The U.S. Navy's Bribery Scandals

USS Ronald Reagan

The U.S. Navy's Bribery Scandals
| published August 3, 2014 |

An E-2C Hawkeye lands on the flight deck of the aircraft carrier USS Ronald Reagan, July 29, 2014;
photo courtesy U.S. Navy

By Earl Perkins
Thursday Review features editor

The U.S. Navy's multi-million dollar bribery scandal may well reach higher in the ranks, but on July 17 a retired officer was allowed to plead guilty to arranging kickbacks to an Asian defense contractor, according to the Washington Post.

Edmond A. Aruffo retired as a lieutenant commander in 2007 after serving 20 years in the Navy, but has now made a deal with federal prosecutors in San Diego which includes pleading guilty to one count of conspiracy to defraud the U.S. government.

Following his retirement, Aruffo worked three years as an executive with Glenn Defense Marine Asia. The Singapore-based contractor supplied and serviced Navy ships at ports throughout Asia until the bribery charges emerged last September. GDMA was a long-time provider of port services to the Navy. Three other men had previously pleaded guilty in the case—another GDMA executive, a Navy petty officer and a senior agent with the Naval Criminal Investigative Service.

Three others await trial, including two Naval officers and the company's president, Leonard Glenn Francis, whose colorful moniker in Navy circles is "Fat Leonard."

When the rich and powerful are caught with their hands in the cookie jar, America often allows the chosen ones to retire and retain their pensions while underlings are left to take the fall. The military and private sector are similar in this respect. Other countries don't worry about doing the right thing—the people in charge make decisions and everybody else lives with them.

With the advent of sophisticated computers, technology, records documentation, cell-phone cameras and whistleblowers, this nation's potential future changes almost constantly. With America's "me now" attitude, huge egos, and penchant for borrowing massive sums of money, I don't see a positive ending to this movie.

Transparency can be a good thing, but it becomes problematic when the whole world knows exactly what rules we are forced to live under. This country is an open book, giving every other nation and its agents the potential to exploit our weaknesses.

With the extremely strict chain-of-command enforced by the Navy, it would be almost impossible for Aruffo to have personally orchestrated this huge affair without raising massive suspicions long ago. Two admirals and two captains are still under investigation, although they have yet to be charged with a crime.

Aruffo's plea agreement states that he arranged an elaborate kickback scheme in Japan from July 2009 to September 2010, eventually defrauding the Navy of between $1 million and $2.5 million.

The career Navy man was GDMA's country manager in Japan, evidently conspiring with Japanese subcontractors to overbill the Navy for basic services when its ships docked there. He named 19 different vessels that were involved in the scheme. He and GDMA used much of that money to provide meals, drinks and gifts to Navy officers, although the plea agreement didn't list specific amounts.

“This corruption scandal continues to lead us in new directions, and we continue to marvel at the extent of it,” said Laura E. Duffy, U.S. attorney for the Southern District of California.

Prosecutors had previously charged Francis and his employees with overbilling the Navy more than $20 million for services supposedly performed in Malaysia, Thailand and nearby nations. You wouldn't exactly call Francis a Navy groupie, but admirals and commanders throughout the Pacific knew him well through his lavish gifts and VIP parties. Fat Leonard and his company stand accused of swapping cash, luxury travel and prostitutes for inside information that allowed him to win bids for government contracts.

Francis has pleaded not guilty to all charges, but Aruffo is the second man who worked for him to admit committing crimes while working for GDMA. Aruffo evidently saw the handwriting on the wall and approached the Navy in hopes of receiving a reduced sentence for turning on his old boss. Prosecutors filed court records last fall that mentioned the involvement of a retired officer with the same initials.

Gary Bruckner, Aruffo's San Diego-based attorney, has not responded to an e-mail seeking comment concerning the accusations. He was held under a $40,000 bond pending sentencing. Aruffo served as an officer on the USS Blue Ridge—flagship for the 7th Fleet and thus responsible for Naval operations throughout much of the Asia-Pacific region.

The stench had continued to emanate from the scandal involving classified data on May 20, when another third sailor pleaded guilty to accepting cash and luxury goods in return for data. Petty Officer First Class Dan Layug said he accepted $10,000 in cash, travel and a "bucket list" of video games and gadgets from a foreign defense contractor in exchange for providing classified information, according to the San Diego Union-Tribune.

Layug, 27, was assigned to the U.S. Navy Fleet Logistics Center in Yokosuka, Japan when the indictment was handed down. Prosecutors have also charged three other officials who served on the Blue Ridge with accepting bribes from Francis.

He received an iPad 3, a Nikon digital camera, a Blackberry, a VAIO computer, a PSP gaming unit and a Wii gaming unit. Appearing in San Diego Federal Court, he admitted to sending the "list" to Francis and accepted $1,000 per month, along with luxury hotel stays for himself and others in Malaysia, Singapore, Indonesia, Hong Kong and Thailand.

“Today, U.S. Navy Petty Officer First Class Dan Layug admitted that he swapped classified U.S. Navy information for cash, luxury travel perks and electronic gadgets from a defense contractor,” said Acting Assistant Attorney General David A. O’Neil of the Justice Department's Criminal Division. “In taking these under-the-table bribes, Layug put his own financial interests above those of the Navy and the country he vowed to serve. The Criminal Division, with our law enforcement partners, is committed to holding responsible those who were part of this massive fraud and bribery scheme that cost the U.S. Navy more than $20 million.”

U.S. Attorney Duffy took an especially strong stance on prosecuting Layug, but she extended him a plea deal while diligently gathering more facts concerning the investigation.

"Every service member is entrusted with the enormous responsibility of protecting this country at all costs," she said. "Because of greed, Daniel Layug fell woefully short of that high calling, and this guilty plea holds him accountable for a painful betrayal."

And it's probably in your best interest to think before you write e-mails seeking bribes from government contractors. I'm sure Layug winced when he was called to the stand concerning his actions.

"What are the chances of getting the new iPad 3? Please let me know," he emailed to his GDMA contact, along with the list of gadgets he wanted including "a high-end camera, an iPhone 5 cellular phone, a Samsung S4 cellular phone, and an iPad Mini.

"The camera is awesome bro! Thanks a lot! Been a while since I had a new gadget!" he wrote after receiving the goods.

Layug pleaded guilty to one count of conspiracy to commit bribery, and faces a lengthy jail term, along with a $250,000 fine or twice whatever he received from his bribery activities--whichever is greater. Government investigators estimate the scheme cost the Navy $20 million in excessive charges from GDMA for its port services.

“Petty Officer Layug sold sensitive Navy information for monetary gain,” said NCIS Director Andrew Traver. “In doing so, he compromised the integrity of his position and the safety of his shipmates. NCIS will continue to work with DCIS and the U.S. Attorney's Office in investigating and prosecuting these crimes to the fullest extent possible.”

Related Thursday Review articles:

Fat Leonard and the U.S. Navy; Earl Perkins; Thursday Review; March 20, 2014.