The Complex

Pentagon Investigates Thousands of Soldiers in Massive Fraud Case

When a retired Army colonel and an enlisted soldier from Albuquerque, N.M., were charged last year with defrauding the National Guard Bureau out of about $12,000, the case drew little public attention. But it's now become clear that the two men are among the roughly 800 soldiers accused of bilking American taxpayers out of tens of millions of dollars in what a U.S. senator is calling "one of the biggest fraud investigations in Army history."

The wide-ranging criminal probe centers around an Army recruiting program that had been designed to help the Pentagon find new soldiers during some of the bloodiest days of the Iraq and Afghanistan wars. The program went off the rails, investigators believe, after hundreds of soldiers engaged in a kickback scheme that allowed them to potentially embezzle huge quantities of money without anyone in the government noticing. In one case, a single soldier may have collected as much as $275,000 for making "referrals" to help the Army meet its recruiting goals, according to USA Today, which first reported the story Monday. 

The military's failure to spot, or stop, the wrongdoing will be the focus of what is expected to be a highly contentious hearing Tuesday before the Senate's Subcommittee on Financial and Contracting Oversight. The committee's chairwoman, Sen. Claire McCaskill, D-Mo., has summoned several of the National Guard officials who were in power at the time the alleged wrongdoing was taking place.

The numbers of soldiers and money involved are staggering.

An Army internal audit has discovered that 1,200 recruiters had received payments that were potentially fraudulent. Another 2,000 recruiting assistants had received payments that were suspicious. More than 200 officers remain under investigation, according to McCaskill's office. There are currently 555 active investigations involving 840 people. 

Trouble in the recruiting program has been acknowledged previously, but the full scope and the results of the service's own internal investigation of the program have not previously been disclosed. In the past, Army officials overseeing the program and a contractor who worked with the service on it, Docupak, insisted that accounts of potential fraud in it were greatly exaggerated, congressional officials said in a memo distributed to the media Monday. About 200 agents with the service's Criminal Investigative Command are now examining the program's records, and will review the actions of more than 106,000 people who received money through the program. That work will likely take until 2016, officials said.

A Defense Department official acknowledged that a lack of proper military oversight contributed to the problems. 

"I think it was human greed, and I think it's the cascading effects of contractors' lack of supervision, as well as the Defense Department's lack of supervision," the official told Foreign Policy, speaking on condition of anonymity because of the sensitive nature of the probe.

The scandal comes amid a new wave of scrutiny of senior officers across the military as well as a cheating and drug scandal within the Air Force's nuclear officer corps. The new probe is different because it involves hundreds of rank-and-file troops, including relatively low-ranking officers and enlisted personnel. Military experts have long said the military is a reflection of society and "bad apples" exist in every organization, but theburgeoning scandal threatens to tarnish the reputation of the Army recruiters who in many communities are the public face of the military. 

The Army National Guard Recruiting Assistance Program, the initiative at the heart of the new probe, was created in 2005 to find new recruits during some of the most challenging periods of the Iraq and Afghan wars. Soldiers received between $2,000 and $7,500 per referral. The program was deemed a success because it helped to bolster recruiting numbers despite heavy combat in the two warzones and deep public doubts about the two conflicts.

The program was wildly successful in terms of garnering recruits - and wildly expensive. The National Guard paid out more than $300 million for just over 130,000 enlistments, and began meeting its recruiting goals even as sectarian violence continued to roil Iraq. Almost 40 percent of all recruits in the guard enlisted through G-RAP while it existed, congressional officials said. The Army's active and reserve forces, meanwhile, started similar programs in 2007 and 2008. 

"The program worked," the official told Foreign Policy. "It definitely pulled up our numbers and we've never had a problem since."

But evidence of fraud later emerged as recruiters, who are forbidden from receiving payments under such a program, were found to have gotten money anyway. It was suspended in 2012. Officials suspect that recruiters, who already receive incentives based on the numbers of would-be troops they bring in, may have grown resentful as they saw non-recruiters receive thousands of dollars for serving as "recruiter assistants." Schemes formed in which soldiers assigned to recruiting duty essentially double-dipped, either posing as average soldiers or using others' names to fraudulently collect the millions of dollars of taxpayer money out of the program. Most of the soldiers under investigation are recruiters.

In one example, the Justice Department announced in December that it had charged retired Col. Isaac Alvarado, 74, of Albuquerque, N.M., and Sgt. 1st Class Travis Nau, 40, with a variety of crimes in connection with the program. Alvarado was charged with one count of conspiracy to commit wire fraud, four counts of wire fraud, and four counts of aggravated theft identity in an indictment that was filed in the U.S. District Court in New Mexico. Nau, also of Albuquerque, was charged with one count of conspiracy to commit wire fraud, three counts of wire fraud, and three counts of aggravated theft identity.

From about November 2007 to February 2012, Alvarado served a recruiting assistant, while Nau, Alvarado's son-in-law, worked as a recruiter for the guard. Nau allegedly provided Alvarado with the names and Social Security numbers of potential soldiers, allowing Alvarado to cash in if they enlisted, authorities said. Nau also advised at least two potential soldiers to lie in their paperwork to say that Alvarado had assisted in their recruitment, authorities said. In total, the retired colonel is accused of collecting some $12,000 in fraudulent bonuses. 

In another case, Fabian Barrera, 46, an Army National Guard captain in Texas, stands accused of personally obtaining more than $185,000 in fraudulent recruiting bonuses.

At least 25 additional personnel were charged in District Court in southern Texas last summer with similar acts, authorities there announced in August. Those soldiers, based in the San Antonio and Houston areas, face charges ranging from wire fraud, to identity theft, to witness tampering. At least 11 had pleaded guilty as of last summer. 

The hearing Tuesday is expected to have two panels, one of active-duty Army officials and one of the National Guard officials who helped run the service at the time of the alleged wrongdoing.

The witnesses will include Clyde Vaughn, a retired Army three-star general and former director of the Army National Guard who was in office during part of the time the program was in effect Michael Jones, a retired colonel who was the division chief for the Army National Guard Strength Maintenance Division, which oversaw the program; Philip Crane, president of Docupak, the company that managed the program; and Kay Hensen, a retired lieutenant colonel who served as the corporate compliance officer for Docupak with the National Guard Bureau.

Photo by Spc. Anita VanderMolen / Army

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