San Diego

Retired Admiral Indicted in Multi-Million Dollar Navy Bribery Scandal

The indictment alleges some of the defendants attended a party in the MacArthur Suite of the Manila Hotel took place in February 2007 during which “Historical memorabilia” related to the infamous General Douglas MacArthur was used in sex acts.

A retired Navy admiral is among nine military officers indicted in the U.S. Navy bribery scandal.

Bruce F. Loveless was expected to appear in front of a federal judge Tuesday in downtown San Diego to face criminal charges in connection with a widespread bribery scheme that has resulted in more than a dozen convictions involving senior U.S. Navy officials.

Then-Rear Admiral Loveless was under investigation as early as November 2013 when he was Director of Intelligence Operations. Prior to that he served as the N2 for CTF70, aboard USS Kitty Hawk.

Loveless is accused of accepting extravagant gifts from "Fat" Leonard Francis, a Singapore-based businessman who bribed senior naval officials with travel, food, wine, cigars and prostitutes in exchange for specific Navy warship movements so his company could overbill the Pentagon by millions of dollars.

When interviewed as part of the federal investigation, Loveless used the word “never” when asked if he had received anything of value from Francis.

In an indictment unsealed Tuesday, federal prosecutors state Loveless attended several "guys' trips" or "boys' nights out" with other naval officials paid for by Francis's company GDMA.

Court documents allege Loveless was a guest at a dinner paid for by GDMA in Hong Kong in January 2008. The bill for the dinner was allegedly $18,000. Four months later, prosecutors allege Loveless and other officers stayed at a Bangkok hotel, “during which they were entertained by numerous prostitutes paid for by Francis.”

Other defendants named in the indictment include Donald “Bubbles” Hornbeck, Enrico “Rick” DeGuzman, David “Newly” Newland, James “JD” Dolan, David “Too Tall” Lausman, Stephen Shedd, Mario “Choke” Herrera and Robert Gorsuch.

The naval officers referred to their group as "the Cool Kids," "the Band of Brothers," "the Brotherhood," "the Wolfpack," or the "familia," federal prosecutors state in court documents.

All defendants face conspiracy to commit honest service fraud. Newland, DeGuzman, Hornbeck, Dolan, Loveless, Lausman, Shedd, Herrera and Gorsuch face bribery charges.

Lausman faces additional charges of making false statements and obstruction of justice.

The indictment states Lausman and his wife received travel and other expensive gifts from Francis when Lausman was Commanding Officer of USS Blue Ridge and USS George Washington.

He's accused of writing to Francis and describing himself, the commanding officer of U.S. nuclear-powered aircraft carrier, as the businessman's "obedient and humble servant."

In a 2013 interview with NCIS, Lausman denied GDMA had ever paid for a hotel room for him. The following year, Lausman told federal prosecutors the same.

Court documents allege Lausman had been receiving hotel stays and other perks from Francis as early as 2006. In exchange, he allegedly wrote letters endorsing Francis' ship husbanding business to top Navy brass.

He’s also accused of destroying computer files linking him to GDMA.

Federal Magistrate Mitchell Dembin entered not guilty pleas for both Loveless and DeGuzman, who are scheduled to appear in court again later this month.

Prosecutor Patrick Hovakimian asked Dembin to require both defendants post a $50,000 personal appearance bond. Hovakimian argued that DeGuzman had committed “extensive, serious and prolonged” illegal acts. The prosecutor noted that Loveless was in a position of immense authority, acting as the 7th Fleet’s intelligence officer, when he allegedly took part in ”wild sex parties” and accepted other illegal favors from Francis. “He abrogated his official duties over and over again,” Hovakimian said. “He showed callous disregard for his duties.” The prosecutor said Loveless, who was in custody and wore prison scrubs and shackles during his court appearance, currently lives in a rented luxury penthouse in Coronado, with panoramic ocean views.

Magistrate Dembin did not impose the requested $50,000 bond, and allowed both defendants to remain free on their own recognizance at this point in the case. But the magistrate did impose travel restrictions and other conditions of release on DeGuzman and Loveless.

The defendants all held "secret" or “top secret” clearances in order to perform their duties, according to the indictment.

They are accused of sharing confidential ship schedules for aircraft carriers, ships and submarines through personal email servers cooltoad, Hotmail and msn, among others.

After receiving one emailed schedule, Francis replied, “Thanks for the updates. Outstanding. 'Choke' has secured 3 hrs 10 of Lap Dancing in [Tokyo]" according to court documents.

Lap dances were just a few of the perks Francis used to court the naval officers. From February 2006 to at least February 2014, the defendants received everything from cash and gifts to lavish meals and services of prostitutes, according to court documents.

Among the gifts to the naval officers and/or their wives were boxes of steak, cases of wine, Ulysse Nardin watches, a John Paul Jones fountain pen and a Versace handbag, federal prosecutors allege.

The indictment alleges the naval officers would then overlook inflated invoices or quashed bids from competitors.

The indictment alleges a party in the MacArthur Suite of the Manila Hotel took place in February 2007 during which “Historical memorabilia” related to the infamous General Douglas MacArthur was used in sex acts.

In April 2007, Francis paid at least $13,000 for one of Hornbeck’s relatives to receive a culinary internship at a restaurant within the Equatorial Hotel in Kuala Lumpur, Malaysia, according to court documents.

At a June 2007 dinner (with a tab of approximately $11,000), federal prosecutors allege Gorsuch handed Francis two disks containing classified port visit information on many U.S. ships.

It was in the summer of 2007 that GDMA employees and Francis began asking the defendants to find other naval officers willing to participate in the bribery scheme.

In April 2008, Francis asked two of the defendants – Hornbeck and Dolan – to pressure other U.S. navy officials to pay bills suspected of fraudulent charges.

Newland served as Chief of Staff to the Commander of the Seventh Fleet.

DeGuzman was a Fleet Marine Officer who served as the civilian Deputy Chief of Staff of Operations for U.S. Marine Corps Forces, Pacific after he retired from active duty.

As Deputy Chief of Staff for Operations, Hornbeck was responsible for directing operations of all combatant chips in the Seventh Fleet AOR.

Dolan served as Assistant Chief of Staff for Logistics for the Seventh Fleet.

Stephen Shedd served as the Commanding Officer of USS Milius.

Herrera reported to Hornbeck and was responsible for scheduling port visits for ships and subs. Gorush served as administrative support for the commander of the Seventh Fleet.

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