California National Guard bonus program riddled with corruption
http://www.insidebayarea.com/california/ci_16299931
By Charles Piller
10/09/2010
SACRAMENTO -- Master Sgt. Toni Jaffe was known as "the M&M lady"
because she decorated her office cubicle with keepsakes of the
confection's advertising characters.
However, the treats she dispensed were sweeter than candy and are now
the subject of a criminal investigation.
From 1986 until her retirement last year, Jaffe's job with the
California Army National Guard was to give away money -- the
federally subsidized student-loan repayments and cash bonuses -- paid
for by federal taxpayers nationwide -- that the Guard is supposed to
use to attract new recruits and encourage Guard members to re-enlist.
Instead, according to a Guard auditor turned federal whistle-blower,
as much as $100 million has gone to soldiers who didn't qualify for
the incentives, including some who got tens of thousands of dollars
more than the program allows.
For years, the auditor and other Guard officials alleged in
interviews or internal documents obtained by McClatchy Newspapers,
California's incentives program was operated as a slush fund that was
doled out improperly to hundreds of soldiers with fabricated
paperwork, scant supervision and little regard for the law.
The Guard documents describe a high-speed assembly line for bonuses
and loan repayments, in which Jaffe single-handedly processed some
8,600 payments over a 16-month period in 2007 and 2008 -- about 25 per workday.
Most student loan repayments, the documents show, were drawn from
money designated for combat veterans. Yet a large portion of those
funds went to Guard members who hadn't served a day at war. Captains
and majors were among those whom auditors think benefited improperly.
A McClatchy Newspapers investigation, including a review of thousands
of Guard documents gathered or prepared by auditors and other
officials and sworn statements from managers who replaced Jaffe,
found evidence that from 2001 until last year Jaffe often provided
improper or illegal bonuses and loan payments.
The documents show that her efforts were overlooked or ignored by
recruiters and officers up the chain of command. Some recruiters
appear to have benefited personally. The documents also show that
state Guard officials failed to fix the incentives program despite
warning signs going back years.
In comments to McClatchy Newspapers laced with profanity and evident
bitterness toward former superior officers, Jaffe denied wrongdoing,
insisting that she had followed regulations "by the book."
"They are still trying to blame me for s... I didn't do," she said in
a phone interview from her home near Sacramento. "I wish I never
joined the Guard. I regret it, and I hate the Guard."
On July 8, the managers who replaced Jaffe briefed Capt. Ronald S.
Clark, a federal auditor who oversees funds spent by state Guard
organizations, about her alleged lapses. A former police
investigator, FBI agent and U.S. Secret Service officer, Clark has
fought white-collar crime for years.
Still, he said, the scale and audacity of the corruption he
encountered in reviewing the California program shocked him:
Excluding $43 million in improper payments recently halted by Jaffe's
replacements, Clark estimated that $100 million was misspent. He
called it "war profiteering."
Early in the audit, he said, he became concerned that officers
implicated as recipients or enablers of improper payments might
attempt to interfere with his work. So for the first time in his
career, Clark became a whistle-blower. He secretly contacted the
Internal Revenue Service and FBI.
"I don't like grifters," Clark said. "And I'm disgusted -- at times,
ashamed -- to wear the same uniform as those who steal taxpayer funds
or protect thieves."
In late August, after Clark came forward, the U.S. Department of
Justice, the FBI, the IRS and the Army Criminal Investigation
Division launched a criminal probe into the California program, in
the process taking over Clark's audit, which was never completed. In
a letter obtained by McClatchy Newspapers, the U.S. attorney in Los
Angeles informed Brig. Gen. Mary J. Kight, the adjutant general of
the California National Guard.
Maj. Thomas Keegan, a spokesman for the Guard, told McClatchy
Newspapers that Kight helped initiate the investigation after she
learned of "significant irregularities" in the incentives program.
However, he said that neither Kight nor other state Guard officials
would answer questions about the investigation or the incentives
program, to avoid prejudicing the investigation. A spokesman for the
Department of Justice, the lead agency in the investigation, said the
department wouldn't comment.
McClatchy Newspapers examined payment documents on hundreds of
soldiers, personnel files, e-mails to and from Jaffe and other
officials, program audits and Guard spreadsheets that detail
violations of bonus and loan rules. They were obtained from several
confidential sources, including state and federal employees. The
documents describe falsified and shredded records and five-figure
favors that Clark called "corruption on an astonishing scale."
According to a review of Guard documents, the officers who benefited
from the highest payments that auditors concluded were improper included:
--Capt. Bruce Corum, a Santa Cruz-area chiropractor who joined the
Guard in 2002, received $83,000 over one seven-week period in 2008.
That included $63,000 -- well above the $10,000 limit for the Guard
program -- for student loans taken out too long ago to qualify for repayment.
As an officer commissioned before Oct. 28, 2004, by law Corum also
was ineligible for the program. Jaffe added a $20,000 bonus for which
Corum also was unqualified because he lacked the required job skills.
Corum told McClatchy Newspapers that he couldn't recall how he
obtained the benefits.
--Capt. Teressa Vaughn, a licensed cosmetologist and a resident of
Los Angeles County, received student loan repayments of $51,800
plagued by similar problems -- overpayments, loans too old to qualify
and officer commission date. She also got a $30,000 bonus for which
she was ineligible because she lacked proper job experience.
Vaughn, a chaplain candidate, has worked as a recruiter, meaning she
was obliged to know the incentives program rules that Guard documents
show were violated in her case. Vaughn said she wasn't authorized to comment.
--The Guard repaid $51,000 in student loans for another recruiter who
holds a top-secret clearance, Capt. Robert Couture of Hermosa Beach,
near Los Angeles. The contract required under military regulations to
certify eligibility wasn't on file, Couture received more than the
maximum benefit allowed, and he didn't qualify for the windfall due
to his rank. Keegan, the Guard spokesman, said Couture couldn't comment.
The Guard documents didn't answer the question of whether
beneficiaries of the incentives understood that the payments they
received might have been improper.
A spot check by Clark's office for Kight examined 62 individuals who
received $1.2 million in loan repayments and bonuses during the past
several years. Auditors found that at least 52 appeared to have
benefited improperly. The recipients, about half of them commissioned
officers ranking as high as major, got the funds despite falsified
documents, ineligibility, payments beyond program limits and other
improprieties.
When he began to grasp the magnitude of the problems, Sgt. Cody
Lathrop, one of two managers who replaced Jaffe after she retired a
year ago, prepared a sworn statement for the record that was included
in the documents McClatchy Newspapers obtained. That statement,
provided to federal auditors, cited "serious illegal activity" and
"systematic and historic abuse and mismanagement of fiscal law,
guidance and policy."
Sgt. Ray E. Douke III, the other new manager, echoed the concerns in
a sworn statement. Lathrop and Douke declined to comment to McClatchy
Newspapers.
In his statement, Lathrop voiced concern "for my family's safety,"
fearing physical violence in retaliation for disclosures that could
spark prosecutions and efforts to recoup funds from soldiers.
He called the extent of the apparent fraud "spine-chilling."
Jaffe, 51, worked at Mather Air Force Base near Sacramento as the
Guard's incentives program manager beginning in 1986.
Her interests, according to her Facebook page, included the popular
online game "Farmville," criminal justice television dramas and an
abiding fascination with her favorite candy. Her page featured a trip
to a New York M&M's convention. Recently parked in front of her
modest suburban home, Jaffe's Ford Mustang, with vanity plates
expressing love for her husband, was the color of blue M&M's.
She served the 17,000-member Army section of the state Guard. The
overall California National Guard, with an annual budget last year of
$1 billion, has more than 21,000 service members, including its Air section.
Each state controls its own Guard troops, with the top commander --
the adjutant general -- appointed by the governor. Most of the
Guard's funding, however, including loan repayments and bonuses,
comes from federal taxpayers.
The Guard responds to state emergencies, such as floods and fires,
and maintains order during civil unrest. Most members are "citizen
soldiers" who drill one weekend a month, plus two weeks every year,
and hold down regular civilian jobs. Since the Iraq and Afghanistan
wars began, many have been called up for active duty, adding urgency
to recruit new soldiers and retain officers.
One key to recruiting during wartime has been student loan repayments
and cash bonuses. In 2010, bonuses for the Army section of the Guard
alone were budgeted at $549 million nationwide. Some individuals have
received tens of thousands of dollars.
In managing the programs, Jaffe was supposed to begin with a review
of applications forwarded by soldiers, their superior officers or
recruiters. She was obliged to verify that applicants' claims of
eligibility were valid.
That process can be cumbersome, because each of the nearly 60 bonus
and loan-repayment programs she administered for the Guard follows
unique rules. Some provide enticements for soldiers with critically
needed skills. Others go to rank-and-file members. In all cases,
Jaffe was supposed to enter data in a tracking database and order
payments for the lender or soldier.
Instead, contracts that certify eligibility, required by Defense
Department regulations, were often absent, as were tracking data in
systems designed to catch errors. Processing forms show that payments
sometimes were boosted in sloppy handwritten notes.
"It seemed very unsophisticated," Clark said. "But no one was
supervising her work."
In the course of his audit, Clark frequently communicated with Douke
to compare notes, in part because Douke worked alongside Jaffe for
several months before he replaced her and was able to observe her
methods. Douke told Clark in an e-mail, obtained by McClatchy
Newspapers, that Jaffe maintained her torrid pace by approving most
funds "under the table" and ignoring program rules.
It takes little time to "blindly process payments for everyone,"
qualified or not, Douke wrote. Clark said in an interview that six
people now share the work that Jaffe normally did alone.
According to auditor documents, an apparent example of Jaffe's
streamlined practices involved Lt. Yasser Brenes, a Guard recruiter.
In 2007 and 2008, Jaffe approved loan repayments of $27,000 for
Brenes without the required contract on file and in excess of program limits.
Of that $27,000, USAA Federal Savings Bank got $18,500, ostensibly in
repayment of a student loan. But USAA, a private lender, has never
offered federally guaranteed student loans, the only kind that
qualify under the Guard program. Military regulations are clear on
unqualified loans: The payment should never have been made.
Guard documents also showed that Brenes was ineligible because he
received a college scholarship from the Reserve Officers' Training
Corps. In essence, he was reimbursed twice for his education costs,
which is strictly prohibited by military rules.
On top of loan repayments, Brenes got a $10,000 bonus; the required
contract certifying his eligibility wasn't on file. Loan repayments,
ROTC scholarships and such bonuses are mutually exclusive, and as a
full-time Guard employee, he was ineligible anyway.
Based at Mather Air Force Base, Brenes recently was promoted to
captain. He said his superiors told him not to comment.
Maj. Douglas Williams, among the highest-ranking officers to benefit
from the alleged fraud, received loan repayments of $33,800,
documents show. Guard documents show they were improper for many of
the same reasons that Brenes' were: He was ineligible due to his
rank, his payments exceeded program limits and no contract was on file.
Williams' bonanza was also unique, however. He was a high-level staff
officer in the recruiting command where Jaffe worked. Guard spokesman
Keegan said Williams would have no comment.
As loans and bonuses flowed to recruiters, company commanders and
their staffs, it became common knowledge at state Guard headquarters
that Jaffe "definitely blurred the lines of law," Douke wrote to
Clark, in response to a query about how apparent fraud became so common.
Jaffe earned a reputation, Clark said, of being "a soft touch."
In one instance, on June 18, 2008, the wife of Guard captain and
chiropractor Corum sent Jaffe an e-mail seeking help for Corum's
student loans. Jaffe authorized $63,000 that day, no contract
required, Guard documents show.
Jaffe routinely would backdate payment records, assigning payments to
long-past loan due dates, Clark said, "to make it appear as if the
service member was owed the funds and that she was merely catching up
on her work."
In most years, $1,500 to $3,000 was the maximum payment that would
have been allowed on qualified loans. In Corum's case, on a single
day Jaffe created 21 payment requests for $3,000. Each was identical
except for the annual payment due dates, running from 1987 to 2008.
The Guard couldn't repay Corum's loans for several reasons, according
to audit documents. Even without those impediments, however, federal
law prohibits payments for debts incurred more than six years earlier
without a waiver from the secretary of defense.
Another beneficiary of backdated records, Capt. Eric Goldie, is an
attorney currently deployed in Iraq. Goldie received $40,500 in loan
repayments in 2008, although his required contract wasn't on file,
according to Guard documents, and he was ineligible due to his rank.
"I have done nothing wrong," he said in an e-mail, referring specific
questions to California Guard headquarters, where Keegan declined to comment.
In an interview, Jaffe acknowledged processing payments to officers
without required contracts. If mistakes were made, she said, they
were caused by recruiters who "falsify paperwork and lie to the
soldiers" about what benefits they qualify for.
Given an immense workload, "I could only go on what they say," she
said. "There's 300 recruiters. I didn't have the time to research every one."
Jaffe leveled harsh criticism up the recruiting chain of command.
"They would always tell me that I was doing a good job, then stab me
in the back," she said, declining to provide details. "They are there
just to protect themselves."
Auditor Clark said, based on his knowledge of how the Guard operates,
it was implausible to him that a sergeant could authorize what he
estimated were thousands of fraudulent payments without detection by
any superiors.
He blamed, in part, relentless pressure for new soldiers. In a May
2007 memo, Brig. Gen. Louis J. Antonetti, the new commander of the
Army section of the state Guard, stated his top priorities:
recruitment and retention.
A little more than a year later, Antonetti launched "operation
overdrive" to re-energize enlistment. "I cannot overemphasize the
importance of this effort," he wrote. "I am counting on leaders at
every level to commit themselves fully."
Antonetti's 2008 operation came as federal Guard authorities were
projecting substantial increases in efforts to pull in new soldiers
and commit others to years of future service. This included a more
than 13 percent boost in incentives program funding by 2010.
In response to a written inquiry from Clark about factors that
contributed to Jaffe's actions, Douke cited the importance of
payments to "overdrive."
"There were leaders -- officers -- willing to look the other way," he
wrote, "as long as it supported the strength objective."
In fact, Guard documents show that for years, Jaffe's supervisors had
reason to know about problems with her work and failed to intervene.
In 2005, an incentives expert dispatched to California by the
National Guard Bureau discovered $2.5 million in overpayments from
Jaffe's programs, according to a briefing prepared by Douke and
Lathrop for Kight, the adjutant general. Those findings were reported
to state leaders, a chronology by Lathrop noted.
Yet the following year, Jaffe was promoted to master sergeant and her
position was moved from the personnel division into the recruiting command.
In April 2008, personnel records show, Jaffe was served with an
"adverse action" notice -- an allegation of wrongdoing that could
result in reprimand, censure, demotion or court-martial. The cause
for the "flag," in military parlance, wasn't noted. Col. Diana L.
Bodner, who took over the recruiting command in 2007, signed the order.
The flag normally would have sparked an investigation, but it's not
clear whether one took place.
The vast majority of questionable payments occurred from 2007 through
2009 after she was moved to the recruiting command, Clark said. In
the 18 months after the flag was created until Jaffe retired, she
processed some $63 million in bonuses.
In 2009, Clark's office began to examine one small bonus program
among the many that Jaffe administered. Clark didn't participate in
that audit. The report, issued last August, found a 20 percent error
rate. Numerous lapses were cited, including the shredding of key documents.
As bad as that sounded, Douke told Clark in an e-mail that the audit
looked to him more like damage control, understating the problems.
Neither he nor Lathrop nor any other experts had been consulted.
The auditors noted that their work was requested to support an
earlier, state Guard criminal investigation of "improperly approved
and paid enlistment and re-enlistment bonuses." The results of that
probe haven't been made public.
McClatchy Newspapers obtained personnel evaluations of Jaffe for the
period between April 2007 and August 2008, the most recent in her
file. Neither the flag nor the criminal probe of programs Jaffe
administered was mentioned. Instead, she was praised for "100 percent
accountability" in processing more than $86 million in loan
repayments and bonuses and for "superior knowledge of bonus and
incentive matters."
Paradoxically, the evaluators also said that Jaffe "becomes confused
and puzzled when asked direct questions on bonus procedures." They
gave her "marginal" overall ratings.
Bodner and another rater signed the evaluations in October and
November 2009, more than a year after the period of evaluation and
after Jaffe had retired.
An active flag would have blocked that retirement. However, records
show that in July 2009, Bodner's successor as recruitment commander,
Lt. Col. Jodee Rowe, removed Jaffe's flag for unspecified reasons,
permitting Jaffe to retire honorably. Jaffe said she was forced out,
but she refused to say why.
Jaffe's missteps were so obvious that within weeks of taking over
from her last fall, Douke sent word up the chain of command that they
had a serious problem, according to a timeline he authored.
Clark's decision to contact outside authorities, he said, was based
partly on the response of California leadership to Douke and
Lathrop's concerns.
The two sergeants had been "screaming like crazy about this to any
leader who would listen," Douke wrote to Clark in an e-mail, but were
"disregarded as overreacting" until Clark's federal office stepped in.
Douke added his concern that beneficiaries of improper payments could
"pollute the integrity of entire command structures."
Clark said he also thought that his office was ill prepared for a
problem of this magnitude. It employs four auditors to oversee $1
billion in annual spending by the California Guard -- understaffed
for tackling what he estimated could be $100 million in ill-gotten
taxpayer funds.
His concern was heightened, Clark said, when he heard about
California National Guard Maj. Jeffrey Nichols. Guard documents show
that Nichols received $45,000 in loan repayments in 2008 without the
required contract on file. The amounts exceeded program limits; the
loan was obtained too far back to qualify, and Nichols' officer
commission date made him ineligible, according to Guard documents.
Around the time his student loans were repaid, Nichols was picked to
head the national incentives program at the National Guard Bureau in
Washington, D.C. Nichols, who now works to reduce National Guard
attrition, declined to comment.
Clark said he began to worry that the National Guard Bureau might
exercise its legal right to forgive improper payments to avoid
embarrassment and the possible impact on recruiting. At that point,
he said, he contacted federal agents.
"I came to realize that this criminal matter would be
multi-jurisdictional, and would require vast resources to
investigate," Clark said. "Soon National Guard officials will know
this is for real and that there are no more lumpy rugs to hide stuff under."
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