As you might have seen in the news, there is a lot of (justified) outrage about a recent report by David Cloud at the Los Angeles Times that revealed the California National Guard is forcing thousands of troops to repay enlistment bonuses. Most of the soldiers accepted them in good faith, but it turns out they were technically not eligible to receive the payments.
Secretary of Defense Ashton Carter recently announced a halt to Guard repayments, pending a further review (though this may not help those who already made these payments, and doesn’t assuage those worried they will still have to repay the bonuses later). Congress is also pledging to fix the problem when they return from recess.
It’s important to understand that these problems were caused by mismanagement and fraud at the California National Guard, first uncovered by a whistleblower.
To make up for troop shortfalls, the California National Guard offered soldiers bonuses of $15,000 or more to reenlist. But now the Guard is asking nearly 10,000 soldiers, including many who served multiple combat tours, to pay them back—with interest. Some of those ordered to repay the bonuses included former Captain Christopher Van Meter, who earned a Purple Heart after he was thrown from an armored vehicle turret, and former Master Sergeant Susan Haley, who deployed to Afghanistan in 2008. In some cases these bonuses were paid out of money designated to only go to people performing certain assignments. Even though some of the soldiers who had received the bonuses were not technically eligible to receive them, the fault was clearly that of Guard officials.
The Sacramento Bee first uncovered the fraud in 2010. Now-retired Brigadier General Louis J. Antonetti made recruitment and retention his top priority as the commander of the Army section of the Guard from 2007 to 2010. Incentives included bonuses and federally subsidized student-loan repayments. He called it “operation overdrive,” and as long as the Guard met its end-strength goals, one manager told auditors, “[t]here were leaders – officers – willing to look the other way” regarding improper payments.
The Bee’s investigation found California’s incentives program was operated as a “slush fund, doled out improperly to hundreds of soldiers with fabricated paperwork, scant supervision and little regard for the law.”
“Most student loan repayments, those documents show, were drawn from money designated for combat vets,” the Bee wrote. “Yet a large portion of those funds went to Guard members who hadn't served a day at war.”
Captain Ronald Clark, then a federal auditor with the National Guard, was tasked with auditing the program. As it became clear to him that many senior officers were complicit or enablers—and might interfere with his work to protect themselves—he secretly contacted the Internal Revenue Service (IRS) and the Federal Bureau of Investigation (FBI). About a month later the Department of Justice, FBI, IRS, and federal Army Criminal Investigation division initiated a criminal investigation.
In 2011 Master Sgt. Toni Jaffe, who managed the incentive program, pleaded guilty to filing $15.2 million in false claims. According to the Bee, her successor in the program halted $43 million of her planned payments as improper.
Since the LA Times story came out the California National Guard has defended its actions by claiming this was a national issue impacting all states, and that they have become the focus because they are “the only state that audited” bonus payments. But part of why they did that audit was because they had tolerated criminal fraud and misconduct for years; the audit wasn’t voluntary good government work. That said, the Guard established a special Center to hear appeals for those who acted in good faith, which they told ABC News had helped about 4,000 soldiers retain about $37 million in bonus money.
In 2013 the Bee editorial board warned that the wrong solution to the problem was to punish soldiers who acted in good faith. “It’s not their fault that fellow California National Guard members committed fraud to boost enlistment numbers.”
In addition to unfairly punishing veterans who acted in good faith, the costs of recoupment may be greater than what is actually recovered on behalf of taxpayers. In May the Army National Guard told 60 Minutes the Army had spent nearly $28 million to uncover $10 million of alleged fraud for bonuses recruiters claimed for new soldiers they had never actually never met.
The common problem in these programs, and too many other Pentagon programs, is that they spend the money first and ask questions later. Between FY 2000 and FY 2008 reenlistment bonus spending went from $891 million to $1.4 billion. “The system paid everybody up front, and then we spent the next five years figuring out if they were eligible,” Colonel Michael S. Piazzoni told the LA Times.
This kind of scandal can make it more difficult to garner support for programs to enhance recruitment and retention in the future. The sloppy oversight and management of this program is also just one more reason a Pentagon audit is overdue.
The federal government’s improper payments problems cost taxpayers hundreds of billions of dollars. The Pentagon conservatively contributes over $1 billion to this total each year, but the general consensus is that this amount is vastly understated as a result of the inaccuracy of the Pentagon’s improper payment analyses, which are deemed unreliable annually. Even of these estimates, the Pentagon is only able to recover about one third.
The National Guard trying to recover its improper payments should be a dream come true, but somehow they chose the worst possible avenue to do so.
Sometimes it just doesn’t make monetary (or moral) sense to go after a loss. Recovery must be guided by common sense and assessments of the costs and benefits of recovery, a concept championed by the Office of Management and Budget in its guidance related to improper payment recovery processes. If the Pentagon is actually ready to get serious about curbing and recovering its misspending, they might want to start with enforcement actions focused on contractors that regularly overcharge the government, not soldiers volunteered to put their lives on the line and who acted in good faith.