COOPERATING WITNESS SPILLS THE BEANS IN NAVY GOVERNMENT CONTRACTING FRAUD CASE
High Ranking Civilian Contracting Official Latest to Be Arrested in Largest Military Government Contracting Fraud Case in U.S. History
ABC News recently reported that on Monday February 2, 2015, the U.S. States Attorney’s Office in San Diego filed a criminal complaint against Paul Simpkins, a former Department of Defense Civilian Official who oversaw Navy contracts for Southeast Asia, charging him with one count of conspiracy to commit bribery in federal court in San Diego. According to a U.S. Justice Department Press Release Simpkins, 60, was arrested by federal authorities in Haymarket, Virginia, on February 3, 2015, and was arraigned in United States District Court for the Eastern District of Virginia. According to the criminal complaint a “confidential witness,” who has already pleaded guilty in this ongoing government contracting fraud and bribery probe involving Glenn Defense Marine Asia (“GDMA”) Ltd., provided information to federal investigators which implicated Simpkins. See my blog on January 23, 2015 “Government Contractor Pleads Guilty to Bribery & Fraud.”
The GDMA investigation involves an elaborate kickback scheme which rewarded military officers and civilian officials working for the Navy with cash, high class prostitutes, first class accommodations, and other luxury perks in exchange for steering ships toward piers owned by GDMA. In some instances U.S. military officials even provided GDMA with classified information regarding the whereabouts of U.S. Navy ships, which were out at sea. Federal prosecutors and agents with the Defense Criminal Investigative Service (“DCIS”) say that the confidential witness’ accounts are backed up by documents uncovered in their investigation. The San Diego Chronicle reported that the cooperating witness is likely the CEO of GDMA Leonard Francis, a/k/a “Fat Leonard”, who pleaded guilty in January 2015, and is reportedly cooperating with the government in this investigation. If convicted of conspiracy to commit bribery, in violation of 18 U.S.C. Section 371, Simpkins faces a maximum sentence of five years in prison and a fine of up to $250,000. Simpkins pleaded not guilty at presentment before a federal magistrate judge and denies these charges. Reuters reported that seven defendants have already pleaded guilty thus far in this far-reaching and now further widening investigation. USA Today reported an estimated three dozen Navy admirals were under investigation in this case and two of them have had their national security clearances revoked. The Washington Post reported on February 10, 2015 that three other admirals were issued letters of censure by the Secretary of the Navy, but those three admirals will not face criminal charges.
According to the criminal complaint, the cooperating witness has a 30 year old criminal conviction for a firearms related offense in a foreign country. The Chronicle reported that Francis, who lives in Singapore, was convicted approximately 30 years ago in Malaysia for unlawful possession of two firearms and ammunition without a license. The cooperating witness told federal authorities that beginning in 2006, Simpkins agreed to exercise his influence to steer ships to ports owned by GDMA in Thailand and the Philippines in exchange for cash payments and other things of value. Simpkins has held several high level positions in the Navy over the years including: Supervisory Contract Specialist at the U.S. Navy Regional Contracting Center in Singapore from 2005 to 2007, and Manager of the Department of Defense Office of Small Business Programs from 2007 to 2012. While working in Singapore, Simpkins was responsible for supervising Navy contracts with local companies within Southeast Asia which provided so-called husbanding services to docked Navy ships such as food, fuel, and waste removal.
The cooperating witness alleges that Francis initially met Simpkins in a Singapore hotel bar and offered Simpkins a $50,000 bribe. Simpkins, however, rejected that amount. According to the criminal complaint Francis ultimately paid Simpkins $150,000 as an initial bribe. Thereafter, Francis made large payments to Simpkins allegedly by simply wiring the money to Simpkins’ wife’s bank account. According to a DCIS investigator’s sworn affidavit filed in court, Simpkins used the e-mail account of a mistress to communicate with Francis and to direct Francis to certain bank accounts where the bribery payments were deposited. Moreover, e-mails referenced by federal investigators show that even after Simpkins returned to the United States to work, he kept in touch with Francis and offered to help Francis in the area of “law and litigation” and expressed a willingness to introduce Francis to other “even higher ranking” Navy officials. Prior to a 2012 trip to Singapore, Simpkins allegedly requested Francis treat him to some prostitution services. Simpkins allegedly wrote to Francis in an e-mail, “Can u set up some clean, disease frees women when I am there?” Francis allegedly confirmed in reply, “honeys and bunnies.”
Beyond steering contracts to GDMA, Simpkins allegedly enabled Francis to further perpetuate his government contracting fraud by covering up Francis’ overbilling schemes, once GDMA landed Navy contracts. For example, The Chronicle reported that Simpkins intervened in an oversight review of GDMA’s invoices for suspected overbilling. Simpkins allegedly told a subordinate, “Do not request any invoices from the ship . . . Do not violate this instruction. Contact the ship and rescind your request.” The complaint also alleges that Simpkins overruled a lieutenant’s request to open up one of GDMA’s contracts for rebidding because the Navy was being overcharged by GDMA. ABC News reported that at one point, Simpkins allegedly instructed U.S. Navy personnel in Hong Kong to stop using meters to monitor the volume of liquid waste GDMA was removing from Navy ships. The cooperating witness has likely agreed to provide authorities with information about others involved in this government contracting fraud and bribery scheme in hopes of receiving a reduced sentence.
There are often many benefits to cooperating witnesses. If the government agrees that the information and assistance provided by the cooperating witness has been of great value in pursuing their case, at sentencing federal prosecutors will seek what is known as a 5K reduction, under the U.S. Voluntary Sentencing Guidelines. 5K reductions make a cooperating witness eligible for a sentence which downwardly departs from the applicable sentencing guideline range. Another tool available to the government for cooperating witnesses is a Rule 35 sentencing reduction under the Federal Rules of Criminal Procedure. Under Rule 35, the government may ask for a reduced sentence because of cooperation a defendant has provided to the government.
5K reductions are generally sought if cooperation is completed before sentencing by the court. Rule 35 motion reductions are typically sought if cooperation is completed after sentencing took place. Finally, cooperating witnesses in extremely rare circumstances can be offered immunity from prosecution. Under this scenario, a cooperating witness agrees to testify and/or provide information to the government with the promise of no prosecution of the witness. Such arrangements often only occur where the witness has extremely valuable information and the information is not available to the prosecution through any source other than the witness. 5K reduction and Rule 35 reduction requests are made at the discretion of the government. Ultimately, sentencing is determined by the presiding judge who is not bound by the recommendation of the federal prosecutor or the defense attorney. Additionally it is important to note that cooperating witnesses sometimes risk exposing themselves to physical harm in retaliation for their cooperation.
Anyone who is under investigation for bribery and/or government contracting fraud should contact an experienced white collar criminal defense attorney to evaluate your case, weigh the evidence against you, and consider all of your potential defenses. Moreover, anyone charged with a crime who believes he or she has valuable information that could materially assist federal prosecutors should speak with your lawyer about your options as a potential cooperating witness; and whether cooperation is advisable in your particular case and circumstance.