During WWII, about 380 U.S. Navy ships were lost in combat. However, Charles McVay III was the only captain in U.S. Naval history to be court-martialed for losing a ship, which was sunk by an act of war.

In the midst of the Second World War he commanded the heavy cruiser USS Indianapolis with a crew of 1196 men and led the ship through the invasion of . During the battle of Okinawa he was awarded the Silver Star Medal for displaying courage under fire while his ship was exposed to and hit by fierce Kamikaze attacks.

Early in the morning of July 30th, 1945, USS Indianapolis was attacked by Japanese I-58 under Mochitsura Hashimoto. Two hits were registered. One of the torpedoes separated her bow, sinking the ship within 12 minutes and causing a massive loss of life. About 900 men were left afloat in the water without lifeboats and most died subsequently from injuries sustained aboard the ship, dehydration, exhaustion, shark attacks and the result of drinking salt water. The final 317 survivors were rescued nearly 100 hours later. Because the ship was on a secret mission it was not reported as overdue when it failed to arrive as scheduled. It did, however, send distress signals, which were picked up by three separate radiomen. None of the radio operator's in charge acted upon. Declassified records show that one thought it was a Japanese ruse, the second asked not to be disturbed, and the third was drunk. The Navy, however, claimed that SOS messages were never received. The rescue came only after survivors were spotted from a PV-1 Ventura, piloted by Wilbur C. Gwinn and co-pilot Lieutenant Warren Colwell who were on a routine patrol flight. Gwinn's navigational antenna counter-weight had fallen off, leaving the antenna whipping around in the wind. While he was lurching to the rear through the fuselage to examine the damage he noticed a long oil slick on the sea surface and eventually sighted the survivors. Captain McVay was wounded and among those rescued. He repeatedly asked the Navy why it took so long to rescue his men but never received a specific answer.

A Navy Court of Inquiry recommended that McVay be court-martialed for the loss of USS Indianapolis. Admiral Chester Nimitz, the commander in chief of the pacific fleet, disagreed but was overruled by the second most senior officer of the U.S. Navy, Admiral Ernest King, Chief of Naval Operations. King's motive for ordering the court-martial may have had links to grievances with McVay's father, Charles B. McVay, an Admiral after World War One. At that time, King was a junior officer under Charles B. McVay who reprimanded King for sneaking women aboard a ship. King was known for retaliation.

Many facts were, however, in favor of Captain McVay's defense. For instance, he requested a escort for his journey but naval command assumed his route would be safe and the request was denied. Furthermore, McVay was not informed that USS Underhill had sunk a Japanese sub just six days prior on his intended route. Moreover, the Indianapolis was not equipped with submarine detection equipment. It was generally felt that Captain McVay had been a scapegoat for Admiral King. Nevertheless, the conviction effectively ended his career. He was stripped of all seniority. Captain McVay had frequently received vicious letters and disturbing phone calls from relatives of the dead crewmen. On 6 November 1968, McVay committed suicide by shooting himself with his service pistol at his home in Litchfield, Connecticut. When his body was found he was still clutching a toy sailor figure in his hand, which was given to him as a good luck charm during his childhood years.

In 1997, a 12-year-old student Hunter Scott was instrumental in raising awareness and brought national attention to the situation. As part of a school project he interviewed nearly 150 survivors of USS Indianapolis and reviewed 800 documents. He concluded that Captain McVay was innocent and brought his testimony before the U.S. Congress. Additionally, Japanese Commander Hashimoto wrote to Senator Warner "Our people have forgiven each other for that terrible war. Perhaps it is time your people forgave Captain McVay for the humiliation of his unjust conviction." The testimonies of Scott resulted in the passage of a Congressional resolution, signed by President in October 2000, exonerating McVay.

In July 2001, Secretary of the Navy Gordon R. England ordered Captain McVay's U.S. Navy record to be cleared of all blame.