Sergeant Tom Symon, who was a corporal when the incident occurred, gave evidence on Friday at the court martial of three soldiers accused of abusing and sexually humiliating Iraqi detainees at a base near Basra in May 2003.
He told the court how he had come to the warehouse where four suspected Iraqi looters were being held and had seen two naked men with one of the accused, Lance Corporal Darren Larkin, who he thought had been laughing.
"I went straight up to them and said, basically: 'Get your clothes on'," Symon said, adding that he had then told the men to get on with clearing up the mess that looters had made.
"Now that I have had time to think about those two naked Iraqis, I believe, to my disgust, that I should have told someone higher up in authority above me," he said.
Looters had been rounded up and
forced to clear up the camp
Symon said he had reservations about the whole operation in which looters were rounded up and set to work clearing up the camp.
But he had not felt able to contradict an order from a higher officer. "In my own mind, I probably believed it was wrong, but who was I to say at the time? I was just doing what I was told," he said.
The army admits that the round-up plan, dubbed Ali Baba, broke Geneva Convention rules which say civilians should not be forced to work. But it says the plan was a sincere if misguided attempt to stop looting of humanitarian supplies from the World Food Programme.
Larkin, Lance Corporal Mark Cooley and Corporal Daniel Kenyon are charged with abusing and sexually humiliating detainees. They deny the charges, although Larkin has pleaded guilty to one count of assault.
The trial is the latest case of alleged abuses by soldiers in Iraq after pictures of US troops humiliating prisoners at Baghdad's Abu Ghraib jail emerged last year. The trial is expected to run for four more weeks.