FROM: U.S. JUSTICE DEPARTMENT
Thursday, July 3, 2014
Former U.S. Navy Officer Pleads Guilty in International Bribery Scandal
Defendant Admits Overcharging Navy by up to $2.5 Million for Port Services in Japan
A retired Navy official who started a second career working for defense contractor Glenn Defense Marine Asia (GDMA) pleaded guilty in federal court today, admitting that he and others overcharged the Navy by up to $2.5 million for port services to American ships and then used some of the proceeds to treat Navy officials to lavish dinners, cocktails and entertainment.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Laura E. Duffy for the Southern District of California, Director Andrew L. Traver of Naval Criminal Investigative Service (NCIS) and Acting Deputy Inspector General of Investigations James R. Ives of the Department of Defense (DCIS) made the announcement.
“There is an old Navy saying: ‘Not self, but country.’ Edmond Aruffo instead put self before country when he stole from the U.S. Navy as part of a massive fraud and bribery scheme that cost the U.S. Navy more than $20 million ,” said Assistant Attorney General Caldwell.
“This corruption scandal continues to lead us in new directions, and we continue to marvel at the extent of it,” said U.S. Attorney Laura Duffy. “If there are others who, like Edmond Aruffo, have traded integrity and honesty for greed and profit, we will find them and prosecute them.”
“Retired U.S. Navy Lieutenant Commander Edmond A. Aruffo, who previously held a position of trust and responsibility conferred on him by the Navy, betrayed his former service for personal gain by rigging invoices and deserves to be held accountable for his criminal actions,” said Director Traver. “NCIS will continue to work with DCIS and the Department of Justice in vigorously investigating and prosecuting these crimes of corruption and fraud.”
“The guilty plea of Edward Aruffo is part of an ongoing effort by the DCIS and its law enforcement partners to bring to justice individuals who seek to illegally enrich themselves at the expense of U.S. taxpayers,” said Acting Deputy Inspector General Ives. “While the vast majority of DOD contractors engage in lawful business practices, a few are driven by greed to break the law. Those who do will be caught and punished. American taxpayers will accept nothing less.”
Edmond A. Aruffo, who retired in 2007 at the rank of lieutenant commander after a military career spanning more than 20 years, is the seventh defendant charged – and the fourth to plead guilty – in the expanding corruption scandal involving GDMA’s illicit relationships with Navy officials. GDMA is a Singapore-based contractor that has serviced Navy ships and submarines in the Pacific for decades.
Aruffo, who became manager of GDMA’s Japan operations in 2009, entered his plea before U.S. Magistrate Judge Karen S. Crawford of the Southern District of California to a single count of conspiracy to defraud the United States. Aruffo’s bond was set at $40,000; however, he indicated to the court he not post bond and immediate self-surrender. A sentencing hearing was scheduled for Oct. 3, 2014, at 9 a.m. before U.S. District Judge Janis L. Sammartino of the Southern District of California.
According to court documents, GDMA owner and CEO Leonard Francis enlisted the clandestine assistance of Navy personnel – including Commander Michael Vannak Khem Misiewicz, Commander Jose Luis Sanchez, NCIS Special Agent John Beliveau and Petty Officer First Class Daniel Layug – to provide classified ship schedules and other sensitive information about an ongoing criminal investigation of GDMA. Court documents also allege that Francis and his cousin, GDMA executive Alex Wisidagama, conspired to defraud the United States through a number of overbilling schemes. In total, GDMA allegedly overcharged the Navy under its contracts and submitted bogus invoices for more than $20 million. Wisidagama, Beliveau and Layug have pleaded guilty while the others are awaiting trial.
According to Aruffo’s plea agreement, Aruffo was hired by GDMA’s Francis, who is accused of bribing Navy personnel with cash, luxury travel, expensive meals, consumer electronics and prostitutes in exchange for classified and proprietary information to win contracts and favorable treatment for his company.
According to the plea agreement, Aruffo was serving as the operations officer of the USS Blue Ridge when he met Francis. GDMA was providing “husbanding” services, such as tug boats, harbor pilots, trash removal, line handlers and transportation to that ship and numerous others.
In the plea agreement, Aruffo admitted that he and others defrauded the U.S. Navy in connection with charges for port services provided to nearly every Navy ship that came to port in Japan from July 2009 to September 2010.
As part of its contract with the Navy, GDMA was required to coordinate various vendors to provide port services for the Navy ships. Those vendors were to submit invoices directly to the Navy, rather than through GDMA.
The plea agreement said that Aruffo and others obtained letterhead from the Japanese vendors and used it to prepare bogus invoices which inflated the cost for services by tens of thousands of dollars. Aruffo admitted he arranged kickbacks to GDMA from the vendors, once they were paid by the Navy.
For example, according to the plea agreement, in February of 2010 the USS Lake Erie visited the port of Sukomo, Japan. Aruffo arranged for a Japanese vendor to provide a variety of husbanding services. The vendor invoiced the Navy $145,229.77 – an amount inflated by about $50,000, which the vendor ultimately gave to GDMA as a kickback.
A few days later, Aruffo arranged for another Japanese vendor to provide such services to the USS Blue Ridge at the port of Otaru, Japan, the plea agreement said. The vendor billed the Navy in the amount of $432,476.14 and then kicked back $204,961.20 to GDMA.
The ongoing investigation is being conducted by NCIS, DCIS and the Defense Contract Audit Agency. The case is being prosecuted by Director of Procurement Fraud Catherine Votaw and Trial Attorneys Brian Young and Wade Weems of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Mark Pletcher and Robert Huie of the Southern District of California.
