“How is this not a movie?”
This is the common response when people learn about the US Navy’s Fat Leonard scandal. The high stakes drama and salacious details do seem made for the silver screen, but what’s more surprising is how many people — among them Hill staff, Pentagon budget experts, and other defense policy participants — are unaware of the crimes that proliferated up and down the ranks of the 7th Fleet less than a decade ago. That military leaders, Congress, and the public seem to have forgotten this affair that took down rising leaders, defrauded the US government, and undermined our national security is at least as troubling as the events themselves.
Here’s the short version of events:
The US Navy contracted with Glenn Marine Group (GMG), a ship husbanding company that assisted the Navy with port security, repairs, fueling, restocking and other dockside needs. The president of GMG, Francis Leonard (aka Fat Leonard), overbilled the Navy for things like fresh water and redirected carrier movements to ports where he could charge the most. He bribed officers with $18,000 meals and extravagant hotel stays, prostitutes, parties, cash, and luxury goods. He gained access to sensitive information and paid off people in roles who could help avoid investigations into his activities. Only after the US Department of Justice stepped in — to investigate a suspected mole within the Naval Criminal Investigative Service (NCIS) who was tipping off Leonard — did the enterprise start to unravel.
In 2013, federal agents arrested Leonard in San Diego and charged another 33 people with various crimes, though Leonard’s activities cast a much wider net. In 2018, the Washington Post reported that: “According to the Navy, an additional 550 active-duty and retired military personnel — including about 60 admirals — have come under scrutiny for possible violations of military law or ethics rules.”
Do you know about the US Navy’s Fat Leonard scandal? If not, just know that the persistent lack of oversight has deep consequences for US national security.
Who has actually been held accountable, and how, is unclear. We know the Navy held at least one military trial. Seven people received letters of censure and others have been subject to “administrative actions,” all behind closed doors. Of the 34 original defendants, 29 pleaded guilty. The trial for the remaining five started Feb. 28, 2022 in a San Diego federal court, devoid of cameras. In the absence of any ongoing public investigations from federal agencies or congressional hearings, this trial might be the only chance taxpayers get to air this scandal and get answers as to how corruption of this breadth was possible.
THE RED FLAGS THAT WERE IGNORED
Unfortunately, the apparent collective amnesia among the US Navy and congressional leaders leaves many other important questions unanswered. Perhaps most critically, we don’t have answers as to how multiple levels of oversight between Leonard and taxpayers could have broken down over and over. Whistleblowers, who risk their careers and livelihoods on behalf of the truth, are the frontline of government accountability. One such whistleblower, David Schaus, shared his story at a recent event co-hosted by R Street Institute and Project on Government Oversight.
Schaus was a naval officer assigned to the Hong Kong US Consulate General and served as an assistant officer in charge of the Ship Support Office. After he raised questions about obviously phony invoices, he was first threatened by Leonard, then repeatedly ordered by his superiors to drop the issue. When Schaus refused and reported the problem to the NCIS, he was socially isolated by his colleagues. Even after leaving the navy, when Schaus continued to press for an investigation into Fat Leonard, not only were his concerns ignored, he found himself to be the subject of an NCIS investigation.
The naval inspector general, another key oversight role, was ignored. Instead of exerting oversight and proper leadership, officers up the naval chain of command lauded Leonard with “Bravo Zulus” — Navy attaboys. These officers would go on to become a “three-star admiral and commander of all US submarine forces,” a “four-star admiral and commander of all US military forces in the Pacific,” and chief of naval operations. Basically, the US Navy’s higher ups ignored Leonard. As convicted Commander Mike Misiewicz told Defense News, “Yeah, he was a crook, but he was our crook.”
Finally, Congress has yet to hold a hearing on the matter. In three hearings since the scandal came to light the subject was broached, but in none of the hearings was Fat Leonard the main topic or explored in a remotely thorough way. Why?
THE HIGH PRICE OF A LACK OF OVERSIGHT
Not only do we not have clear and public answers as to the cause of these many oversight failures, we likewise do not have a clear and public understanding as to any reforms that may have been made — or that need to be made — to prevent similar fraud and corruption on the part of contractors and our military. This is particularly concerning because Fat Leonard is not an isolated event. Similar allegations of fraud and bribery have since cropped up involving husbanding companies from South Korea, the Middle East, and Malta. Without more comprehensive and transparent analysis either by Congress, the Government Accountability Office, an inspector general or a similarly equipped investigative agency, decisionmakers and the public can’t be certain whether this sort of corruption is widespread and has been left unchecked, or whether we’ve become better at identifying and stopping it.
This persistent oversight failure comes at a high price, far beyond the $35 million — approximately two hours of funding for the service branch — the navy was overcharged. For example, we don’t know the full extent of the damage imposed by Leonard and his lackeys to our national security, and it’s likely significant. Given that he found many naval officers to be easily influenced and maintained files of compromising photos and information on these individuals, Leonard most likely exposed our military to unfriendly intelligence operations. Nor do we know if Leonard was equally solicitous to other governments’ intelligence or military actors. Perhaps most shocking, when an NCIS agent alerted Leonard about coming indictments and advised him to clean up his electronic data trails, Leonard shifted his work from US to Chinese servers.
The outstanding “Fat Leonard Podcast” from journalist Tom Wright and Project Brazen, which features extensive interviews with Leonard himself, reminds us that oversight failure also comes with an exceedingly high human toll. Throughout the series, we hear of the damaging effects of distrust within the ranks, referred to as “different spanks for different ranks,” when top leaders are perceived to only get slaps on the wrist, if anything, as a result of their misdeeds. Other subjects share painful stories of families and marriages torn apart, women treated as commodities, and abuse.
BUT IT’S NOT UNCLE SAM’S MONEY
The events call into question other consequential decisions that emanate from the Pentagon and Congress about our national security, the culture within these institutions and defense contractors, and their stewardship of appropriated funds. In this damning quote from Episode Two of the podcast, “Ring of Steel,” Leonard exposes the heart of this problem:
“Like I said, you don’t need to overcharge the navy, they give you their money. They’ll just give you money for free. I mean, if anybody’s got a defense contract, you’re good for life. Because the military overall, whether it’s the Navy, Marine Corps, Air Force, every branch, there’s no one that has due diligence, fiscal. Because it’s not their money, it’s Uncle Sam’s money.”
Except that it’s not.
It’s not Uncle Sam’s money. It’s money taken directly from taxpayers’ pockets which makes it our right to demand answers from our government. It’s obvious those leaders would like the Fat Leonards to go away, but it’s incumbent on the public to make sure they doesn’t.
Nan Swift is a fellow with the Governance Project at the R Street Institute where she focuses on budget reform, reducing wasteful spending, and improving the way Congress works.
A tip from the author: Everyone should listen to the Fat Leonard Podcast for more information, but not where children might hear.