The Complex

New Details Emerge In Massive Army Financial Scandal

One of the largest fraud investigations in the Army's history has grown even larger, with lawmakers releasing new evidence that a troubled Army National Guard recruiting program allowed hundreds of troops, including a two-star general and at least 18 colonels, to effectively steal as much as $66 million.

Senator Claire McCaskill (D-Mo.), who has been leading the congressional investigation into the National Guard program, repeatedly asked senior officials who had overseen the Army's now-defunct Recruiting Assistance Program why the initiative hadn't been designed with better anti-fraud measures. The program offered cash incentives to all troops who helped nudge other would-be soldiers to join the military. The Army's actual recruiters weren't eligible for the money, but an Army audit completed in 2012 concluded that disgruntled recruiters and other troops may have unlawfully cooked the books to collect tens, and in some cases, hundreds of thousands of dollars that they didn't deserve.

"This is what kills me about this, you guys: This is, like, basic," a clearly exasperated McCaskill said at one point during Tuesday's hearing in front of her subcommittee on financial and contracting oversight, her voice rising. "You just assumed whoever was typing [recruits' information] in was telling the truth! And then nobody checked to see if they're lying! You're giving out millions of dollars, no questions asked!"

The hearing included two panels of officers: one comprising active-duty generals from the active-duty Army, and one including National Guard officials who previously oversaw the flawed recruiting program. Both groups promised to cooperate with the ongoing investigation, but the National Guard officials also defended the initiative, saying it propped up the force at a time when it was 20,000 soldiers short and strapped by not only war operations, but mobilizations at home to deal with catastrophes like Hurricane Katrina, which devastated a broad swath of the southeastern United States in 2005.

Suspicions about fraud in the National Guard program have swirled around it for years, but the Army always downplayed those concerns and said it had been properly overseen. Their confidence was misplaced: the Army's Criminal Investigative Service has now initiated 559 investigations into 1,219 people who have skimmed $29 million through the initiative, officials disclosed for the first time Monday. Maj. Gen. David Quantock, the head of Army CID, told Congress on Tuesday that he believes that figure could grow to between $50 million and $66 million as CID agents continue to unravel cases that in some cases involve events that took place years earlier.

That means some soldiers who broke the law may avoid prosecution because the statute of limitations for their crimes will have run out. Other administrative forms of punishment may be possible in those situations, such as reductions in rank, which can affect pensions.

The Guard's version of the program was commonly known as G-RAP, and remained in place until 2012. It total, it cost $408.7 million, Lt. Gen. William Grisoli, director of Army staff, told McCaskill's subcommittee on Tuesday. The Army Reserve and active-duty force also used similar programs for shorter periods of time, spending $42.6 million and $7.9 million, respectively.

The program worked by giving soldiers between $2,000 and $7,500 for getting others to meet with recruiters and join the Guard. It has been widely hailed as a success over the years by Army officials, who noted that the Guard was about 20,000 short of its authorized 350,000-man size in 2005 but met its numbers after the program was put in place. G-RAP was canceled in 2012 by Army Secretary John McHugh, who also quietly called at the time for internal reviews because of the fraud allegations.

Lt. Gen. Clyde Vaughn (ret.), who commanded the Army National Guard from June 2005 to June 2009, was among the officials who defended the incentive program on Tuesday, saying its success in finding those additional recruits should not be overlooked. He pushed back against McCaskill's allegation that he and his staff didn't do enough to oversee the money, saying he regularly urged the general officers in charge of the National Guard in each state and territory to watch out for fraud. Those other officers were potentially at fault, he implied, for failing to keep a closer eye on the soldiers under their individual commands.

"I told them, 'We have to catch the first peckerwoods who get out here and mess this thing up. And, we have to prosecute them quickly,'" Vaughn told the subcommittee on Tuesday, using a surprisingly colorful military epithet. "And I did that 18 months in a row."

But McCaskill zeroed in on the oversight issue again. Merely telling the commanders of National Guard branches in each state to watch for fraud isn't the same as making sure there's a formalized process in place to catch it, she said. McCaskill added that the National Guard officials overseeing G-RAP and the contractor assisting them, Docupak, should have made sure the money was being spent appropriately.

"What worries me a little bit," McCaskill said, "is that it reminds me what I heard around contracting in Iraq from the generals: 'Not my problem. Not my command. Not my issue.'"

Allison Shelley/Getty Image News

National Security

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