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Lavish dinners. Pricey cognac and Cuban cigars. An all-expenses-paid vacation in the Philippines and a $30,000 hotel bill in Singapore.
These are the elements of the kind of cozy relationships with defense contractors that Navy ethics overseers warned Navy officers to avoid.
Yet one former top-ranking Marine Corps officer at Pearl Harbor is among dozens of top naval officers now facing charges they committed bribery to benefit a defense contractor. Hundreds more active and retired military personnel are under investigation.
But in an unusually bold move in the far-reaching bribery and fraud scandal, Enrico DeGuzman is fighting back against the U.S. government that indicted him earlier this year on numerous charges. DeGuzman intends to plead not guilty to the allegations, according to his Honolulu attorney, Birney Bervar.
“He denies all bribery allegations,” Bervar said in an interview. “He says he did not do anything different than he would have done in the best interests of the United States.”
Bervar said DeGuzman believes that what he did was standard operating procedure in the Navy.
DeGuzman is one of nine defendants charged in a 78-page federal indictment in March. According to the indictment, DeGuzman is alleged to have accepted extravagant epicurean meals in five-star hotels and luxury vacations for himself and his family in exchange for steering port-service contracts to defense contractor Leonard G. Francis, owner of Singapore-based Glenn Defense Marine Asia. DeGuzman also hoped that Francis would hire him when he retired from the military, according to the government document.
DeGuzman, a Honolulu resident who served until recently as the deputy chief of staff of operations at Camp HM Smith in Aiea, is one of the latest to be charged in a widening corruption scandal that has ensnared much of the Navy’s Seventh Fleet.
So far, 21 current or former U.S. Navy officers have been charged or pleaded guilty in connection with the case. Eleven have pleaded guilty and 10 cases are pending.
DeGuzman’s indictment represents another blow to the Seventh Fleet, the naval force responsible for patrolling and protecting Southeast Asia, the Pacific Islands, the Philippines, Australia, Russia and India. The Seventh Fleet is part of the Honolulu-based Pacific Command. It is the fighting force that includes the most forward-engaged vessels coping with mounting challenges from North Korea and China.
More than two dozen top naval officers, many of whom spent parts of their career in Hawaii, are facing prosecution in the case. About 200 active-duty and retired military officers are under investigation in the case, according to court documents filed in San Diego at the U.S. District Court for the southern district of California.
Another Hawaii resident, former U.S. Navy Cmdr. David Kapaun, pleaded guilty in June to making false statements, in effect to lying about his relationship with the same Malaysian contractor in a security clearance document. He faces a sentence of up to five years in prison and a maximum fine of $250,000. He is scheduled to be sentenced on Sept. 11 in Honolulu.
The contractor, Francis, known by the nickname “Fat Leonard” because of his wide girth, has been called the mastermind of the schemes, which spanned much of the past decade. He has pleaded guilty to offering bribes, extravagant meals, luxury hotel stays and, in many cases, sessions with prostitutes in exchange for secret information about troop and ship movements throughout the Pacific. He wined, dined and entertained hundreds of military officials in the Seventh Fleet.
The secret information allowed Francis to beat his Navy-contracting competitors and steer business to port facilities he owned, charging American taxpayers inflated prices.
According to the federal indictment involving DeGuzman, the criminal association between the two men began when DeGuzman was a colonel in the U.S. Marine Corps, where he was responsible for coordinating the missions of the Marine Corps within the Seventh Fleet area of operation.
From February 2006 through 2014, according to the government document, DeGuzman and the other defendants conspired to commit bribery to benefit Francis.
For one extravagant meal, at the Petrus Restaurant in Hong Kong, which cost $20,435, Francis created “fraudulent receipts in an amount that defendants knew was a small fraction of the actual cost of the dinner,” according to the indictment.
At another event, a dinner at the Jaan Restaurant in Singapore, DeGuzman and his friends enjoyed foi gras terrine and ox-tail soup, paired with expensive wine and champagne, followed by Hennessy Private Reserve cognac at $600 a bottle and Cohiba Cigars, which cost $2,000 a box. At another dinner, at the New York Grill in Tokyo, the tab came to $30,000, according to the indictment.
Guests at the Tokyo dinner, including DeGuzman, subsequently overruled a Navy decision to reduce spending at the port of Hong Kong, and instead sought to ensure that the ship berthed pierside, which is more expensive for taxpayers.
According to the indictment, DeGuzman played a role in planning the lavish meals and other events.
DeGuzman disregarded specific warnings about these kinds of relationships with defense contractors, the government says. On Feb. 2, 2007, the Seventh Fleet JAG circulated an ethics memo that advised military personnel not to accept gifts from the contractors.
Three weeks later, DeGuzman and his friends accepted hotel lodging at Francis’s expense at the Shangri-La Hotel, Singapore, at a cost of $30,000, according to the indictment. They ate at the Blu Restaurant and the Jann Restaurant at the hotel, with live entertainment.
A few days later, DeGuzman forwarded to Francis an internal U.S. government email in which a State Department official complained about GDMA’s employees when a ship was at port in the Philippines.
Francis was arrested in San Diego in 2013, and pleaded guilty in 2015. He has not yet been sentenced.
“DeGuzman advised Francis: ‘Recommend some quick damage control the Glenn Marine way to minimize,’” according to the indictment.
In an email, DeGuzman sent to many government officials, he blamed the problems on local Filipino personnel.
When Francis complained about another firm that was trying to compete for a contract, DeGuzman promised someone would “fix it later,” but that Francis needed to “play nice” for a period of time, the indictment said.
Francis subsequently hosted DeGuzman and his wife on a vacation in the Philippines. In an email exchange, DeGuzman said his wife would assist with “arranging” things to enlist the wife of another military officer to provide the same kind of assistance to Francis that her own husband provided, according to the indictment.
At one point, DeGuzman was required to pay for his own hotel room, so he informed Francis, who agreed to pick up the tab. DeGuzman subsequently reiterated his willingness to transmit negative information about one of Glenn Marine’s competitors that Francis said would “bury” the other firm.
On other occasions, Francis asked DeGuzman to arrange to steer the fleet away from Subic Bay in the Philippines to other ports that he controlled.
Francis also provided appreciation letters he had drafted, known as “bravo zulu letters,” to DeGuzman, and DeGuzman arranged for the letters to be signed by senior Navy officials.
As he neared retirement, DeGuzman asked Francis whether he could work for him. “I would like to know more about GDMA if you think I can be part of the team,” DeGuzman wrote to Francis.
In November 2008, he asked again: “What would you think if I joined GDMA in 2010 versus 2009? In the meantime, I can continue to try to open up more venues for Marine and GDMA business.”
DeGuzman did not go to work for Francis, who came under investigation in 2010. Francis was arrested in San Diego in 2013, and pleaded guilty in 2015. He has not yet been sentenced.
If DeGuzman continues to assert his innocence, his case would be among the first to go to trial in which the allegations would be aired publicly. In all the other cases, Navy officers accused of the misconduct have quietly pleaded guilty.
In an interview, Bervar said it is an unusual case and he is not sure why his client was among the group that was recently indicted. Bervar said there have been notable disparities in the length and severity of sentences meted out to defendants in the Fat Leonard case.
“We don’t know why they have prosecuted some people and not others, and gave some people deals and not others,” Bervar said.
Bervar is not the first defense counsel in this wide-ranging case who has raised this same question.
San Diego attorney Knut Johnson represented Alex Wisidigama, an employee of Francis who was also his cousin. Wisidigama, a Singapore resident who had no money to pay for his own defense, was sentenced in March 2016 to 63 months in federal prison.
Wisidigama’s role in the conspiracy, according to Johnson, was “unpacking Mr. Francis’s clothes, making sure the presentation was together and literally carrying his briefcase,” a point Johnson made at the sentencing hearing, suggesting that some relatively minor players were receiving heavier sentences than those with more culpability.
In a sentencing memo for John Beliveau, who pleaded guilty to taking bribes last year, his attorney, Jessica Carmichael, also noted the differences in penalties.
“The admirals were allowed to retire as a Captain or Admiral and keep full benefits,” she wrote. “The Navy officers received prison sentences.”
Believeau, a former Naval Criminal Investigative Service supervisory agent, was sentenced to 12 years in prison.
Four admirals implicated in the case, on the other hand, have all avoided jail time, according to published reports.
Rear Adm. Adrian Jansen was reprimanded and fined $7,500; Vice Adm. Michael H. Miller and Rear Adm. Terry B. Kraft were censured and Rear Adm. David R. Pimpo was censured, reduced in rank and forced to retire as a captain, according to the Washington Post. Miller was former superintendent of the U.S. Naval Academy, Kraft was former commander of U.S. naval forces in Japan and Pimpo was former commander of the Naval Supply Systems Command, according to the Washington Post.