TODAY   |  November 07, 2013

3rd Navy official arrested in bribery, prostitution scandal

Federal officials say U.S. Navy Cmdr. Jose Luis Sanchez was arrested on charges of accepting prostitutes, luxury travel and cash from a foreign defense contractor, the latest development in a Navy scandal that is reaching high into the officer corps. NBC News’ Jim Miklaszewski reports.

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>> with a widening bribery scandal that's rocked the u.s. navy .

>> it certainly has. this one they say the scandal reached high into the navy's officer core. if massive overbilling scheme run by an asian contractor allegedly provided prostitutes, cash and kickbacks in exchange for information. nbc's chief correspondent jim miklazewski has the story.

>> reporter: it's a scandal that stretches from the u.s. to southeast asia . three navy officials have been arrested and it's cost the u.s. navy millions. at the center of this scandal is leonard frances , owner of a singapore-based company that provides dock ships to navy warships. they accuse frances of bribing navy officials with large sums of cash, prostitutes and even tickets to lady gaga to steer the navy's business his way. prosecutors claim in one year alone, frances , aka fat leonard bill accounted the navy out of $10 million. navy commander is charged with accepting bribes. in a speech to his high school in illinois this year, he told students he couldn't be prouder to be an american.

>> we cannot let our guard down.

>> reporter: a second commander, jose sanchez is accused of accepting $100,000 and after provided with prostitutes allegedly sent frances a facebook message, yummy, daddy like. a navy criminal investigator is accused of providing frances with details of the navy's investigation. all the defendants have pleaded not guilty, but if convicted, could face up to five years in prison. jim miklazewski, nbc news, the pentagon.