US prosecutors allege that Glenn Defense Marine, which has serviced and supplied navy ships and submarines at ports in Asia and the Pacific for 25 years, routinely overbilled for everything from tugboats to fuel to sewage disposal.
Phuket has been named as one of two ''pearl'' ports where the alleged conspirators could make the most cash from their underhand activities.
Investigators are known to have spent time on Phuket tracing the activities of the chief executive of the Singapore-based defense contractor, Glenn Defense Marine Asia, and men in uniform who allegedly help him cream off millions of dollars.
Since 2011, Glenn Defense Marine has been awarded Navy contracts worth more than $200 million, the Post says. How much of that was scammed is what the investigation will determine.
Retired Admiral Gary Roughead, a former chief of naval operations, told the newspaper that the allegations were ''extremely serious, disconcerting and surprising.''
One accused US Navy officer, Commander Michael Misiewicz, called Glenn CEO Leonard Glenn Francis ''Big Bro.'' Francis is 6-3, weighs 350 pounds and is known in Navy circles as ''Fat Leonard,'' court papers say.
In exchange for prostitutes, travel and other favors, federal authorities allege Misiewicz provided Francis with classified information about ship movements and steered vessels to specific Asian ports.
Court papers also make references to other, unnamed Navy officers who accepted favors from Francis, an indication that the investigation remains in its early stages.
Under arrest as well is Glenn Defense Marine's general manager for global government contracts, Alex J. Wisidagama.
He was charged with fraud and remains in custody.
Phuket has become a popular destination for shore leave and has hosted several US aircraft carriers and warships from time to time over the past few years.
Leonard is alleged to have been keen to have vessels diverted to Phuket and a port in Malaysia where accounts could be easily rigged.
Laura E. Duffy, the US attorney for the Southern District of California, said the investigation was continuing: ''The significance of the case is that it involves huge sums of money, a wide range of players, a long period of time and a number of countries.''