FBI & NCIS EXPOSE $140M Navy Fuel Scheme — 19 Indicted, 9 San Diego Terminals Raided

6:22 a.m. January 14th,    2026. Naval Base Point Loma, San Diego, California. A gray government sedan pulled through the security checkpoint at the main gate. The driver showed credentials. The guard waved him through. Inside, Special Agent Damon Kraus, Naval Criminal Investigative Service, 14 years on the job.

 In his jacket pocket, a folded printout. One page from a compliance audit flagged 3 days earlier by a Pentagon logistics contractor. The number on that page was 3,847,000 gallons of JP-5 jet fuel that couldn’t be reconciled with delivery manifests across 14 months of operations. Estimated value at wartime contract prices, $140 million.

Kraus parked near the fuel receiving station and sat for a moment. He’d worked contractor fraud before. Payroll inflation, ghost vendors, overbilling on parts. This was different. This was fuel that never arrived. And somebody had been signing off on it. What Kraus didn’t know yet, couldn’t have known from a single page, was that the missing fuel wasn’t missing at all.

It had been redirected, methodically, systematically, across nine separate commercial petroleum storage terminals operating within a 40-mile radius of Naval Base Point Loma. It had been sold on the commercial maritime market. Some of it moved through brokers whose names would later appear on OFAC watch lists.

And at the center of it, two active-duty Navy warrant officers whose authorization signatures appeared on every falsified delivery confirmation in the chain. The investigation that would unfold over the next 14 weeks was code-named Operation Drydock. It produced 19 federal indictments, 11 search warrants executed simultaneously, and one of the largest military fuel fraud prosecutions in San Diego federal court history.

It began with a phone call. And before that, with a civilian fuel dispatcher in Chula Vista who decided on a Tuesday morning in October 2025 that he wasn’t going to sign his name to something he knew was false. His name was Ernesto Villanueva. He was 43 years old. He had worked in petroleum logistics for 19 years.

On the morning of October 7th, 2025 he drove to the NCIS field office on Rosecrans Street and asked to speak to an agent. Villanueva managed dispatch operations for Coastal Pacific Fuel Services. A mid-tier petroleum storage and distribution company out of Chula Vista. The company held a secondary subcontract under a primary Defense Logistics Agency fuel delivery contract supplying JP-5 to Naval Base Point Loma as part of a consortium of regional suppliers.

 On the surface, the arrangement was standard. The DLA had used tiered subcontracting for fuel logistics for decades. Dozens of companies participated. Oversight was distributed across multiple layers of contracting authority. That distribution of oversight was the vulnerability. Villanueva had noticed the discrepancies 6 weeks earlier.

 In late August 2025, he started receiving delivery orders that didn’t match the volumes he was being asked to document. Trucks were leaving the terminal with payloads recorded on official manifests. The volumes on those manifests were accurate for what the trucks were carrying. What the manifests didn’t reflect was what had already been removed before the trucks were loaded.

 The math didn’t work. Villanueva would later tell investigators, “We were supposed to receive a certain amount from the pipeline. We were supposed to deliver a certain amount to the base. Every week the numbers balanced on paper, but I knew what was in the tanks, and the tanks weren’t holding what the records said they were holding.

” He raised it with his supervisor. The supervisor told him there were calibration issues with the monitoring equipment. Villanueva accepted that for 3 weeks. Then, in late September 2025, he was handed a manifest and asked to backdate it. The manifest was for a delivery that, according to Villanueva, had never occurred.

 It was pre-populated with a delivery date of September 4th. He was being asked to sign it on September 29th. He asked why. His supervisor told him to just sign it. Villanueva took the manifest home that night. He sat at his kitchen table and looked at it for a long time. He thought about his 19 years in the industry. He thought about what his signature on that document would mean.

 The next morning, he didn’t go to work. He drove to the NCIS field office on Rosecrans Street. The agent who took Villanueva’s statement was special agent Renata Okaphor. Nine years with NCIS, assigned to the economic crimes unit at the San Diego field office. She was not expecting what she heard. What she expected was a relatively contained fraud complaint.

 A single company, possibly a supervisor, skimming from a delivery contract. Standard white-collar case, 6 to 12 months of investigation, a handful of indictments. What Villanueva described was something else. According to Villanueva, the volume being diverted wasn’t occasional. It wasn’t an opportunistic skim. It was systematic, structural, built into the delivery schedule.

 Based on what he described, the frequency of deliveries, the size of the discrepancies, the duration of the pattern, Okafor calculated on her notepad during the interview that the potential scale was in the tens of millions of dollars. She excused herself after 40 minutes, walked to her supervisor’s office, and closed the door.

 Three days later, Niñas formally opened an economic crimes case. Four days after that, Special Agent Kraus at Point Loma received a memo requesting access to the base’s fuel receiving records going back to November 2024. The numbers confirmed what Villanueva had described. Across 14 months of documented fuel deliveries to Naval Base Point Loma, the reconciliation gap was not the result of calibration errors.

The shortfall was consistent. It averaged approximately 275,000 gallons per month. It showed no seasonal variation. It showed no correlation with operational tempo. It had every signature of deliberate, sustained diversion. The investigation pulled in agents from multiple federal agencies within the first 30 days.

 NCIS retained primary jurisdiction. The offense involved Navy property and active duty military personnel. The FBI’s financial crimes squad at the San Diego field office joined to handle the commercial side investigation. The terminals, the brokers, the downstream sale of diverted fuel. Homeland Security Investigations came in when OFAC connections were identified.

 The joint task force operated out of a nondescript office suite in Mission Valley. By mid-November 2025, the team had eight case agents, two financial analysts, and one Assistant United States Attorney assigned full-time. I spent hours going through the publicly filed court documents from this case, and one detail kept nagging at me.

The precision of the diversion scheme. This wasn’t improvised. It was engineered. And the engineering required insider cooperation that went far deeper than anyone initially assumed. The nine petroleum storage terminals at the center of Operation Drydock were not random. They formed a geographic cluster around the naval logistics supply chain: Chula Vista, National City, the Port of San Diego industrial waterfront, two sites in the Otay Mesa industrial corridor.

Each terminal was registered as a civilian marine fuel supplier. Each held valid state and local operating permits. Each had an established commercial customer base that provided legitimate cover for the volume of fuel moving through their facilities. The terminals were connected by ownership through a series of shell company structures that investigators would spend weeks unraveling.

 At the top, sat two holding companies: Pacific Basin Petroleum Holdings LLC and Meridian Marine Fuels Inc. Both were registered in Delaware. Both listed nominees as registered agents with no operational connection to the businesses. The actual ownership, traced through beneficial ownership filings, bank records, and financial forensics, led to three individuals, none of whom held any formal position at any of the nine terminals.

 The scheme worked like this. Fuel designated for delivery to Naval Base Point Loma entered the subcontractor pipeline through the DLA’s contracted delivery framework. Under the contract structure, primary contractors and their subcontractors were authorized to receive fuel into their storage terminals for temporary holding before delivery to the base.

Standard logistical practice, the base’s own storage capacity required staggered delivery rather than continuous flow. The terminals in the scheme used this holding period as the diversion window. Fuel was received at the contracted volume. Before the delivery trucks were loaded for base delivery, a portion of that fuel was transferred into separate storage tanks registered under civilian marine fuel inventory.

 Those tanks fed a completely separate distribution network serving commercial maritime customers, fishing vessels, commercial shipping, private charter operations, and as investigators would later discover, several vessels that DHS subsequently flagged for operating in Iran-adjacent shipping lanes in the Persian Gulf. What was loaded onto the trucks for base delivery was the remainder.

 The manifests were falsified to reflect the full contracted volume. The two active-duty Navy Supply Warrant Officers at Point Loma, Warrant Officer First Class Gerald Odum and Chief Warrant Officer Two Patricia Salazar, were the points of failure in the verification chain. They approved the manifests on the receiving end without physically verifying the actual delivered volume against the documentation.

The question investigators faced, were Odum and Salazar negligent or were they complicit? The answer came from their bank accounts. Financial forensics on both warrant officers were initiated in November 2025 under sealed subpoenas. What analysts found did not suggest negligence. Odom had received 37 wire transfers over 13 months from an LLC registered in Nevada, Pacific Rim Logistics Solutions, totaling $287,000.

The transfers were coded as consulting fees. Odom had no consulting business. He had no secondary employment disclosed on his military financial disclosure forms. Salazar’s transfers were more layered. They ran through two intermediaries before appearing as deposits to a joint savings account held with her husband.

Total received $194,000 over 11 months. The origination point, traced through correspondent banking records, was a commercial account at a San Diego branch of a regional bank held in the name of a company called Harborgate Marine Services. Harborgate Marine Services was one of the nine terminals. The task force now had what it needed for the conspiracy charge.

 What it needed next was the top of the structure. The three individuals whose beneficial ownership connected the holding companies to the terminal network. That took six more weeks. It almost fell apart twice. The first obstacle came in mid-November 2025. The primary financial analyst on the task force, the one who had begun mapping the beneficial ownership structure, was pulled from the case by her parent agency for an unrelated assignment.

 The task force lost three weeks of momentum while a replacement was brought in and briefed. Those three weeks mattered. The targets hadn’t been tipped off, but the delay pushed the timeline for indictments into late March 2026, compressing the window for surveillance operations. The second obstacle was more serious.

 In late December 2025, one of the sealed subpoenas was inadvertently disclosed to a defense attorney representing a tangentially related civil matter. The disclosure was administrative, a filing error by a federal court clerk. The attorney was ethically bound to disclose the receipt of information she wasn’t entitled to, and she did.

But, the damage was potential. The task force couldn’t confirm whether any information had reached the targets. What’s most surprising about this case isn’t the scale of the diversion scheme. It’s how fast investigators had to move after that disclosure. Within 72 hours, the task force compressed its surveillance schedule and moved up the financial forensics review.

 There was no time to regroup. Agent Okafor later noted in a case summary that the December disclosure was the moment the investigation nearly unraveled. What saved it was the decision made the same night the disclosure was discovered to accelerate rather than regroup. The three individuals at the top of the beneficial ownership structure were identified as Marcus Webb, 51, formerly a commercial fuel broker licensed in California and Texas, Raymond Chew, 44, who had operated a petroleum distribution company in Long Beach before its dissolution in 2019,

and a third individual identified in court documents only as a co-conspirator pending arraignment, whose identity remained sealed through the time of the initial indictments. Webb and Chew were the operational architects. Webb had designed the terminal acquisition structure, identifying existing civilian marine fuel suppliers that could be acquired through the shell company framework and integrated into the diversion pipeline.

 Chew managed the downstream commercial distribution, the relationships with maritime fuel buyers, who absorbed the diverted JP5, without, in most cases, knowing its origin. The OFAC flagged connections came through Chew’s commercial network. Three vessels that had purchased fuel through his distribution chain was subsequently identified by the Treasury Department’s Office of Foreign Assets Control as having operated in Iranian adjacent shipping corridors in the Gulf of Oman.

Investigators couldn’t establish that the fuel had been intentionally routed to these buyers for sanctions evasion purposes. The connection was flagged, but remained collateral to the primary prosecution. Here’s the take that will probably get some pushback. The DLA subcontracting structure that made this scheme possible has been flagged in Inspector General reports going back more than a decade.

The vulnerability wasn’t hidden. It was documented, and the resources to fix it, better reconciliation technology, third-party verification requirements, enhanced oversight of multi-tier subcontractors, were proposed and deferred repeatedly on budget grounds. What happened at Point Loma wasn’t just a crime. It was a predictable consequence of a system its own auditors warned wasn’t working.

 What do you think? Was this a failure of the individuals who chose to commit fraud or a failure of the system that made the fraud this easy to sustain for over a year? Drop your answer in the comments. The surveillance phase of Operation Drydock ran from early January 2026 through mid-February. The task force placed physical surveillance on Web, Chew, and the nine terminal facilities.

Digital surveillance, court-authorized, covered the primary communication channels used by the terminal operators. The surveillance produced one significant and unexpected development. In late January 2026, intercepted communications between Webb and an unidentified contact revealed that Webb had become aware of the EnSys investigation.

Not its scope, not the specific evidence already gathered, but the fact that an inquiry had been opened regarding fuel delivery records at Point Loma. The source of the tip was never conclusively identified. Webb’s response was to begin quietly liquidating assets. He did not, however, shut down the terminal operation.

Whether that was arrogance or a calculation that a shutdown would signal guilt more clearly than continued operation, investigators couldn’t determine. What it meant operationally was that the task force had a closing window. Put yourself in Agent Kraus’s position for a moment. You’ve spent 3 months building a case.

 You know the target has received at least partial warning. You have enough for indictments, but the financial forensics aren’t complete. The full map of diverted funds and shell company assets isn’t finished. Every additional week of investigation strengthens the forfeiture case. Every additional week is also a week in which the target is moving money.

 The call was made in the first week of February 2026. Finalize indictments. Target March for simultaneous execution. The AUSA assigned to the case, Nicole Ferrera of the Southern District of California, filed the sealed indictment package with the federal court on February 28th, 2026. The package covered 19 defendants in total.

 Webb, Chew, the unidentified co-conspirator at the beneficial ownership level, the operators of each of the nine terminals, five individuals involved in the falsified documentation process, and warrant officers Odom and Salazar. The charges: conspiracy to defraud the United States, theft of government property, wire fraud, making false statements to a federal agency, and for Odom and Salazar, bribery of a public official.

 The execution date was set for March 17th, 2026, a Monday morning, 4:30 a.m. 11 search warrants, nine terminal facilities, Webb’s residence in La Jolla, and Chew’s residence in Rancho Bernardo. Simultaneous execution across a 42-mile geographic footprint. Coordinated between NCIS, FBI, HSI, and local law enforcement providing perimeter support.

 The pre-dawn of March 17th brought a marine layer off the Pacific that cut visibility across the coastal portions of San Diego County. At the terminal sites along the National City waterfront and the Otay Mesa Corridor, fog reduced sightlines to less than 100 yards. The NCIS tactical team assigned to the two National City terminals requested a 30-minute delay at 4:18 a.m.

The delay was denied. The risk of a compromise, any target becoming aware of activity at a nearby site before their own location was secured, outweighed the visibility limitation. At 4:31 a.m., simultaneous entry commenced at all 11 locations. The National City terminals went first. At Terminal Bravo, the facility Villanueba had identified as the initial diversion point, agents breached the administrative office and secured the site within 6 minutes.

 No resistance. Two employees present for a pre-dawn shift were detained and interviewed on site. At the La Jolla residence, Webb answered the door in a bathrobe. He did not appear surprised. He said nothing until his attorney arrived 4 hours later. At Rancho Bernardo, Chu was not at his residence. Surveillance teams had tracked him to a hotel in Mission Valley the previous evening.

A secondary team held in reserve for exactly this contingency moved on the hotel room at the same moment the primary operations commenced. Chu was taken into custody in the hotel corridor at 4:34 a.m. as he was attempting to leave with a rolling suitcase. Inside the suitcase, a laptop, three burner phones, and $47,000 in cash.

Warrant officers Odom and Salazar were taken into military custody at their respective duty stations at Naval Base Point Loma by NCIS agents at 5:00 a.m. Both were served with federal arrest warrants and Article 31 advisements simultaneously. Neither made statements. The search of the nine terminal facilities produced 17 boxes of physical financial records, 12 hard drives removed from administrative computers, and access credentials for nine separate cloud storage accounts.

The administrative records at three terminals had been partially deleted. The deletions, according to digital forensics, had been performed within the previous 72 hours. The financial forensics team that had spent 3 months reconstructing the beneficial ownership structure and the flow of diverted funds ultimately traced $83 million of the estimated $140 million in diverted fuel value through the shell company network.

The remaining $57 million moved through transaction chains that, as of the March 2026 indictments, had not been fully resolved. The third individual at the beneficial ownership level, the co-conspirator whose identity remained sealed in the initial indictment, was arraigned in sealed proceedings on March 22nd, 2026.

Court records filed subsequently identified this individual as a former DLA contracting officer who had, between 2022 and 2024, overseen the renewal of the primary fuel delivery contract under which the subcontractor network operated. The former official had retired from federal service in late 2024 and had subsequently become a paid consultant to one of the Shell holding companies.

One detail that stuck with me from the case file, this individual’s signature appears on the contract renewal documentation that locked in the subcontracting framework through 2027. The contract contained no enhanced reconciliation requirements, no third-party verification mandate, no volume matching audit trigger.

Every provision that might have caught the diversion at the structural level was absent. Whether that was the product of corruption at the time of drafting or simple bureaucratic inertia remains an open question in the case. The most recent publicly available court filings, as of the date of this account, indicate that plea negotiations were ongoing for eight of the 19 defendants.

Webb and Chew had entered not guilty pleas and were scheduled for trial. Odom and Salazar both faced additional proceedings under the Uniform Code of Military Justice in parallel with the federal criminal case. Villanueva, the fuel dispatcher from Chula Vista who refused to sign a backdated manifest and drove to the NC’s field office on Rosencrantz Street, received formal recognition as a cooperating witness.

Under federal whistleblower statutes, he may be entitled to a portion of any recovered funds. The investigation also produced one outcome that the indictment documents note but don’t resolve. The downstream commercial buyers who purchased diverted JP5 through Choose distribution network. Most of them were interviewed.

 Most had purchased fuel at prices consistent with market rates. Most had no documented knowledge of the fuel’s origin. The three vessels flagged by OFAC for operations in Iranian adjacent shipping lanes have not been the subject of additional enforcement action publicly announced as of this date. 19 people were indicted.

 11 locations were searched. $83 million of $140 million was traced through the shell company structure. The remaining $57 million has not been publicly accounted for. Will schemes like this happen again? The DLA subcontracting framework that enabled it is still in place. The Inspector General recommendations from 2015 and 2019 calling for enhanced reconciliation requirements on multi-tier fuel delivery contracts have still not been fully implemented.

 Comment yes if you think this is a one-time failure. No if you think the structure guarantees it happens again. The network is dismantled. The demand for military logistics infrastructure that moves too fast and audits too slowly still exists. If you want to follow the prosecutions as they develop, subscribe. The trial dates for Webb and Chew are scheduled for later in 2026.

There will be more to this story. What no one has publicly explained is where $57 million worth of government fuel actually went. The shell company chains that moved it dissolved faster than the subpoenas that chased them. Some of the accounts were emptied before the March 17th raids. Some of the transfers crossed jurisdictions that are still in the process of responding to mutual legal assistance requests.

 The fuel is gone. The money is mostly gone. 19 people were charged with the mechanics of taking it. The architecture that made it possible, the layered subcontracting, the distributed oversight, the reconciliation gap that went undetected across 14 months and 4 million gallons. That architecture is still there. Ernesto Villanueva still works in petroleum logistics.

 He drives a different route to work now.