Former U.S. Navy Cmdr. David Kapaun of Oahu pleaded guilty to lying about his relationship with a Malaysian defense contractor in U.S. District Court in Honolulu on Tuesday.

The guilty plea in Honolulu is the latest development in a broadening corruption scandal that has ensnared more than two dozen top Naval officers, many of whom spent parts of their careers in Hawaii. The Washington Post has reported that 200 people are under scrutiny, including 30 admirals, for schemes that involved trading military secrets for hedonistic jaunts in Southeast Asia.

Kapaun’s admission of guilt was another blow to the reputation of the Seventh Fleet, the naval force that is responsible for patrolling and protecting Southeast Asia, the Pacific Islands, Australia, Russia and India. The Seventh Fleet is part of the Honolulu-based Pacific Command.

Republic of Singapore Navy (RSN) Major (MAJ) Danny Tan, (left), RSN (MAJ) H .C. Lim, (center) and US Navy (USN) Commander (CDR) Dave Kapaun (right), at a reception onboard the USN dock landing ship USS RUSHMORE (LSD 47) during the seventh annual COOPERATION AFLOAT READINESS AND TRAINING (CARAT) Exercise 2001.
In this July 4, 2001, photo provided by the U.S. Department of Defense, U.S. Navy Cmdr. Dave Kapaun, right, with Republic of Singapore Navy officers at a reception on board the U.S. Navy dock landing ship USS Rushmore. Kevin H. Tierney/U.S. Department of Defense

Malaysian defense contractor Leonard G. Francis, owner of Singapore-based Glenn Defense Marine Asia and known by the nickname “Fat Leonard,” has been called the mastermind of the schemes spanning much of the past decade.

His firm provided support services, such as fuel, water, food and trash removal, to the ships of the Seventh Fleet in the Pacific.

Kapaun, 58, who until recently was the deputy chief of staff for special operations at the Pacific Command in Honolulu, told Magistrate Richard Puglisi that he had knowingly lied on his application for a security clearance renewal by failing to disclose that he had a long-standing relationship with Francis.

Kapaun is among a group of Hawaii-based Naval officers who have been implicated in the wide-ranging conspiracy that involved top military brass allegedly accepting bribes, extravagant meals, luxury hotel stays and sessions with prostitutes from Francis, who offered the payments in exchange for receiving secret information about troop and ship movements throughout the Pacific.

The secret information allowed Francis to beat his competitors and steer business to facilities he owned, charging American taxpayers inflated prices.

So far, 21 current or former U.S. Navy officers have been charged or pleaded guilty in connection with the case. Eleven, including Kapaun, have pleaded guilty and 10 cases are pending. All the other cases have been prosecuted in San Diego.

In March, nine men were indicted in the U.S. District Court for Southern California and charged with conspiracy, making false statements, obstruction of justice and conspiracy to commit fraud. They included Rear Adm. Bruce Loveless, Marine Corps Col. Enrico DeGuzman and Naval Cmdr. David Lausman, all former or current Hawaii residents.

“I had a past association with him that was unfavorable, so I did not list him as required on the form.” — Former U.S. Navy Cmdr. David Kapaun, referring to Leonard “Fat Leonard” Francis

Loveless commanded the Pacific Command’s Joint Intelligence Operations Center in Pearl Harbor from 2009 to 2012.

A 1986 graduate of the U.S. Naval Academy in Annapolis, Loveless is accused of accepting gifts of fine wine and luxurious meals. At Francis’ expense, Loveless allegedly stayed at the Conrad Hotel in Bangkok on May 2, 2008, on May 6 at the Shangri-La Hotel in Singapore, and on May 12 at the Shangri-La Hotel in Jakarta, Indonesia. At each of those sites, Loveless and other Naval officers were entertained by prostitutes, according to the indictment.

During a multi-day party at the Makati Shangri-La in Manila, Loveless stayed in the Presidential Suite at the hotel with prostitutes, at which time naval officers and other invited guests drank the hotel’s entire stock of Dom Perignon wine, the Justice Department said.

Also named in the same indictment was Enrico DeGuzman, then a Marine Corps colonel who is alleged to have accepted luxury vacations and hotel accommodations for himself and his wife and gourmet meals at upscale restaurants.

From July 2007 to January 2011, DeGuzman served as assistant chief of staff of operations for the U.S. Marine Corps Forces, Pacific, at Camp H. M. Smith in Honolulu. After he retired, he became the civilian deputy chief of staff of operations for the U.S. Marine Corps Forces, Pacific.

David Lausman, former executive officer of the aircraft carrier USS Abraham Lincoln, commanding officer of the USS Blue Ridge and commanding officer of the aircraft carrier USS George Washington, was alleged to have accepted numerous gifts from Francis.

Lausman and his wife were alleged to have received a luxury trip to Thailand at Francis’ expense. Later in Hong Kong, Lausman’s wife allegedly accepted a gift from Francis of a Versace handbag that cost $11,345. She subsequently found fault with the handbag and arranged for an employee of Francis to pick up the bag and deliver a replacement to her via a supply officer aboard the USS George Washington, according to the indictment.

In 2012 and 2013, Lausman worked assessing strategic communication in the U.S. Pacific Command in Hawaii.

Another officer with strong ties to Hawaii was David Newland, chief of staff to the commander of the Seventh Fleet. According to the indictment, in February 2007, Newland attended a party hosted by Francis in the MacArthur Suite at the Manila Hotel. At the party, naval officers and prostitutes engaged in sex acts using historical memorabilia related to Gen. Douglas MacArthur, the Justice Department said.

USS CG-62 USS Chancellorsville docked at Pearl Harbor. photograph Cory Lum/Civil Beat
The USS Chancellorsville docked at Pearl Harbor. The Navy has a significant presence on Oahu, and several of the suspects in the scandal have Hawaii connections. Cory Lum/Civil Beat/2015

The criminal allegations in the March indictment allegedly occurred from 2006 to 2012, although court documents indicate the time period under scrutiny has expanded as the investigation has widened. Taxpayers are alleged to have lost tens of millions of dollars due to the conspiracies, in which ships were directed to ports controlled by Glenn Defense Marine Asia or subsidiary firms instead of ports where berthing the ships was less expensive.

On May 17, U.S. Rear Adm. Robert Gilbeau was sentenced to 18 months in prison for lying to investigators about what the Justice Department said was his “20-year illicit relationship” with Francis.

“Gilbeau is the highest-ranking U.S. Navy officer to be sentenced in the investigation so far,” the Justice Department said in a statement last month.

Kapaun faces a sentence of up to five years in prison and a maximum fine of $250,000. He was released on $10,000 bail, and is scheduled to be sentenced Sept. 11 in Honolulu.

At Tuesday’s hearing, Magistrate Puglisi asked Kapaun several times if he believed himself to be guilty.

“Yes,” Kapaun said.

Puglisi asked Kapaun, who was ashen-faced, why he had failed to include Francis’s name on the official security clearance document that he completed and signed Feb. 17, 2015. The document required him to list the names of foreign nationals with whom he had contact.

“I had a past association with him that was unfavorable,” Kapaun told the judge, “so I did not list him as required on the form.”

After the hearing, Kapaun’s attorney, Victor Bakke, said that his client played only a minor role in the transactions with Francis.

Bakke told Civil Beat that Kapaun “was enticed, like a lot of other high-ranking Navy personnel” and that he has acknowledged his guilt.

“He used extremely poor judgment and he’s remorseful about it,” Bakke said.

During the court hearing, Bakke and the Justice Department attorney did not disclose the nature of the gifts the former Navy commander had received from Francis.

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