Leland was said to have served in Vietnam and it was this conflict that caused him to become unstable after one of his own soldiers tried to shoot him, making his disillusioned with the current military - which in part fueled his desire to rebuild the military in his own image: he saw the toy factory as his chance to do just this.
Leland was also insane - which was demonstrated several times in the film, such as when he was inspecting an arcade full of violent war-games of his own making and tested one out for himself: he grew angry when he lost 1000 points due to shooting a UN Truck in the video-game and went on a rampage as he loudly declared his hatred for the UN - "always showing up where they aren't wanted".
Leland also gradually changed the toy factory from its original utopian look (a bit like Willy Wonka's Chocolate Factory) into a dark dystopia - when the heroes of the story band together to stop him he goes completely insane and attempts to outright murder them using many modified toys that act as military-grade weapons.
It is revealed that Leland's ultimate goal was to brainwash children via violent video-games into unwittingly fighting wars for him, stating that to them it would just be "another game" - making him an evil genius.
In the end Leland was defeated when one of his own creations, known as the Sea Swine, malfunctioned and attacked him - putting him in hospital: this coupled with his previous abuse of power resulted in him losing the business, which was passed on to Leslie, who discontinues the war-project and returns the factory to its original purpose.
- Leland is quite similar in many ways to the DC villain, Toyman, in regards that both utilize toys as deadly weapons.