US Navy Corruption and the Fall of Fat Leonard
How Gucci bags, prostitutes and fancy dinners allowed one Malaysian businessman to bilk the US government out of millions
Did you know that Navy officers took cash, prostitutes and more from a defense contractor who bilked the US government out perhaps hundreds of millions?
Tom Wright (@TomWrightAsia) is the co-author of the Billion Dollar Whale (about Malaysia’s other most famous conman, Jho Low) and the creator of the recent Fat Leonard podcast, the product of reporting coupled with Tom’s extensive interviews of Fat Leonard. See below for a transcript of our conversation.
Transcription and editing by Callan Quinn.
Fat Leonard makes fat profits
Jordan Schneider: Let's take a step back. Who is Fat Leonard and how did he get involved in helping out the US Navy sail around southern Asia?
Tom Wright: Fat Leonard - that was what he was called, it's not what I'm calling him - was in husband engagement. Husbanding is an old term from the 1800s or even earlier. When a ship would go to a repair yard, the ship repairer was called a husband.
These are people who provide food, fuel and security to US Navy ships when they're not at their home port.
When the US Navy is at San Diego, Hawaii or a permanent base, it doesn't need these people. Sometimes it will go into a government port like in Singapore, where the Singapore government organizes it, but in many places, they need a husband and contractor to do all the work. And don't forget: these aircraft carriers have 5,000 people.
Leonard became the monopoly in the Pacific and Indian oceans for this job, a huge operator who ended up living in a $130 million mansion with 20 luxury cars.
Jordan Schneider: Where did Leonard start? What was his background?
Tom Wright: Leonard came from a family that had done this work for commercial ships. He comes from Penang in Malaysia, a small island off the northwest coast of Southeast Asia.
Leonard had an abusive childhood. He was a wild kid and he goes to jail as a young man for an armed robbery. But he ends up taking over the family business when he comes out of jail. He's an incredibly good networker.
He takes out the wives of Naval attachés in Kuala Lumpur, the capital of Malaysia, and gets to know them. He starts to win Navy business for his family firm, and that's the beginning of the wild rise that we chart in the early episodes of our podcast. He's almost like a Jordan Belfort, Wolf of Wall Street type.
He ends up quite wealthy but this all gets supercharged after the attacks on the USS Cole warship in 2008.
Jordan Schneider: Al-Qaeda took the equivalent of rowboats, filled them with explosives, put them next to a Navy ship and blew it up. Lots of people died.
These ships were designed to fight the Soviet Union in the Arctic sea, not necessarily to deal with insurgent-type attacks. And that changed the dynamic of protection.
I enjoy putting ChinaTalk together. I hope you find it interesting and am delighted that it goes out free to eight thousand readers.
But, assembling all this material takes a lot of work, and I pay my contributors and editor. Right now, less than 1% of its readers support ChinaTalk financially.
If you appreciate the content, please consider signing up for a paying subscription. You will be supporting the mission of bringing forward analysis driven by Chinese-language sources and elevating the next generation of analysts, all the while earning some priceless karma and access to an ad-free feed!
Tom Wright: I was referring to the mom and pop operators that did this before Leonard. Small operators didn't have equipment [for protection]. The US Navy had had a huge base in the Philippines that they could rely on but the Filipino government shut it in the early nineties.
That created this great opportunity for Leonard to come in and to build up other ports that the Navy could go to, including Bali and a port in Thailand. The Navy was starting to require much greater security for its ships, not just on the port side but at sea. They didn't want another attack.
Leonard starts to provide this thing called the Ring of Steel, which was a collection steel barges that he would move around the outside of the Navy.
He ended up charging hundreds of thousands of dollars, if not millions of dollars, for that service each time a ship would come in.
Douglas MacArthur Hotel orgies
Jordan Schneider: Back to our narrative. Fat Leonard is providing resources that the Navy needs, but he's also ingratiating himself with Navy-enlisted folks up and down the chain of command.
What sort of common threads do you see in the vulnerabilities of the Navy folks who ended up playing ball with him?
Tom Wright: The thing that's amazing about this is how easy it was to corrupt the Navy officers. We've talked before about how Leonard did a good job. I think his reason for talking to me before being sentenced was that he wanted to get across the fact that he did a good job.
With the Ring of Steel protecting the Navy and 180 boats in his flotilla that would service the Navy, there was nobody else able to offer these services.
But then in the mid-2000s, with the wars in Iraq and Afghanistan raging and all these contracts coming in to protect and to service the fleet, Leonard starts to build what we call a mafia network at the heart of the Seventh Fleet.
Jordan Schneider: The amount of toxic masculinity in every dimension of this story is just horrifying. One of the other anecdotes was the idea of both giving these people prostitutes as well as giving them bags to give to their wives, and using the wives as bait to find other folks.
Tom Wright: They call it shaping, trying to give gifts to wives that they can give to their husbands to shape them and see if they're willing to come into the conspiracy. We talked to people who were in the Seventh Fleet who weren't in the conspiracy and they didn't know this was going on.
They were careful about working out whether people were willing to receive gifts. One way they did that was to see if their spouses were willing to receive Chanel or Gucci handbags.
One of them was Michael Misiewicz. His wife, Marcy Misiewicz, talks on multiple episodes about this. She was given a Gucci handbag by Michael but she didn't know it was from Leonard.
She ends up becoming a very important part of the narrative because she doesn't get drawn into the whole thing like the other Navy spouses. It's not everyone in the US Navy, of course, but it was a big swathe of people.
Jordan Schneider: I love how they say they didn’t know they were prostitutes, and believed that these women thought they were handsome.
Tom Wright: They don't even admit that they slept with prostitutes. The thing you're referring to is when they say things like “if they were prostitutes, they didn't present themselves to me as such.”
I mean, is it surprising to people that Navy seamen go to bed with prostitutes? Absolutely not. That is what has happened since the beginning of time. But what's going on here is that it's becoming institutionalized and it's the contractor organizing the prostitutes.
Sometimes he's organizing orgies. The podcast begins with him organizing an orgy in the Manila Hotel where Douglas MacArthur stayed during the second world war.
Jordan Schneider: Let's take the story forward a little bit. How does the Navy and then ultimately the DOJ and the FBI start to wrap this up?
Tom Wright: You're probably thinking how the hell did this continue for long? How has this guy ripped off the US Navy for so long?
People did make complaints. We talked to a whistleblower in one of the episodes. He was in Hong Kong and he complained about the high costs Leonard was charging for fresh water when the boat could only take half of [the capacity purchased]. He gets ignored.
People made complaints to the NCIS, which is the Naval investigative body. None of those investigations went anywhere. One of the reasons is that Leonard was doing a good job.
No one could replicate what he was doing. And everyone's getting laid and having dinners and parties in every port.
He got arrested in 2013 in San Diego, but the Navy has never really explained what happened because this whole story is such an embarrassment. But we were able to understand through our reporting the sequence of events that led to Lennon's arrest.
Michael Misiewicz, who'd been corrupted by Leonard, ends up abusing his wife Marcy and pushing her up the stairs and she ends up taking it to the Seventh Fleet command. Michael's put on the ship to keep him away from the family, who are living in a house on the base in Japan.
Eventually, she gets sick of it. She knows Michael's having affairs and hanging out with Leonard. Marcy ends up going to the NCIS with her concerns about her husband. Then she talks about the Gucci handbag that she got. She hands over emails and credit card statements.
Leonard, Desmond and Jho Low
Jordan Schneider: Tom have you read Red Roulette?
Tom Wright: I have. It's wonderful.
Jordan Schneider: How would you compare and contrast Fat Leonard and Desmond Shum?
Tom Wright: If you compare his story to Leonard’s, I'd say it's different. Fat Leonard did do a good job in many ways, right? He did provide a lot of things. But he ends up charging millions. That’s where it’s a ripoff.
Whereas in the case of Red Roulette, they build that city that they're planning to do and all this but I'm not sure of where the economic business good is in the Red Roulette story.
Jordan Schneider: My other comparison is that Desmond realizes that this is all stupid and fake and that it’s just a gross game. The way he frames it at least is that he wanted to go clean and be a businessman and do private equity stuff.
Fat Leonard seems like a psychopath. Sure, had this very traumatic childhood. But he's doing horrible things to the parents of his children. On the other hand, I think Desmond knows how to relate to human beings in a somewhat more healthy way, which was my big takeaway.
Tom Wright: That's true. And the big difference is that that's he’s written a tell-all book about the utter corruption at the heart of the Chinese political system, which is incredibly useful to everyone. Who else is in a position to do that?
Jordan Schneider: Why did Leonard agree to talk to you?
Tom Wright: Leonard was arrested in 2013 during a sting in San Diego. They pretended they were calling him in to discuss more contracts and they ended up arresting him in the Marriott hotel. He's been cooperating ever since with the government as a star witness in the cases against all the other Navy officers who were corrupted by him.
He admits to all the corruption in the same way that Desmond Shum writes about the corruption, but whereas Desmond Shum saying it was all terrible, Leonard tries to spin it that he did a great job.
It was amazing that he decided to talk for this podcast because it's not good for him. He's not been sentenced and the government will be very angry with him.
But he has kidney cancer, and that's another reason that he may have decided to talk. He's not in good health.
Jordan Schneider: Was your emotional valence throughout doing these interviews?
Tom Wright: Leonard is a is a fascinating character. He's very charming on many levels when you're talking to him. And as you listen to the podcast, you'll be charmed by him. I think at many points you'll almost be rooting for him.
Jordan Schneider: I wasn't rooting for him at all.
Tom Wright: I think what you could say is at least you don't hate him at the earliest stages.
[But then I] started to find out things about his cruelties to women, including the mother of his children. I started to have a real problem with this guy. He talks very openly and in a misogynistic way about how the mother of his child was just a mistress who he fired.
I had to keep the interviews going even though I was personally troubled by what I was learning about him as we were going forward.
Jordan Schneider: I did a show with Lizzie Li and Mike Forsyth about Red Roulette. And one point that Mike made was that if Chinese journalists were allowed to dig around, the number of comparable stories that they would be able to find - not just in the PLA but across the entire system - would just be horrifying.
It's fascinating, right? You get these little glimpses every once in a while, throughout the anti-corruption campaign in particular there were show trials, but you never get the “what does this mean about the institution” [side of it].
Tom Wright: The corruption in China is very deep. Jho Low, the fraudster at the center of the 1MDB scandal, went on the run and is now living in China [editor’s note: his exact location is not known, but at one point was confirmed as being in Macau].
The reason he went to China after he was exposed was that he was given protection. Jho Low was involved in corrupt Belt and Road deals in Malaysia.
We know about this because somebody on the Malaysian side took minutes of a meeting in Beijing in 2016 where they discuss all these corrupt deals they're going to do.
Check out the full ChinaTalk podcast episode on Fat Leonard, Orgies, US Navy Corruption and The Fall of Fat Leonard, here.
Have thoughts, comments or ideas you want to share about this week’s ChinaTalk? Leave your feedback in the comments!
Thanks for reading,
Jordan