Capt. Daniel Dusek, commanding officer of the amphibious assault ship USS Bonhomme Richard, was stripped of his command this week, Time magazine reported Thursday.
Cmdr. Michael Vannak Khem Misiewicz was arrested last month.
Both officers were based in Japan.
Misiewicz was charged with directing warships to ports in Asia and the Pacific region where they were overcharged for food, water and other services, sometimes at the cost of millions of dollars.
In exchange, the Navy says, the commander was awarded the use of prostitutes, luxury travel for himself and his family, and tickets to a Lady Gaga concert.
Dusek has not been charged with a crime but the Navy announced Wednesday "the investigation negatively affected Dusek's leadership ability and was a distraction to the command mission."
The investigation has led to the arrest of the president of port services company GDMA, based in Singapore, and a supervisor in the Naval Criminal Investigative Service.