After a ship-servicing contractor promised to arrange prostitutes for a Navy commander and his buddies in Malaysia and Singapore in 2009, according to court records, the officer, Jose Luis Sanchez, shot back a Facebook message saying, “Yummy ... daddy like.”
The federal authorities say that was not all that Commander Sanchez, 41, liked about the contractor. Over the past five years, the company showered Mr. Sanchez and other Navy officials with lavish trips, nights with prostitutes and tickets to “The Lion King” and a Lady Gaga concert in exchange for help on a scheme to overbill the Navy by millions of dollars, according to court records.
Mr. Sanchez, who was also charged in a criminal complaint with accepting $100,000 in cash bribes, was arrested on Wednesday. He is the third Navy official implicated since mid-September in a widening investigation by federal prosecutors in San Diego.
The contractor, Leonard Glenn Francis, a Malaysian, and one of his employees have also been arrested. Mr. Francis and two of the Navy officials charged in the case have pleaded not guilty. Commander Sanchez will not have to respond to the charges formally until later this month, said his lawyer, Vincent J. Ward.
The seamy nature of the charges has embarrassed top Navy officials and raised questions about lax oversight, including whether the Navy kept paying the high fees because that was easier than finding other companies to do the work. Federal records show that Mr. Francis’ company, Glenn Defense Marine Asia, had Navy contracts that were potentially worth more than $200 million. The contracts are now suspended.
Several retired Navy officials said in interviews that Navy lawyers had frequently warned officers not to attend Mr. Francis’ parties. But they said it was hard to avoid him because he would often fly to Hawaii for high-level Navy command ceremonies and attend the dinners that Asian navies held for their American peers.
“This is also a corporate culture kind of thing, where we in the Navy collectively got lazy because this guy could provide anything you needed, even if it was at a high price,” said one Navy captain who retired recently and would speak only on the condition of anonymity because of continuing ties to the Navy.
The investigation centers on a group of midlevel officers who had planned ship schedules in Asia since 2009 and on a senior Navy investigator who prosecutors say tried to help the contractor cover his tracks.
Prosecutors contend that Mr. Francis bribed the officers to divert aircraft carriers and other ships to port calls in Malaysia and Thailand, where Mr. Francis could charge exorbitant prices for supplying and servicing the warships, rather than sending them to Hong Kong and Singapore, where he faced lower-priced competition.
Mr. Francis, who was known as Fat Leonard among the Navy officers he worked with, has been supplying tugboats, food, waste-disposal and security services to Navy ships for 25 years. Navy officers said that Mr. Francis stood well over six feet tall and weighed more than 350 pounds before having gastric bypass surgery. He lived in a mansion in Kuala Lumpur, and court records say that he liked to refer to himself as Lion King. He also had hired at least one former American Navy officer to help expand his business.
According to emails cited in the court filings, Commander Sanchez began sending Mr. Francis — whom he addressed as “boss” — classified ship schedules in January 2009 and alerted him on Oct. 16 of that year that the Navy was worried about overcharges at Port Klang, Malaysia, where Mr. Francis owned the terminal.
Mr. Francis called Port Klang one of his “Pearl Ports,” where he could earn unusually high profits, according to the court filings. Prosecutors contend that his company would give the Navy fictitious subcontractor bids to keep more of the business for itself at inflated prices.
On Oct. 16, 2009, Mr. Francis also promised that he would hire prostitutes for Mr. Sanchez and several Navy colleagues, who were referred to in the messages as the commander’s “wolf pack,” the court filings show.
After Mr. Sanchez left his job as a deputy logistics officer in Japan in April 2010, Mr. Francis targeted Navy Cmdr. Michael Misiewicz “as someone who might be susceptible to providing favor,” the court records show. After Commander Misiewicz began to supply Mr. Francis with confidential information on ship plans, the records show, one of Mr. Francis’ employees wrote, “We got him!”
Mr. Misiewicz, who survived genocide in Cambodia as a child and later graduated from the Naval Academy and commanded a destroyer, had been seen as a rising star in the Navy. He has been charged with accepting theater and concert tickets, prostitutes and trips for family members in Cambodia in exchange for aiding Mr. Francis’ business.
Investigators said it was not clear when Mr. Francis’ efforts to overbill the Navy began, but added that the investigation was continuing.
Navy officials in Washington declined to comment on the case, other than to say that the Naval Criminal Investigative Service had begun examining possible overcharges by Mr. Francis in 2010.
A supervisor in the investigative service, John B. Beliveau II, also has been charged in the case. Court documents say that he improperly used his access to the agency’s computers to keep Mr. Francis apprised of the investigation’s findings.
Mr. Francis also supplied Mr. Beliveau with prostitutes and trips to Asia, prosecutors say.
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