When the U.S. Navy began its great sell-off of surplus ships in 1991, Richard Jaross was among the first to see an opportunity.He began dismantling Navy ships at a California scrapyard, where workers were exposed to lead and asbestos. He came to Baltimore to help put together the ill-fated Coral Sea project. He then set up a scrapyard in Wilmington, N.C., but the state shut it down for mishandling asbestos, polluting a river and contaminating the soil with oil and lead.

Troubled histories, it turns out, are not uncommon among the shipbreakers to whom the Navy has entrusted its ships. Among the others are:

• Andrew Levy: His company managed a maritime union retirement plan in the 1980s and lost more than $20 million, according to the U.S. Department of Labor. A federal court permanently barred him from managing private-sector benefit plans. He later became involved in the Coral Sea project and in a scrapping operation that was closed down in Rhode Island.

• Kreso Bezmalinovic: Before he got into shipbreaking, he pleaded guilty to paying off a government inspector. Later, he was convicted on federal fraud charges involving asbestos-abatement companies he controlled.

• Emilio Sanchez: A South Texas businessman with many interests, in 1994 he tried to negotiate in Mexico two stolen U.S. Treasury checks - each made out to him for $10 million. Never prosecuted, he has bought the scrapping rights to several Navy ships since then.

• Kerry L. Ellis: The owner of a Baltimore company scrapping the Coral Sea, he tried to fool any inspectors who came around. Prosecutors finally caught up with him, leading to his conviction in May for mishandling asbestos and dumping oil and debris into the Patapsco River.

The shipbreaking industry, which involves about a dozen key operators, has left a dismal record of spills, accidents, deaths, lawsuits, bankruptcies and indictments at ports across the country.

"The history of ship scrapping in the United States in the past five years has been terrible in all ways," said E. Grey Lewis, a former Navy general counsel. "The people involved in it are one-night stands. They've been indicted or they've had to flee the area. And, of course, the United States Navy is now on notice that these people are not obeying the law."

The negligence at the scrapyards has been abetted by the Navy's and Defense Department's lack of vigilance. There is virtually no meaningful monitoring of the shipbreaking industry. Prosecutors and regulators from a disjointed network of agencies sometimes have stumbled upon violations at individual scrapyards, but the Defense Department agency that administers the scrapping program has done little to address its failings.

That agency, the Defense Reutilization and Marketing Service (DRMS), said it has raised standards for selecting scrappers. But critics say that is hardly enough.

"They sell a ship ... then all hell breaks loose," said F. Browne Gregg, whose company participated in a scrapping venture. "They literally lose control of the ship."

'Clearly not in command'

On Sept. 16, 1993, DRMS sent its lone inspector, Tommy Evans, on his first visit to the Seawitch Salvage yard in Baltimore since the arrival of the aircraft carrier USS Coral Sea. But Evans didn't inspect the vessel that day.

He thought it too dangerous.

"I could not get aboard the Coral Sea due to safety reasons," Evans wrote in his report.

The next day, a 23-year-old worker named Alfio Leonardi Jr. found out how unsafe the vessel could be. He and Kerry L. Ellis, the scrapyard operator, were walking on the flight deck when Leonardi stepped on a tabletop-size piece of deck plate that had been cut but hadn't fallen. The area wasn't roped off or marked. The plate dropped through and Leonardi fell with it, 30 feet to the hangar deck.

"I felt a burning feeling inside," he recalled. "There was blood coming out of my mouth. I didn't think I was going to live."

Leonardi suffered a ruptured spleen, a fractured pelvis and fractured vertebrae in the fall. He broke his arm so severely that two rods had to be inserted. He has been unable to return to the vigorous work he once loved.

"It's like my whole life stopped the day of that accident," said Leonardi. "I can't do nothing anymore."