out fraud in Navy contracts across Asia, the report said.
For example, the NCIS failed to post any Economic Crimes agents in its offices in the Pacific Rim and Southeast Asia until 2008, when it placed one agent in the Yokosuka, Japan, field station, the report stated. That was caused partly by the Sept. 11, 2001 terror attacks. Before those incidents, the NCIS boasted 140 dedicated special agents in the Economic Crimes Department. That number plunged to only nine fraud specialists as the detectives were diverted to counter-terrorism programs, according to the analysis.
Although the NCIS Economic Crimes Department was the smallest anti-fraud division of all the Defense Criminal Investigative Organizations, it oversaw a Navy that expends more contracting dollars annually than any of the other armed forces. Other NCIS agents left in Asia “possessed limited training and experience in procurement fraud investigations,” the report said.
New Economic Crimes billets were created stateside in 2006, but those agents probed purchases of counterfeit or defective parts while America fought wars in Afghanistan and Iraq.
By early 2014, the NCIS Economic Crimes program had dwindled to 73 positions, including supervisors, and more than half of the agents had less than a year “or no experience in the investigation of major procurement fraud,” the report revealed.
In a section charting the “way ahead” for Economic Crimes, the report’s authors urged 13 vital reforms to prevent another Fat Leonard scandal, ranging from hiking the number of Economic Crimes and Forensic Financial Examiner positions to buying financial analytical software.
Many of the proposed changes lacked funding, the authors pointed out, including hiring more agents, developing a training plan specific to probing public corruption and white-collar crimes, crafting Certified Fraud Examiners through Naval Postgraduate School and increasing their numbers at field offices, obtaining intermediate and advanced instruction at schools houses in other agencies, and promulgating briefing materials about economic crimes to sailors and civilians handling Navy contracts.
To find out how many fixes the Navy completed during the past 3 ½ years, the Union-Tribune sent NCIS officials 16 questions culled from the “way ahead” portion of the 2014 report.
In a statement, NCIS spokesman Ed Buice warned it was “inaccurate to extrapolate too broadly” from that or similar phrases because several of the Fat Leonard cases “which originated in the same time period continue to be part of the larger, ongoing … investigation” into Glenn Defense. But he also insisted that the Navy had fixed the problems identified in the study.
Since 2012, Buice wrote, the NCIS increased the number of agents assigned to Economic Crimes by more than a third, growth that’s projected to continue “over at least the next five years.”
Despite those gains, NCIS Economic Crimes remains roughly 40 agents short of the number it fielded 17 years ago.
In the past three years, NCIS agents averaged 418 economic crime probes annually, about four per agent.
The shortage of agents has been mitigated by an internal restructuring the Economic Crimes program, Buice wrote, which has focused the white-collar crime agents on “investigative priorities” while hiking their expertise and providing a spine of management to supervise their probes.
Today, the majority of the agents are located in the agency’s five Economic Crimes Centers of Excellence — in Washington, D.C.; Mayport, Florida; Norfolk, Virginia; Newport, Rhode Island; and San Diego, he said.
Seven are assigned to the Pacific area of responsibility overseas.
These agents are better trained, thanks to a five-year education program for economic crime investigators. Since 2012, the NCIS has nearly tripled its number of certified fraud examiners to 35 specialists, and 18 more are slated to gain those credentials this year.
Nearly all the agents working economic crimes have received basic formal procurement fraud schooling, Buice said. More than four out of every 10 agents now has more than three years of experience tackling economic crimes; nearly one out of 10 boasts a decade of experience.
In 2015, the agency launched an interactive economic crimes prevention program. The briefings detail the types of fraud Navy employees might encounter and show how they can anonymously report allegations to the NCIS.
During the past two years, the NCIS has given 1,535 briefings to more than 91,000 Navy personnel, Buice said.
Sentenced on Oct. 14 to a dozen years behind bars, Beliveau the mole didn’t respond to a letter posted to where he’s serving out his sentence — the Federal Correctional Institution Allenwood in his home state of Pennsylvania.