The Justice Department unsealed a fresh indictment Tuesday charging eight Navy officials - including an admiral - with corruption and other crimes in the "Fat Leonard" bribery case, escalating an epic scandal that has dogged the Navy for four years.
Among those charged were Rear Adm. Bruce Loveless, a senior Navy intelligence officer who recently retired from a key job at the Pentagon, as well as four retired Navy captains and a retired Marine colonel. The charges cover a period of eight years, from 2006 through 2014.
The Navy personnel are accused of taking bribes in the form of lavish gifts, prostitutes and luxury hotel stays courtesy of Leonard Glenn "Fat Leonard" Francis, a Singapore-based defense contractor who has pleaded guilty to defrauding the Navy of tens of millions of dollars.
The indictment lists page after page of bribes allegedly provided to the defendants including $25,000 watches, $2,000 boxes of Cohiba cigars, $2,000 bottles of cognac and $600-per-night hotel rooms.
According to the charging documents, Francis also frequently sponsored wild sex parties for many officers assigned to the USS Blue Ridge, the flagship of the Navy's 7th Fleet, and other warships.
During a port visit by the Blue Ridge to Manila in May 2008, for example, five of the Navy officers attended a "raging multi-day party, with a rotating carousel of prostitutes," at the Shangri-La Hotel, according to the indictment. The group allegedly drank the hotel's entire supply of Dom Pérignon champagne and rang up expenses exceeding $50,000, which Francis covered in full.
On another port visit by the Blue Ridge to Manila in February 2007, Francis allegedly hosted a sex party for officers in the MacArthur Suite of the Manila hotel. During the party, "historical memorabilia related to General Douglas MacArthur were used by the participants in sexual acts," according to the indictment.
In exchange, according to federal prosecutors, the officials provided Francis with classified or inside information that enabled his firm, Glenn Defense Marine Asia, to gouge the Navy out of tens of millions of dollars.
Federal agents fanned out across six states Tuesday in a coordinated operation to arrest the defendants, authorities said.
Loveless, the retired admiral, was arrested at his home in Coronado, Calif. The Navy had announced in November 2013 that he was under scrutiny by the Justice Department and suspended his access to classified material. He was allowed to retire last fall.
Navy officials have said that about 30 admirals are under investigation, although only a handful have been named publicly.
Robert Gilbeau, a one-star admiral, was convicted last June after he pleaded guilty to making false statements to investigators about his contacts with Francis. He has since retired. He is scheduled to be sentenced next month in federal court.
Separately, the Navy has censured or disciplined three admirals for ethics violations after they accepted lavish meals and other gifts from Francis.
Others taken into custody Tuesday included David Newland, 60, a retired captain from San Antonio; James Dolan, 58, a retired captain from Gettysburg, Pa.; David Lausman, a retired captain from The Villages, Fla.; and Donald Hornbeck, a retired captain who lives in Britain.
Agents also arrested Enrico de Guzman, a retired Marine colonel from Honolulu; Lt. Cmdr. Stephen Shedd, an active-duty officer from Colorado Springs; and Robert Gorsuch, 48, of Virginia Beach, a retired chief warrant officer.
None of the defendants could be reached for comment Tuesday. The charges against them include bribery, conspiracy, obstruction of justice and making false statements to federal investigators.
All of the accused officers formerly held key positions on the command staff of the Japan-based 7th Fleet and were bribed by Francis because they could help steer business to Glenn Defense Marine Asia, according to court papers.
The case is being prosecuted by the U.S. attorney's office in San Diego with the assistance of the Naval Criminal Investigative Service and the Defense Criminal Investigative Service.
"This is a fleecing and betrayal of the United States Navy in epic proportions," said Alana W. Robinson, the acting U.S. attorney for the Southern District of California. She said the defendants "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 new indictment brings the number of people charged with crimes in the Fat Leonard investigation to 27. Ten current and former Navy officials have pleaded guilty so far.
Prosecutors say the case is still unfolding and that more than 200 people have come under scrutiny.
The scandal is the worst corruption case in Navy history and has rocked the service since Francis was arrested in September 2013 in an international sting operation that lured him from Singapore to San Diego. Francis pleaded guilty to bribery and conspiracy charges two years ago. and court papers indicate he has been cooperating with authorities.
Over time, the investigation has revealed the ease with which the 6-foot-3-inch, 350-pound defense contractor was able to penetrate the senior ranks of the 7th Fleet and recruit moles to work on his behalf.
Court papers portray Francis as a master manipulator who persuaded Navy officials to feed him classified information about ship movements and confidential contract information that he used to undercut his competitors.
Corrupt Navy personnel have also pleaded guilty to leaking Francis sensitive law enforcement files that he exploited for years to thwart dozens of failed criminal investigations into his company.
Despite rising signs of widespread fraud, the Navy kept awarding business to Francis's company to resupply its ships and submarines throughout Asia. In 2011, Glenn Defense won deals valued at $200 million to service U.S. vessels at ports stretching from the Russian Far East to Australia. The contracts were canceled after Francis's arrest in 2013.
While Francis was already legendary within the Navy for his hedonistic parties, the indictment unsealed Tuesday provided fresh details of how senior officers with the 7th Fleet allegedly became accustomed to living the high life at ports throughout Asia, at Francis's expense.
In February 2007, for example, Francis splurged for $50,000 worth of shopping, dining and luxury hotel rooms for Newland, de Guzman and others during a port visit to Singapore, prosecutors allege.
The next month, in Tokyo, the defense contractor allegedly took Newland, de Guzman, Hornbeck and others to the luxurious Oak Door restaurant, according to the indictment. The meal included foie gras, lobster thermidor, Sendai tenderloin, cognac and cigars.
For dessert: the "Liberte Sauvage," the winning cake at the Coupe du Monde de la Patisserie, a prestigious international baking contest.
During a four-day visit by the Blue Ridge to Hong Kong in January 2008, Francis provided rooms for Dolan, Hornbeck, Loveless and Shedd at the J.W. Marriott hotel at a price of $626 per night, court papers say.
Then he took all of them - plus Lausman - out for an extravagant dinner in a private room at the Petrus Restaurant overlooking Hong Kong harbor, according to the indictment.
That eight-course meal featured black truffle soup, rock lobster salad, Osetra caviar, pan-seared duck liver with pear and sunchoke, Dover sole, grilled Wagyu beef tenderloin, fine cheeses and baked Alaska for dessert, court papers show.
Each course was paired with wine or Champagne. The total bill: $18,371.
Afterward Hornbeck, who at the time served as the 7th Fleet's deputy chief of staff for operations, emailed Francis a thank-you note, according to the indictment. "The food, music and wine were wonderful," he wrote.
Hornbeck, who was preparing to retire from the Navy, also sounded out Francis to see if he might be willing to hire him. "If you are still considering opening an office in San Diego in the near-future, I would very much be interested in being a part of that," he wrote.
The job never materialized. But court papers show that Francis showered the Navy captain with other gifts, including $13,000 to pay for a culinary internship for a relative of Hornbeck's at the Chalet Suisse restaurant in Kuala Lumpur, Malaysia.