[Senate Hearing 113-377]
[From the U.S. Government Publishing Office]







                                                        S. Hrg. 113-377

              FRAUD AND ABUSE IN ARMY RECRUITING CONTRACTS

=======================================================================

                                HEARING

                               before the

                     SUBCOMMITTEE ON FINANCIAL AND
                         CONTRACTING OVERSIGHT

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 4, 2014

                               __________

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                  THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan                 TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin             KELLY AYOTTE, New Hampshire
HEIDI HEIKAMP, North Dakota

                   Richard J. Kessler, Staff Director
               John P. Kilvington, Deputy Staff Director
               Keith B. Ashdown, Minority Staff Director
                     Laura W. Kilbride, Chief Clerk
                     Lauren Corcoran, Hearing Clerk


          SUBCOMMITTEE ON FINANCIAL AND CONTRACTING OVERSIGHT

                       CLAIRE McCASKILL, Chairman
CARL LEVIN, Michigan                 RON JOHNSON, Wisconsin
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          MICHAEL B. ENZI, Wyoming
MARK BEGICH, Alaska                  KELLY AYOTTE, New Hampshire
TAMMY BALDWIN, Wisconsin

                 Margaret Daum, Majority Staff Director
                 Rachel Weaver, Minority Staff Director
                       Kelsey Stroud, Chief Clerk


















                            C O N T E N T S

                                 ------                                
Opening statement:
                                                                   Page
    Senator McCaskill............................................     1
    Senator Johnson..............................................     3

                               WITNESSES
                       Tuesday, February 4, 2014

Lieutenant General William T. Grisoli, Director of the Army 
  Staff, U.S. Army; accompanied by Major General David E. 
  Quantock, Provost Marshal General of the Army, and Commanding 
  General, U.S. Army Criminal Investigation Command and Army 
  Corrections Command; and Joseph P. Bentz, Principal Deputy 
  Auditor General, U.S. Army Audit Agency........................     4
Lieutenant General Clyde A. Vaughn (Ret.), Former Director, Army 
  National Guard.................................................    21
Colonel Michael L. Jones (Ret.), Former Division Chief, Army 
  National Guard Strength Maintenance Division...................    24
Philip Crane, President, Docupak.................................    26
Lieutenant Colonel Kay Hensen (Ret.), Corporate Compliance 
  Officer, Docupak, and Former Contracting Officer, National 
  Guard Bureau...................................................    27

                     Alphabetical List of Witnesses

Crane, Philip :
    Testimony....................................................    26
    Prepared statement...........................................    58
Grisoli, Lieutenant General William T.:
    Testimony....................................................     4
    Prepared statement...........................................    41
Hensen, Lieutenant Colonel Kay:
    Testimony....................................................    27
    Prepared statement...........................................    61
Jones, Colonel Michael L.:
    Testimony....................................................    24
    Prepared statement...........................................    52
Vaughn, Lieutenant General Clyde A.:
    Testimony....................................................    21
    Prepared statement...........................................    48

                                APPENDIX

Statement for the Record from General Quantock...................    66
Responses to post-hearing questions for the Record:
    Mr. Grisoli..................................................    69
    Mr. Bentz....................................................    70

 
              FRAUD AND ABUSE IN ARMY RECRUITING CONTRACTS

                              ----------                              


                       TUESDAY, FEBRUARY 4, 2014

                                 U.S. Senate,      
        Subcommittee on Financial and Contracting Oversight
                      of the Committee on Homeland Security
                                        and Governmental Affairs,  
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:02 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Claire 
McCaskill, Chairman of the Subcommittee, presiding.
    Present: Senators McCaskill, Johnson, and Ayotte.

             OPENING STATEMENT OF SENATOR MCCASKILL

    Senator McCaskill. Welcome, everyone. I know that my 
colleague has a time crunch this morning and so I am going to 
try to begin right away so we can hopefully get time for both 
of us to have some questions before he has to go. Let me begin 
with a very brief opening statement.
    This hearing will now come to order.
    The Recruiting Assistance Program (RAP) was born in 2005 
when the Army National Guard (ARNG) was struggling to meet its 
recruitment numbers due to the wars in Afghanistan and Iraq. 
The National Guard's Recruiting Assistance Program (G-RAP), 
would provide incentives to National Guard soldiers and 
civilians to act as informal recruiters, or recruiting 
assistants (RA). These recruiting assistants would receive a 
payment between $2,000 and $7,500 for every new recruit. The 
contract was run out of the Army National Guard's Strength 
Maintenance Division (ASM), and administered by a contractor, 
Docupak. The recruiting assistants were hired by Docupak as 
subcontractors. After the program was put in place, the 
National Guard began to meet its recruiting goals and the 
Active Army and Army Reserve began their own similar programs.
    In 2007, however, Docupak discovered instances of potential 
fraud, which it referred to the Army. Four years later, after 
suspecting a pattern of fraud, the Army requested a program-
wide audit, and what the audit found was astounding--thousands 
of National Guard and Army Reserve participants who are 
associated with payments that are at high or medium risk for 
fraud, with an estimated total amount of $29 million paid 
fraudulently. This criminal fraud investigation is one of the 
largest that the Army has ever conducted, both in terms of 
sheer volume of fraud and the number of participants.
    Although recruiters were prohibited from participating in 
the RAP program because recruiting was already part of their 
job duties, investigators found that potentially over 1,200 
recruiters fraudulently obtained payments. For example, in 
Texas, a former member of the National Guard was sentenced to 4 
years and 9 months in prison for leading a conspiracy to obtain 
$244,000 in fraudulent recruiting bonuses. He did this by 
providing kickbacks to National Guard recruiters in return for 
the names and Social Security numbers of recruits who had, in 
fact, already been recruited.
    The fraud was not limited to service members. Because 
anyone could sign up to be a recruiting assistant, there are 
also cases of people unaffiliated with the Army stealing names 
and Social Security numbers of potential recruits and receiving 
referral payments that they were not entitled to.
    Even one case of fraud would have been too many. Instead, 
we now know that thousands of service members, their families 
and friends may have participated in schemes to defraud the 
government they served and the taxpayers. Worst of all, this 
program has the potential to become a stain on thousands of 
recruiters and National Guard members who do their jobs so well 
and so honorably.
    And when I looked into how this could have happened, the 
story just got worse. According to the auditors, the National 
Guard made mistake after mistake in designing and implementing 
the program that left it vulnerable to exactly the kind of 
fraud that occurred. In addition, Army auditors found that the 
contracts failed to comply with government contracting rules, 
including basic requirements to conduct the kind of minimal 
oversight that could have detected and prevented some of this 
fraud.
    And as if all that was not bad enough, the Army has 
determined in its investigation that the entire program was 
illegal from the beginning. The payments did not fall in a 
permissible category of bonus payments authorized by law. The 
program also exceeded the limits that Congress had placed on 
legal bonuses the Army could pay to encourage the referral of 
new recruits. As a result, the Army concluded that all of the 
money spent on the program, all $386 million of it, was 
illegal.
    I cannot begin to express how disappointed and angry I am 
to hear of such carelessness with taxpayer dollars. I 
appreciate that recruiting is key to maintaining our military 
strength and key to making sure that we have the skills that 
our military needs, particularly in wartime. But we have to 
make sure that we are going about it the right way.
    Congress and the American public have entrusted the Army 
with taxpayer dollars and with upholding standards of 
integrity. We cannot have programs fly in the face of law and 
good government practice simply to meet recruiting numbers, no 
matter how desperate the situation.
    To its credit, the Army's leadership immediately suspended 
the program back in 2012 when the auditors began to expose 
these massive problems, and they began a variety of 
investigations to determine how this could happen and who was 
responsible. Some of those investigations are still ongoing and 
I look forward to learning the results when they are completed.
    However, I am disappointed that it took a small story in 
the Washington Post in 2012 for this Subcommittee to even have 
an inkling about problems with this large contract, and that it 
took almost 2 years and our repeated insistence for the Army to 
inform the Subcommittee that the problems that the Post 
reported were just the tip of the iceberg. Since then, the Army 
has cooperated fully with our requests and I thank them for 
that.
    Today, I want to spend some time delving into exactly what 
went wrong in the design and management of this program and how 
so many mistakes were made. I also want to discuss what the 
Army is doing to hold all the individuals involved accountable. 
I will also ask questions about what concrete steps the Army 
has taken to address all the deficiencies uncovered so far.
    I thank you all for being here today and I look forward to 
your testimony. Senator Johnson.

              OPENING STATEMENT OF SENATOR JOHNSON

    Senator Johnson. Thank you, Madam Chairman, and let me 
apologize for having to leave at about 10:25. I also want to 
thank you for holding this hearing and your pursuit of this 
particular issue in terms of oversight. I think it is 
definitely an important issue. I want to thank the witnesses 
who have taken time to meet with me in my office and also 
provide me some of the information, because this can be pretty 
detailed and pretty complex, exactly what happened here.
    From my standpoint, I think you did a pretty good job 
laying out the issues, laying out what the problem was. I 
basically have three questions. Did the National Guard have the 
legal authority to do what it did? I think that is still 
certainly a question in my mind. It sounded like they sought 
legal counsel. I think the question is whether there was undue 
pressure put to get basically those legal opinions to allow 
them to do this. I think that is a question we have to 
certainly ask.
    Has there been accountability and will there be 
accountability? Will there be accountability for those 
individuals that basically took the authority to institute this 
program, which obviously went awry? And then, do we have proper 
corrective action so this does not happen in the future? To me, 
those are the three big questions.
    I think I am heartened by the fact, and I think you would 
probably agree with this, that the Army did, once they became 
aware of it, immediately suspend the program. I think the 
investigation that is going on now is serious. I think that 
there are criminal charges being filed and pursued, and I think 
that has to be the case.
    So, from my standpoint, the program has been ended. I think 
this is very appropriate in terms of oversight. I think the 
fact that you have pushed this oversight hearing is certainly 
helping move this process along.
    And, again, I just want to thank you. I wish I could stay 
longer, because this is an important issue.
    Senator McCaskill. Thank you.
    Senator Johnson. Thank you.
    Senator McCaskill. I want to introduce our witnesses. 
Lieutenant General William Grisoli is Director of the Army 
Staff at the Department of the Army Headquarters, a position he 
has held since July 2013. In this capacity, he is responsible 
for ensuring the effective integration and coordination of Army 
policy, positions, and procedures across the functional areas 
of Army responsibility. General Grisoli previously served as 
Director of the Army Office of Business Transformation within 
the Office of the Under Secretary of the Army.
    Major General David Quantock is the Provost Marshal of the 
Army and Commanding General, United States Army Criminal 
Investigation Command (CID) and Army Corrections Command. He 
serves as the Army's top law enforcement official, with 
responsibility for investigations and incarcerations of Army 
personnel. General Quantock previously served as Commanding 
General of the U.S. Army Maneuvers Support Center of Excellence 
in the most excellent Fort Leonard Wood in Missouri.
    Joseph Bentz is the Principal Deputy Auditor General with 
the U.S. Army Audit Agency (AAA), with responsibility for 
developing and overseeing the execution of the Army's internal 
audit plan and coordinating with other accountability 
organizations within the Federal Government. Prior to becoming 
Principal Deputy Auditor General, Mr. Bentz served as Deputy 
Auditor General for Acquisition, Logistics, and Technology 
Audits (ALT). So, you went from the Logistics Civil 
Augmentation Program (LOGCAP) to recruiting fraud.
    OK. I want to thank you all for being here. It is the 
custom of this Committee for you to stand and take the oath.
    Do you swear that the testimony that you are about to give 
will be the truth, the whole truth, and nothing but the truth, 
so help you, God?
    General Grisoli. I do.
    General Quantock. I do.
    Mr. Bentz. I do.
    Senator McCaskill. Thank you very much.
    And, we will begin with you, Major General Quantock.
    General Quantock. I think the opening statement will be 
with General Grisoli.
    Senator McCaskill. Oh, great. OK.

TESTIMONY OF LIEUTENANT GENERAL WILLIAM T. GRISOLI,\1\ DIRECTOR 
  OF THE ARMY STAFF, U.S. ARMY; ACCOMPANIED BY MAJOR GENERAL 
  DAVID E. QUANTOCK, PROVOST MARSHAL GENERAL OF THE ARMY, AND 
 COMMANDING GENERAL, U.S. ARMY CRIMINAL INVESTIGATION COMMAND 
 AND ARMY CORRECTIONS COMMAND; AND JOSEPH P. BENTZ, PRINCIPAL 
         DEPUTY AUDITOR GENERAL, U.S. ARMY AUDIT AGENCY

    General Grisoli. Good morning, Chairman McCaskill and 
Ranking Member Johnson. Thank you for the opportunity to 
discuss the Recruiting Assistance Program and the Army's 
comprehensive efforts to detect, analyze, and investigate 
allegations of fraud and mismanagement.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Grisoli appears in the Appendix 
on page 41.
---------------------------------------------------------------------------
    Before I discuss the particulars of the Recruiting 
Assistance Program, I want you to know that the accusations of 
fraud, mismanagement, and other potentially criminal activities 
surrounding this program are as disturbing to us as I know they 
are to you. You have my commitment that we will do whatever it 
takes to put this right, and you will hear today we have 
already done much, but there is more to be done. We will also 
punish those who have broken the law and recoup resources where 
we can.
    The Recruiting Assistance Program was created in 2005 to 
bolster Army National Guard recruiting efforts during a period 
of increased demand coupled with the difficult recruiting 
market. RAP provided payments to recruiting assistants for each 
potential enlistee that enlisted and entered basic training. 
This effort was coordinated by a contractor, Docupak. All 
components of the Army implemented a form of RAP for various 
periods of time: The Army National Guard from 2005 to 2012; the 
Army Reserve from 2007 to 2012; and the active duty from 2008 
to 2009. The total program was approximately $459 million.
    In 2007, Docupak alerted the United States Army Criminal 
Investigation Command to possible fraud in the Recruiting 
Assistance Program. CID initiated several potential fraud case 
reviews, and in 2011 requested the U.S. Army Audit Agency begin 
a fraud risk assessment of the program. Upon learning of the 
preliminary results, in February 2012, the Secretary of the 
Army immediately canceled the Recruiting Assistance Program and 
directed the recovery of the remaining unexecuted RAP funds. He 
also issued a comprehensive directive to determine ultimate 
responsibility and accountability for the failures in the RAP 
program and to initiate appropriate corrective action. The Army 
created a task force to comprehensively and thoroughly review 
the scope, contracting organizational structural, contracting 
procedures, possible misuse of Army funds, and potential 
criminal activity.
    In September 2013, I updated the Secretary of the Army on 
specific actions the Army had taken to determine ultimate 
responsibility and accountability for the failures in RAP and 
the corrective actions instituted. The Secretary of the Army 
subsequently signed another directive focused on additional 
corrective actions to ensure individual and organizational 
responsibility and accountability.
    Currently, the Assistant Secretary of the Army (ASA) for 
Acquisition, Logistics, and Technology is reviewing the 
National Guard Bureau (NGB) and the Mission Installation 
Contracting Command Corrective Action Plans in response to 
their program management reviews, which found that there had 
been a general breakdown in sound business practices.
    As indicated in my written testimony and by documents 
previously provided to the Subcommittee, corrective actions and 
investigations are still ongoing and with completion dates 
ranging from Spring 2014 to the end of 2016. You have my 
assurances we will continue to keep you informed as these 
investigations proceed.
    In summary, the scope of the Recruiting Assistance Program 
investigations is complex and far-reaching. The Army has taken 
aggressive and comprehensive steps leading to corrective 
actions to prevent future occurrences and is committed to 
working with Congress as we move forward in this matter. Your 
focus helps us focus our oversight. The Army will also identify 
and take action against individuals who should be held 
accountable. I am confident the end result will be 
substantially improved recruiting and contracting processes in 
the National Guard Bureau and the entire United States Army.
    Chairman McCaskill, Ranking Member Johnson, thank you for 
the time and interest in this matter. I look forward to your 
questions.
    Senator McCaskill. Thank you so much.
    I will just ask a couple of questions so there will still 
be some time left for you to ask questions before we leave.
    Senator Johnson. OK.
    Senator McCaskill. Let me get a sense of why it took 4 
years from the time that Docupak gave you some indication that 
there was a problem? Can you lay out for us in a way that would 
make me feel more comfortable why it took until 2011 for the 
audit to be called for?
    General Quantock. Chairman McCaskill, I can take a shot at 
that question.
    Senator McCaskill. OK.
    General Quantock. If you look at how the case came to 
everybody's attention, first of all, there were only two cases 
in 2007 that our CID investigation--that came through a fraud 
hotline that was----
    Senator McCaskill. OK.
    General Quantock [continuing]. Directed. So, understand 
that over this period of time, CID investigated over 43,000 
felony criminal investigations.
    Senator McCaskill. Right.
    General Quantock. So, two cases in 2007 would not have 
raised.
    And then in 2008, there were five cases.
    Senator McCaskill. OK.
    General Quantock. And then, of course, again, that would 
not send a signal, either. And then two more cases in 2009.
    It was not until 2010 when we had 10 cases in 1 year that 
one of our Huntsville agents in Huntsville, Alabama, realized 
there is something that could be misconstrued or cause some 
kind of systematic concern. So, they raised it to us. We took a 
hard look at it. That is when we, basically, went over to AAA 
and said, can you take a hard look at this? There looks to be 
some systematic failures in this program. Could you do a deep 
dive on this program and see if there is anything that we need 
to be concerned about, other than the 19 cases that we are 
doing.
    In addition to that, Docupak came to us in 2010, because 
they got the same 10 cases we did, and they also made us aware 
that they are seeing some irregularities, as well. So, it was a 
combination of Docupak, our agents at the Huntsville, Alabama, 
office, that really brought this to light, and that is when we 
transferred it over to AAA to take a hard look across the 
entire program.
    Senator McCaskill. Well, make sure you convey to that 
investigator, that law enforcement professional in Huntsville, 
our appreciation that he raised the flag in 2010.
    So, basically, what you are saying, General, is that up 
until 2010, these appeared to be isolated incidents as opposed 
to a pattern and a systemic fraud.
    General Quantock. Yes, ma'am. I have 150 fraud 
investigators, civilians, and we look at dozens of fraud 
investigations. So, this was just another one of those kind of 
dots on a map that cross the entire United States. Not only 
that, the 19 cases were, again, across the United States. So, 
there was really nothing that just jumped to our attention that 
would have directed us----
    Senator McCaskill. OK.
    General Quantock [continuing]. That we have a major problem 
here.
    Senator McCaskill. General Grisoli, one of the things--and 
I will get to questions for the auditor after Senator Johnson 
has a chance to question--but one of the things I am worried 
about is holding people accountable, and this is maybe a 
question for both you and General Quantock. I know that 2 years 
ago, we identified 1,200 recruiters and over 2,000 recruiting 
assistants. I know we are looking at a statute of limitations.
    I am really concerned that there are going to be people 
that wear our uniform that are going to beat this by virtue of 
the statute of limitations, or they are only going to get 
``titled,'' and are not going to lose benefits, and will be 
allowed to retire and go their way. These are criminals who 
have dishonored the uniform that we are all so proud of, and I 
would like you to address briefly, if you would, what we need 
to be doing statutorily, whether that is lengthening the 
statute of limitations or making sure that there is some kind 
of procedure internally that you lose your benefits. I do not 
want to mess with anybody's benefits who served our country 
honorably, but if you have served dishonorably, I think you 
deserve more than the word ``titled'' in your file.
    General Grisoli. Madam Chairman, we have the same concern 
you have on this particular issue, and as we prioritize our 
efforts, we try to prioritize the ones of greater risk as 
falling into that category of where the statute of limitations.
    As far as looking at some assistance from Congress, we are 
OK now, but I think we may have to come back and ask for some 
assistance, but we will let you know as we work with you 
through these problem sets and we address the highest priority 
first and the ones that are closest to the statutory limits. We 
will work through that and communicate with your staff.
    Senator McCaskill. It is going to break my heart if there 
are a lot of people who get away with this, on behalf of all 
the amazingly brave and courageous people who step across the 
line. It is just going to break my heart, and we have to figure 
out a way to hold every single one of them accountable, if 
nothing else, just for the benefit of all those, the vast 
majority, that serve so well.
    General Grisoli. Madam Chairman, I would----
    General Quantock. I would agree. Go ahead, sir.
    General Grisoli. Madam Chairman, I would just say that this 
was one of our major points about prioritizing these cases was 
based on age of the case, so we could get after and do exactly 
that.
    The other thing was going through--basically, we have 
100,000 individuals that could be held accountable and trying 
to figure out the high-and the medium-and the low-risk, so we 
did not waste our time on the low-risk cases and we went after 
the high-and the medium-risk, and also the biggest dollar cost 
that was lost.
    All of those things sort of were our focus, so we could 
really focus in. And that is why, today, we have 104 cases 
adjudicated, 16 individuals already in confinement, and we, 
again, continue to go after this very aggressively across the 
entire CID force.
    Senator McCaskill. Great. Senator Johnson.
    Senator Johnson. Thank you, Madam Chairman.
    Let me just start out, because we discussed the history a 
little bit of recruiting bonuses, does anybody think just per 
se recruiting bonuses are a bad idea?
    General Grisoli. No, Senator, I do not. I think that there 
are certain times when the market is tough to recruit that we 
have to have those incentives to bring young men and women into 
the military. So, we need to have those tools to be able to man 
the force.
    Senator Johnson. Now, in my business, we also employed 
recruiting bonuses, and they were most effectively paid out to 
employees, people that knew folks, understood the operation. In 
the past, recruiting bonuses actually had been legally paid out 
to members of the service, correct?
    General Grisoli. Correct, Senator.
    Senator Johnson. But in this case, paying those bonuses to 
military personnel was illegal, improper?
    General Grisoli. There are many different ways something 
can be illegal. For example, the types of funds that are used. 
When we look at our inefficiency concerns, we look at the type 
of money, the purpose of the money that Congress gives us, and 
the time we are supposed to spend those dollars. And so that is 
what we took a look at, and if those are not done properly, it 
is illegal.
    Senator Johnson. Now, as a manufacturer, I am always trying 
to drill down and find out what the root cause of this problem 
was. So, we have a recruiting bonus program, which on the 
surface makes sense and actually allowed you to recruit the 
number of individuals we needed. But then something went wrong. 
What was the breakdown? What was the root cause that something 
that may have been a good idea, a recruiting bonus, went across 
the line and resulted in fraud and criminal activity?
    General Grisoli. The breakdown, the fundamental breakdown, 
was in how they established and then executed the program. So, 
when you establish a large acquisition program of this nature, 
first of all, you have to have the right internal controls and 
processes in place. Some of the other parts that were 
challenging for the National Guard Bureau was their actual 
organizational structure that we found. So, the structure was 
improper. They are working to correct that and we have 
addressed that. The establishment and the plan, the acquisition 
strategy, was improper, so, therefore, that led to poor 
execution.
    Senator Johnson. The last area I just want to explore is 
the authority of the Guard to actually utilize funds from this 
standpoint. Now, at least the previous recruitment bonus 
program was actually passed as a law by Congress, correct? And 
that was in what year?
    General Grisoli. That was in 2006, that Congress had the 
Bonus Referral Program.
    Senator Johnson. And this program started the same year, 
correct?
    General Grisoli. It started prior to that.
    Senator Johnson. It actually started prior to that.
    General Grisoli. Yes, sir.
    Senator Johnson. So, I guess, let me ask Mr. Bentz here, 
have you looked at the legal counsel, the legal advice that the 
Guard relied on to institute this program for their authority?
    Mr. Bentz. Senator, we did not audit the authority under 
which the RAP program was established.
    Senator Johnson. General Grisoli, have you looked at that?
    General Grisoli. Senator, the Guard relied on Section 10503 
of Title X for our legal basis, which was their authority and 
responsibility to assist States. That particular area is 
ongoing review by us right now. We wanted to have our legal 
counsel take a hard look at that authority.
    Senator Johnson. Now, at the time, did the legal counsel 
look at that statute and express a legal opinion that this was 
legal and authorized? Or was this something that the command at 
the time just took upon themselves and took a look at that 
statute and said, OK, we have the authority, and just moved 
forward?
    General Grisoli. At that particular time, we believe there 
was some legal counsel by the National Guard Bureau to their 
contracting office. The question in mind right now, was it the 
correct legal counsel to the Guard Bureau.
    Senator Johnson. Well, is there documentation of that? I 
mean, are there legal written opinions provided to the 
procuring officer?
    General Grisoli. We do not have a legal opinion or opine of 
the situation at 2005, no, sir.
    Senator Johnson. If that legal opinion was sought, it was 
just a verbal opinion?
    General Grisoli. I would have to presume, Senator, that 
that is what it was.
    Senator Johnson. OK. I would really dig into that. I would 
want to find out exactly how this authority was assumed, on the 
basis of what legal opinion. If it was verbal, I would get 
testimony from the counsel that provided that legal advice. I 
think it is a legitimate question. I think it is kind of the 
heart of the issue here, too, just in terms of ongoing 
oversight, to prevent this thing in the future. So, certainly 
from my standpoint, I want that question answered.
    General Grisoli. Senator, we will do that, and as we review 
the basic authority for that, that will be part of our review.
    Senator Johnson. OK. Again, I want to thank the witnesses 
for your service, for coming forward, and again, thank you, 
Madam Chairman, for this excellent hearing.
    Senator McCaskill. Thank you.
    Senator Johnson. Thank you.
    Senator McCaskill. Let me followup on that a little bit. If 
there is a new program undertaken in the military, I was under 
the assumption that in the active branches, there was always 
the requirement of a written legal opinion for a program to 
begin, especially one that was embracing hundreds of millions 
of dollars of expenditures.
    General Grisoli. Madam Chairman, that is correct. When you 
establish an acquisition strategy, the Contracting Officer 
should always go and get a legal opinion on that strategy.
    Senator McCaskill. But that did not occur here.
    General Grisoli. We do not have evidence of that occurring.
    Senator McCaskill. And, is that because there is not a 
written requirement of that in the Guard as there is in the 
active branches, or is that because that requirement was 
disregarded?
    Mr. Bentz. Sir, I can talk to the extent to which the Guard 
Bureau, in their contracting process, sought legal review or 
did not seek legal review. We concluded that their efforts to 
seek legal review on the RAP contracts was insufficient. In 
certain instances, they did not seek legal review. In certain 
instances, they received a legal review that was neither dated, 
fully commented on, and/or questions or comments from the legal 
review fully resolved, ma'am.
    Senator McCaskill. My friend from Missouri will be on the 
next panel and there is no question that I know that no one 
intended anything other than good to come out of this. We 
needed recruits. We were in a very stressful situation for 
command. We were, really, for one of the first times in our 
history, beginning to use the Guard and the Reserves in an 
operational capacity. They were being asked to do what they had 
never been asked to do before.
    And so I am sympathetic to the command pressure but I need 
to be clear here that it was, in fact, command pressure that 
brought this about rather than a thorough vetting of this 
program and the way it was going to operate through normal 
channels of legal counsel and acquisition policy. Is that a 
fair characterization?
    Mr. Bentz. Senator, we did conclude that there was pressure 
brought from the ASM folks on the contracting folks to make RAP 
happen.
    Senator McCaskill. OK. Let me go back. Let us talk about 
the contracting process, because this is particularly 
frustrating. I worked on contracting for years and I keep 
thinking, OK, we have really turned the corner, and then one of 
these issues turns up. Now, admittedly, this was back in 2005, 
before we really began focusing the entire military apparatus 
on basic core competency on contracting.
    Now, I do not need to spend much time. I have been in 
briefings many times with your folks, General Quantock, about 
the fraud that occurred and the theft that occurred in the 
context of Iraq, and to a lesser extent in Afghanistan. We are 
doing better. We have actually got training for the contracting 
officer representatives (CORS). We stood up a contracting 
command. I think the leadership of the military now understands 
that you cannot have the attitude, ``I needed it yesterday, I 
do not care what it costs,'' because that is kind of what the 
attitude was.
    But, talk to me a little bit about this contract and how 
bad it was. Was there anything they did that met the 
requirements of Federal procurement law as it related to the 
way this contract came about?
    Mr. Bentz. Our conclusion was, very little. There are 
actually three contracts associated with the RAP. Initially, 
the first Guard RAP contract was a task order placed off an 
existing marketing services contract, so outside the scope of 
that contract. As they moved forward, there was little 
acquisition planning, as referred to. In the award of the G-RAP 
base contract in 2007, there were processes that favored the 
incumbent contractor, did not actually account for full and 
open competition in that award.
    Senator McCaskill. You are being very careful because you 
are an auditor, and I definitely understand, because having 
been an auditor, you never want to shade anything. But, let me 
state it plainly and see if you disagree with my statement.
    Docupak task ordered off an existing marketing contract 
that really had nothing to do with this particular function. 
Then, when it came time for competition, Docupak had inside 
information that allowed them to compete in a way that was 
totally unfair to the other potential bidders on this 
particular contract, so, no surprise, they got the contract.
    Mr. Bentz. I agree, ma'am.
    Senator McCaskill. OK. Let us talk about leadership and 
fraud in this instance. There is evidence that one major 
general committed fraud, 18 full colonels, 11 lieutenant 
colonels, and dozens of other mid-level and junior officers. I 
need to know, and if you cannot give me specifically all of 
those today, I need to know for the record what has occurred in 
all of those instances in terms of holding them accountable. It 
is particularly egregious when it is our leadership, and that 
is why I hope they have received priority, and I would love you 
to speak to that, General Quantock.
    General Quantock. Yes, ma'am. Actually, that was our first 
priority, is to look at all senior leader misconduct up front. 
So, in addition to age, we also looked at senior leader 
misconduct. I would have to take it for the record\1\ to go 
back and break down all those cases. But, again, it was dollar 
value, it was age of the case, and, of course, our first 
priority was senior leader misconduct, before we looked at 
anything else.
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    \1\ The information from Mr. Quantock appears in the Appendix on 
page 66.
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    Senator McCaskill. To your knowledge, have any of them gone 
to prison?
    General Quantock. No, ma'am. To my knowledge, none have 
gone to prison.
    Senator McCaskill. Have any of them lost benefits, to your 
knowledge?
    General Quantock. No, ma'am, not to my knowledge.
    Senator McCaskill. Have any of them been forced to resign 
from their service?
    General Quantock. I would have to take that one for the 
record,\2\ ma'am.
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    \2\ The information from Mr. Quantock appears in the Appendix on 
page 66.
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    Senator McCaskill. OK. It is very important that we know 
that.
    General Quantock. Yes, ma'am. Absolutely.
    Senator McCaskill. I think we have learned one thing over 
the last 6 or 7 years of contracting oversight, and that is the 
way you really begin to change a culture that would allow this 
to happen is to have everyone see that senior leaders are held 
as accountable as a young member of the Guard who figured out 
he or she could scam the system and game this to make thousands 
of dollars he or she was not entitled to.
    General Quantock. I will tell you that one of the senior 
leaders, though, it was one case and it was for $7,500 because 
they brought in a doctor. In that particular case, the statute 
of limitations did rise up and the Assistant U.S. Attorney 
failed to go forward with the case because--it was not that the 
statute of limitations had then expired at that point, but by 
the time it went through the courts, it would have. So, I think 
that is also.
    And also, the small dollar amount. Although to us it is 
abhorrent--to the Congress, it is abhorrent for senior 
misconduct, but for many Assistant U.S. Attorneys, it is more 
dollar value and bang for your buck than it is on actually who 
commits the offense.
    Senator McCaskill. Well, the thing I am most concerned 
about is I understand that there are very few U.S. Attorneys, 
unless they work in the District of Columbia or someplace where 
they have primary criminal jurisdiction, that would bend over 
or pick up something off the floor for a $7,500 fraud because 
they typically are focused on much bigger cases.
    On the other hand, the worst thing that could happen would 
be for senior leadership to go quietly into the night, and that 
is why I want to know, what tools do you have to make sure that 
everyone understands that there was punishment here? I mean, 
even if they are not going to prison, even if the criminal 
statute of limitations have run, I need to know what else you 
can do.
    General Quantock. Well, there are, of course, many 
administrative tools in the Secretary's kit bag, to include 
Promotion Review Boards at the very end of this chain to see 
if--did they serve at that particular last rank honorably, and 
it may impact, for example, what you talked about, future 
retirement benefits.
    Senator McCaskill. What about the Uniform Code of Military 
Justice (UCMJ)? Is it applicable for any of these?
    General Quantock. Yes, ma'am. However, most of them were in 
the Guard and most of them are in Title XXXII, non-Title X 
status. So, it would fall to the Guard to prosecute many of 
these cases, or in many cases, it is going to even fall to the 
civilian jurisdiction, civilian courts, to take the vast 
majority of these cases.
    Senator McCaskill. Well, for the leadership cases, I am 
thinking. I would like to explore that further, and we will do 
some questions for the record, because I have gotten very 
familiar with the UCMJ on another subject matter and I think it 
is really important that we utilize it aggressively when we 
have had leadership that may fall outside of the interests, 
because we have a lot of cases that have dual jurisdiction, as 
you well know----
    General Quantock. Yes, ma'am.
    Senator McCaskill [continuing]. General. We have lots of 
cases where the civilian prosecutor could take it or the 
military could take it. And, frankly, when that occurs, many 
times, the civilian does not want it, as we have learned in 
sexual assault. Case after case, the civilian prosecutors say, 
``I will not touch that,'' and the commanders have said, we are 
going to go forward.
    General Quantock. Roger.
    Senator McCaskill. We know that has occurred, literally----
    General Quantock. Yes, ma'am. Of course----
    Senator McCaskill [continuing]. A hundred times in the last 
few years.
    General Quantock [continuing]. The subject at that time is 
in Title X----
    Senator McCaskill. Right. So, you cannot----
    General Quantock. So that is the Title X-Title XXXII 
discussion that we always have when we want to take a case that 
we cannot. So, I agree with you a hundred percent, ma'am. We 
need to hold our senior leaders accountable, more accountable 
than anyone else, and we will take for the record\1\ where we 
are at on that.
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    \1\ The information from Mr. Quantock appears in the Appendix on 
page 67.
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    Senator McCaskill. And we may need to look at, in the 
Defense Authorization next year, at the UCMJ, because I know we 
are going to continue to focus on making sure we have it right 
there. It might be that we could do some things that would 
help.
    General Quantock. Yes, ma'am.
    Senator McCaskill. Let us talk a little bit about 
oversight. This is an interesting part of this problem that I 
think is not immediately apparent to anyone who happens along 
this story. That is, the recruiters do not really work for the 
Army National Guard. They work for each individual Adjutant 
General in every State, is that correct?
    General Grisoli. Chairman, that is correct.
    Senator McCaskill. So, what authority does the National 
Office of the National Guard have over these recruiters, if 
any?
    General Grisoli. Chairman, you are getting at some of the 
crux of the problem, which is the decentralized execution of 
this particular contract and not having special management 
oversight or internal controls, and that, I believe, and we 
have found, has caused many of the challenges.
    Senator McCaskill. So, the bottom line is the recruiters in 
every State work for the Adjutant General (TAG) in every State 
who is appointed by that State's Governor and is responsible 
for hiring the recruiters and overseeing the recruiters.
    General Grisoli. The States have that requirement, and that 
is--the central National Guard Bureau or Army Guard assists 
them.
    Senator McCaskill. So, that is why we see a wide disparity 
between some States and other States?
    General Grisoli. I think it is a training issue, because 
some States are better than others, and I think that causes a 
challenge in overall management.
    Senator McCaskill. Could you speak to that, Mr. Bentz, 
about the differences in terms of the patterns that you might 
have seen or maybe it is General Quantock--because we have some 
States where it looked like a free for all, and then other 
States where it appeared that there was not this rampant fraud. 
Could you give us any insight as to what was the difference in 
management in the various States in terms of oversight of this 
contract?
    Mr. Bentz. I cannot. Our look at the oversight of the 
contract was really at the Guard Bureau and the folks at the 
headquarters level, oversight of the contractor. I cannot speak 
to----
    Senator McCaskill. Can you, General Quantock, speak to the 
differences? We had a lot in Colorado. We had a bunch in Texas. 
There were other States that did not have as much. I mean, it 
is almost like word got out and nobody was paying attention, 
and all of a sudden everybody thought, OK, the bank is open. 
Let us go for it.
    General Quantock. Ma'am, I have to take that for the 
record.\1\ We looked at this in a holistic sense. We did not 
really dive down into actually the interaction between each of 
the States and really make a comparison.
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    \1\ The information from Mr. Quantock appears in the Appendix on 
page 67.
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    Senator McCaskill. Well, I think we need to do that, 
because I think if we are going to hold people accountable, I 
think it is very important that in each individual State, the 
Adjutant General understands what happened under their watch 
and that they have primary responsibility for oversight and 
control over the recruiters, even though the program was 
designed in a way that it was very hard to have the adequate 
controls.
    People knew this was going on. There is no way that there 
was not a culture of people saying, hey, here is the deal. 
There is a bounty and we know these people are signing up. My 
understanding is, we even had some high school counselors who 
knew that their kids were interested in the Guard, so they went 
on and signed up to take credit and get money for these 
enlistments, even though these kids were going anyway. Is that 
true?
    General Quantock. Yes, ma'am, that is true.
    Senator McCaskill. OK. Let us talk about the lack of 
controls in the program itself. Mr. Bentz did your 
recommendations include ways to design a recruiting program 
with a reward for a recruiting bonus where you would have some 
control?
    Mr. Bentz. We did talk to changes to the contract, to the 
program, as far as the way the contract is set up and the fee 
that would be paid related to the contract. We did, obviously, 
look at the controls. The contractor, obviously, is responsible 
for controls over execution of the contract, and then the 
government has a responsibility to do quality assurance on the 
contract.
    Senator McCaskill. How many investigators do you have 
working this right now, General Quantock?
    General Quantock. Ma'am, I have 60 full-time investigators 
working on this. We have brought in from the National Guard, 
from the Reserve, and some of our CID retiree rolls have come 
on. So, this is a task force, 60 full-time. Now, I also will 
tell you, many of our agents, or many of our other agents 
throughout the force are also working it. A total force of 
about 200, but 60 full-time.
    Senator McCaskill. And would you state for the record the 
total amount of money you estimate the government has been 
defrauded under these programs?
    General Quantock. Right now, it is $29 million, but the 
question is--we have cleared about $203 million. There is a 
delta of $66 million that we still--and that is really the 
further investigations as we go on. But there is, at worst 
case, we believe, $66 million as we do the rest of the 21,000 
that we have to basically vet through and run the criminal 
investigations, or run the investigations on. So, I would say 
there is about $66 million that are still out there in addition 
to the $29 million that we have already identified, ma'am.
    Senator McCaskill. Twenty-nine plus 66, or 66 total?
    General Quantock. Twenty-nine plus 66.
    Senator McCaskill. OK.
    General Quantock. That is worst case. Many of these folks 
will have done nothing wrong. These are the medium-and high-
risk individuals that we talked about, and----
    Senator McCaskill. So, it is every medium-risk----
    General Quantock. It is every medium-, every high-risk----
    Senator McCaskill [continuing]. Came into the corral, you 
would end up----
    General Quantock [continuing]. For all fraud----
    Senator McCaskill [continuing]. With close to a total of 
$100 million.
    General Quantock. Yes, ma'am.
    Senator McCaskill. Which is unlikely, that all of the 
medium-risk cases are fraud.
    General Quantock. Yes, ma'am. I would call that very 
unlikely.
    Senator McCaskill. Right. So, we are probably talking 
about, if we had to guess or die, around $50 million.
    General Quantock. Yes, ma'am. I think that is a good 
estimate.
    Senator McCaskill. OK. What is the most that any single 
recruiter defrauded that you have been able to uncover at this 
point in time? What is the largest amount that somebody 
pocketed that was fraudulent?
    General Quantock. I want to say it is around $35,000, but I 
will tell you, we have one case with five individuals that is 
nearly a million, between five individuals.
    Senator McCaskill. OK. What percentage of the medium-and 
high-risk cases that you have are at danger of running the 
statute of limitations?
    General Quantock. I have to take that one for the 
record,\1\ ma'am.
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    \1\ The information from Mr. Quantock appears in the Appendix on 
page 68.
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    Senator McCaskill. OK. And I think before we have--before I 
close this part of the panel, I think it is important that we 
look at what one of these fraud cases looks like. It does not 
matter to me which one of you takes this, but if you would give 
maybe two different examples of how this fraud occurred so we 
would have it in the record, so people could envision how this 
worked and how easy it was to pocket this money fraudulently.
    General Quantock. Well, ma'am, in your opening statement, 
you laid out well how this could have happened. Recruiters' 
assistants were basically anyone, and, of course, if they had 
access to a great deal of personal identifying information 
(PII) is what we refer to it--and if they were either by 
themselves, or they could be in cahoots with a recruiter--that 
is why we have to go through every single recruiter--but they 
could create an account, register an account, and then anybody 
that they thought may be able to--and they would be unknowing. 
They could come into the Army, or into the National Guard, and 
they never knew they gave up their PII. And that recruiter 
assistant would basically register them up.
    And that is sort of how we go after the investigation 
piece. We have to go back and look at all the people they 
recruited and find out, you were registered under this 
recruiter assistant. Did you give your personal information? 
Did you know that he was registering you to come into the 
National Guard? And, of course, the vast majority of these 
individuals, as we go through them, did not know that they had 
given their PII up to a recruiters' assistant.
    Now, in the bigger cases, not only did they do that, they 
also were in cahoots with the recruiter, and that is the second 
type, where the recruiters' assistants were in cahoots with the 
recruiter. And you could tell that because many of the--when 
they went online to put their names in the system--they all had 
the same IP address. So, they either had the high IP address or 
they had many people using the same account information to put 
the money into.
    So, that is why you can quickly vet through the low-and the 
medium-and the high-risk based on how the crime was expected to 
be----
    Senator McCaskill. So, you go to the people who are in the 
Guard and you say, someone recruited you and got paid for it. 
Do you have any idea who that is? And they are saying, no, I do 
not know who that is, and nobody recruited me, and I did not 
give my information to this person.
    General Quantock. That is correct, ma'am.
    Senator McCaskill. How would they have gotten this 
information other than from a recruiter? Maybe you could go 
hang out in the office and----
    General Quantock. Well, another example----
    Senator McCaskill [continuing]. See who was walking in and 
then try to claim that you recruited them.
    General Quantock. Well, if you have a recruiter that is in 
this, you go into the office, you want to recruit, you give 
your personal information to the recruiter. The recruiter has 
his recruiters' assistants out there, and what they can do is 
give that personal information to the recruiter assistant. He 
registers and they cut the $2,000 in half.
    Senator McCaskill. I get the kickback part. I get that a 
recruiter could easily set up 15 recruiters' assistants who 
were all his good friends or family members and he could sign 
up everybody he recruited to get his family members paid so he 
could get a kickback. But what about the cases where the 
recruiters were not enabling this? How would a recruiting 
assistant get the personal information and get this money 
unless they were a high school counselor or something like 
that?
    General Quantock. Exactly the point. High school counselor 
or high school principal with all the PII available, knowing 
their seniors are getting ready to join, want or are interested 
in joining the military, they already have ready access to the 
Personal Identifying Information, and that is usually how we 
saw it, and there are many ways, and a lot of times, they would 
get the PII, and the person unknowingly would give the PII to 
them, but did not know what they were going to do with it.
    Senator McCaskill. I see. We have a number of things for 
the record, and one of them is I do want to look at the highest 
rates of fraud on a State-by-State basis so that we can provide 
some guidance and oversight to these Adjutant Generals, because 
I am sure the Adjutant Generals are just as mortified and 
embarrassed as anybody is that knows that we have the best Army 
in the world and the finest National Guard that anyone would 
hope for. I want to make sure that we are not forgetting that 
there is a whole piece of this that is not in Washington.
    Is there anything else that I have not covered with you or 
a question I have not answered that any of you want to address 
before we dismiss you and hear from the next panel? Yes, 
General Grisoli.
    General Grisoli. Chairman, I just want to ensure you that 
we look forward to working with the Subcommittee and yourself 
as we continue to work through this very complicated challenge. 
We are concerned, also, about the fraud and the mismanagement 
and we will work with you openly to make sure that we get this 
right.
    Senator McCaskill. Well, once we finally began to open the 
spigot, you all have been very cooperative. I think there was 
at the beginning a little bit of denial as to the necessity for 
our Subcommittee to get all of this out in the open, and it is 
painful, but sometimes you have to rip the band-aid off and 
that is the only way you really get it fixed.
    Mr. Bentz, you had one more thing, and then I will turn it 
over to Senator Ayotte to ask as many questions as she would 
like.
    Mr. Bentz. No, ma'am. I was just going to say there was 
nothing further.
    Senator McCaskill. OK. Great. Thank you all for your work, 
and Senator Ayotte, do you have some questions?
    Senator Ayotte. I want to thank the Chairman very much. 
This is an incredibly important issue, and I know that you have 
asked many of these questions.
    I am trying to understand, and I think the Chairman already 
covered it--but why it took from CID so long, from 2007 to 
2011, to request the Army Audit Agency to begin a fraud risk 
assessment. So, that is a long time when you have fraud going 
on.
    General Quantock. Yes, Senator, and I will walk you through 
that. Again, in CID, we conducted over 43,000 felony 
investigations. If you look at how this started, in 2007, we 
had two CID cases that were related to this, five in 2008, two 
in 2009, and then 10 in 2010. So, you can see, these are dots 
and they were across the United States. So, they would not have 
been picked up systematically until 2010, when one of our 
agents in the Huntsville office realized there is some 
vulnerability in this and we are seeing a little bit more of 
this kind of problem. So, we need to really take a systematic 
look at this whole contract, and that is why it was referred to 
AAA in 2011.
    Senator Ayotte. So, what about the command structure? Where 
was the oversight of this? So, I know it is done by a 
contractor, obviously, but when the funds started going out the 
door much faster than you would have anticipated, as I 
understood they did----
    General Quantock. I would have not had oversight of that 
particular----
    Senator Ayotte. Yes, but I am talking----
    General Quantock. We look at it from a criminal----
    Senator Ayotte [continuing]. About in the command 
structure. One of the things I think we struggle with quite 
frequently is things that are delegated to contractors, and 
sometimes the contractors--and I am not being critical of the 
contractor here. My point is that there are other places where 
we can be quite critical of contractors across the board, 
Snowden, other things that this Chairman, I know, has spent a 
lot of time on.
    How are we conducting oversight of these contractors, so 
not just your, the transfer to looking at the investigation of 
it, but there is an oversight function. When the money starts 
going out the door a lot faster, how is it within the command 
structure that we did not pick up on that as a raw indicator 
right there, that something was not quite right, as oversight 
within the system?
    Mr. Bentz. Senator, you are correct. On behalf of the Guard 
Bureau, the oversight of the contract insufficient. The 
Contracting Officer's representatives that were responsible for 
that oversight, they believed that the contractor was 
responsible for the oversight and control of the program.
    Senator Ayotte. They thought the contractor. They did not 
realize that they--that we had to oversee the programs----
    Mr. Bentz. Correct.
    Senator Ayotte [continuing]. Because the contractor does 
not take the same oath that all of you take in terms of 
overseeing what the contractor does.
    Mr. Bentz. Correct. Obviously, the contractor has a 
responsibility to ensure that it has a system of quality 
control to----
    Senator Ayotte. Right. But they report to someone within 
the agency, with the Guard Bureau.
    Mr. Bentz. Exactly.
    Senator Ayotte. OK. One thing that, Lieutenant General 
Grisoli, in your written statement, you wrote that, quote, 
``funds were lost due to systematic weaknesses, a general 
breakdown in sound business processes, and wrongdoing.'' So, 
one is oversight within the system and other weaknesses. Can 
you tell me a little bit about that, and the one thing that I 
think about as we look at this problem is if the problems are 
systematic, how can we have confidence that the Army does not 
have similar problems in other programs when we are talking 
about systematic problems? So, if you can help me with that, I 
would appreciate it.
    General Grisoli. Senator, first, on the question reference 
other issues, you talked a little about the oversight and the 
structure. The structure, we found to be not sound.
    Then, when we took a look at how, and we spoke a little bit 
about this, how there was oversight for each one of the States, 
because it was kind of decentralized, what sort of internal 
controls were placed on that, those were not where they should 
have been.
    And then the way we prevent something like this happening 
in the future is we have what we call Program Management 
Reviews. We had our Procurement Executive do a Program 
Management Review on the overall contracting system of the 
National Guard Bureau. We are working very closely with them to 
implement that now. They have provided us a corrective action 
plan. We have accepted that plan and now they are implementing 
that plan. But we have directed that and they are moving out. 
So the systematic, the systemic ones that we are concerned 
about, we are working on fixing those right now so we do not 
have another sort of----
    Senator Ayotte. So, you are looking across systems----
    General Grisoli. Exactly.
    Senator Ayotte [continuing]. Not just this particular 
issue.
    General Grisoli. Yes, Senator.
    Senator Ayotte. And, General Quantock, you talked about how 
the rising rate of incidents really flagged, came to eventually 
flag this in terms of the criminal investigation. Why is it, 
though, and maybe you answered this but it would help me to 
understand, when the money started going out the door on a 
faster rate and that was not flagged, for example, in the Guard 
Bureau piece, why was it not that somebody before it got to you 
all asked the question, well, why is this money going out the 
door so much faster than we thought it would last us? I am just 
trying to understand that, because that would have been a 
question that I would have had, had I been, or any of us, in 
that situation, wondering, our money is supposed to last us 
this long and it seems to be going a lot faster than, really, 
it was supposed to.
    General Grisoli. Senator, I believe you are getting at 
another issue as far as internal controls and the feedback loop 
and properly providing that oversight to track that, and that 
was another weak area.
    Senator Ayotte. So, someone just was not tracking that, or 
how was it not flagged?
    Mr. Bentz. Senator, part of the responsibility on the 
Contracting Officer's representative, they did look to the burn 
rates of how they were going through the funds. They just did 
not call flags based on what they saw on the burn rates.
    Senator Ayotte. That did not flag for them?
    Mr. Bentz. That did not flag.
    Senator Ayotte. But, this was burning the money much faster 
than we thought, was it not, as I understood it?
    Mr. Bentz. I do not believe that was an issue across the 
program, that the funds were being used more quickly than 
anticipated.
    Senator Ayotte. Maybe I misunderstood that, but----
    General Quantock. I think there is also probably no common 
flags on the cause, because when you look at the recruiters, 
Senator, and the recruiters' assistants, about 105,000 
estimate, 81,000 are probably OK.
    Senator Ayotte. Sure.
    General Quantock. We have gone through and vetted them. So, 
when you start looking at the totality of it, there was not 
really--no red balloons that were up there for us to identify 
until later on down the road. Even the burn rate, because if 
the burn rate was below the authorization, then it probably did 
not send any signals up, either.
    Senator Ayotte. Thank you. I appreciate it. Obviously, this 
is something that we need to make sure that the systematic 
controls are put in place, but also that within the command 
leadership that this becomes a priority of oversight when we do 
have contractors.
    And I think one of the bigger challenges we face, too, is 
there is sort of this feeling, when the contractor is doing it, 
they have it covered, and it has created--there have been 
multiple examples where--not just within the Department of 
Defense (DOD), in other agencies, we have seen some pretty 
significant problems with this. So, we have to create--if there 
is going to be a contractor--I think we should ask ourselves, 
do we need a contractor for this, No. 1. But, No. 2, if there 
is going to be a contractor, so that the leadership is clear 
what their oversight responsibilities are with that contractor.
    So, I want to thank the Chairman for holding this hearing 
and really bringing this topic to light, and thank you all for 
what you do for us.
    Senator McCaskill. Thank you.
    I want to make sure I clarify this for the record. Mr. 
Bentz, there was a determination that the whole program 
violated the Anti-Deficiency Act, correct?
    Mr. Bentz. They are currently doing a review at our ASA, or 
Assistant Secretary of the Army for Financial Management and 
Comptroller, over potential Anti-Deficiency Act violations----
    Senator McCaskill. OK.
    Mr. Bentz. Yes, ma'am.
    Senator McCaskill. So, that has not been determined yet?
    Mr. Bentz. That is in process. I believe the completion 
timeframe for that is October of this current year.
    Senator McCaskill. OK. Do you want to add anything to that, 
General?
    General Grisoli. Chairman, it is a preliminary right now. 
It is with the Office of Secretary of Defense (OSD) and the 
formal should come out on October 14.
    Senator McCaskill. October 14?
    General Grisoli. Yes, ma'am.
    Senator McCaskill. OK. We will mark our calendar. Thank you 
all very much. I appreciate your service, and to have somebody 
in law enforcement and an auditor on the same panel makes my 
day anytime, so thank you very much.
    Senator Ayotte. Madam Chairman, may I submit something just 
for the record----
    Senator McCaskill. Sure.
    Senator Ayotte [continuing]. So that it is clear, because 
there really was a problem with, as I recalled reading, with 
the rate in which this contract was spent that was not flagged 
sooner, and I have a document that I would like to submit for 
the record.
    So, if you all could just address that question for me 
again in light of this document, I would appreciate it.
    General Grisoli. Yes, Senator.
    Senator Ayotte. In written answer.
    General Grisoli. Yes, Senator.
    Senator Ayotte. Thank you. I appreciate it.
    Senator McCaskill. Thank you all very much.
    We call our next panel of witnesses. [Pause.]
    I will tell you what. Why do not you all stay standing and 
we will do the oath first and then I will introduce you and it 
will keep you from having to get back up.
    Do you swear that the testimony you are about to give 
before the Subcommittee will be the truth, the whole truth, and 
nothing but the truth, so help you, God?
    General Vaughn. I do.
    Colonel Jones. I do.
    Mr. Crane. I do.
    Colonel Hensen. I do.
    Senator McCaskill. Thank you all.
    If you would be seated, let me introduce this distinguished 
panel, first, beginning with Lieutenant General Clyde Vaughn. 
He retired as the Director of Army National Guard in June 2009 
after 40 years of outstanding service to the Guard and to the 
U.S. Army. As Director, General Vaughn oversaw a force of 
350,000 soldiers in 50 States, U.S. Territories, and the 
District of Columbia, and developed and implemented all 
programs and policies affecting the Army Guard. General Vaughn 
previously served as Deputy Director of the Army Guard and 
Assistant to the Chairman of the Joint Chiefs of Staff for 
National Guard matters.
    Colonel Michael Jones retired from the U.S. Army in 2012, 
after 27 years of service, and now works in the civilian market 
to provide veterans, military spouses, and wounded warriors 
with employment opportunities. Prior to retiring, Colonel Jones 
served as Division Chief of the Army National Guard Strength 
Maintenance Division and held positions in the Office of the 
Secretary of Defense and the National Guard Recruiting and 
Retention Office.
    Philip Crane is the President and co-founder of Docupak, a 
marketing company founded in 1998 with expertise in program 
management, information technology, and the development of 
promotional materials. Prior to forming Docupak, Mr. Crane held 
several positions related to marketing, advertising, sales, and 
logistics.
    And Lieutenant Colonel Kay Hensen manages all Federal 
contract compliance programs for Docupak. She is retired from 
the military and previously served in the United States Army 
Reserve, the Ohio Army National Guard, the National Guard 
Bureau, and the Montana Army National Guard. During her 
military service, Lieutenant Colonel Hensen served as a 
Contracting Officer and expert in contractual planning, 
proposal writing, compliance, and budget forecasting.
    I would like to thank all of you for appearing today. We 
appreciate you being here. I know that you are anxious to help 
us get to the bottom of this and make sure that we keep this 
from ever occurring again. I will take my home State privilege, 
General Vaughn, and turn it over to the Missourian in the 
group.

  TESTIMONY OF LIEUTENANT GENERAL CLYDE A. VAUGHN (RET.),\1\ 
              FORMER DIRECTOR, ARMY NATIONAL GUARD

    General Vaughn. Chairman McCaskill, it is a pleasure to be 
here. I really mean that. I look forward to testifying and I am 
proud that you have called this hearing.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Vaughn appears in the Appendix on 
page 48.
---------------------------------------------------------------------------
    As you know, I have talked with your staff quite a bit last 
Tuesday. I had not seen any of the reports that were out there. 
They got them for me. I had already turned in my statement, so 
I am going to cover some of the things that were in the 
memorandum from your staff, which are very helpful.
    OK. So, the idea for this comes from the States. We were 
Arkansawing [phonetic] about January 2006 and the Adjutant 
Generals brought it to me and said, ``If we could recruit from 
within, if you manage to get to be the Director, then we could 
make a big difference.'' Now, what were they talking about? In 
fact, that particular individual was Major General Hank Cross 
out of Mississippi. When I became the Director, we were 20,000 
soldiers under strength, and as you have said several times, 
they had a lot of stuff going. To give you an idea, we had over 
100,000 mobilized all over the world at one time. We had 
Katrina and Rita hit and we put 50,000 more on the Southern 
coast. And when we looked around, we only had 275,000 available 
out of the whole thing. So, we had to get our strength up.
    We had thought about this comment from the TAGs and we had 
set out to see if we could figure out how to do that, because 
it----
    Senator McCaskill. TAG, just for the record, General, is 
the acronym for the Adjutant Generals in each State.
    General Vaughn. Exactly.
    Senator McCaskill. Right.
    General Vaughn. So, we put the plan together. Again, I have 
not done any interviews on this, but there was a PAT that was 
called in from the States. It was led by my deputy, General 
Grass. It was staffed very well. If you are asking about the 
legal and contracting piece, they never worked for me.
    But there were chops on a document someplace because 
nothing could possibly come up that far from what you call ASM 
through the G-1 through the Chief of Staff. You are exactly 
right. There is always a summary sheet that shows the chops on 
it. And the two chops, of course, that you have to have are 
contracting and legal, and the authorities, you account for 
your people to do the right work and have all that in place. 
And when it finally gets to you, you have a back brief.
    We cut an order off of that back brief, got it out to the 
States. They were very excited about it. There were some other 
events. I have seen some verbiage and some reports that want to 
know why I accelerated. That would be a good question to ask, 
maybe, later on. I want to get through my statement now.
    But, we moved out and kind of the rest is history. It was a 
great recruiting program and I do not think you will find too 
many people that will not state that. We have a recruiting 
commander in the back from one of the States that is an expert 
on this program and I think he will tell you exactly that. Some 
States did a wonderful job with this.
    I did not know of the irregularities, and, of course, you 
cannot blame me, because the CID, the Commander just told you 
how this occurred. We thought we had a great program running. 
And, I tell you, I reviewed documents on a daily basis, what 
was happening in the program, and I had a lot of things on my 
plate, no excuse. Once a month, we had video teleconferences 
(VTCs) with all TAGs, with all Adjutant Generals and all the 
recruiting staffs, and I told them, I said, we have to catch 
the first peckerwoods who get out here and mess this thing up 
for everybody and we have to prosecute them quickly. And I did 
that 18 months in a row. And if I did not do it, Frank Grass 
did it as my deputy, or a guy named Jim Nutall. You can find 
it, exactly where that was done.
    Now, you asked a question a while ago about the 
relationships of the TAGs. Obviously, they have command and 
control. Well, how did that work? What could we have done? We 
had done the same thing that Secretary McHugh did with the 
entire program when he was alerted to a real problem out there. 
If we would have known that there was a real problem in this 
program during the time I was there, we would have shut a State 
down, which would have been a major embarrassment, because, you 
see, the power we had where we were at was the power of the 
purse strings.
    The burn rate was what it was. I mean, I think the report 
says we got a soldier for every piece of money that went out 
there. And, oh, by the way, the $300,000 that is referred to in 
your report, that recruited 130,000 soldiers, if you look at 
that, that only comes up to about $2,400 a soldier.
    So, what I am telling you is, at the end of the day, if you 
are buying tanks and you wanted to buy a thousand tanks, if it 
had been tanks, we would have gotten a thousand tanks for the 
money we put out there. I mean, sometimes that case or that 
point is lost.
    Now, there was fraud between people that really knew there 
was fraud, and I do not think when they find them they have any 
trouble prosecuting them, because, like you say, the trail is 
there. But we did not have a chance to make a mid-course 
correction because we did not know.
    Now, who else did not know? Well, if you think about this, 
the Secretary of the whole Army rolled the same program out 
along with the United States Army Recruiting Command (USAREC) 
over the top of the Army Reserve. Now, last time I was around, 
the Army Reserve's big program was under the control of the 
Army under USAREC. You need to check that out, because I am not 
sure. I have been retired for quite a while, but that is the 
way it was.
    So, you ask yourself, how is it that the Director, and, oh, 
by the way, the two deputies, and, oh, by the way, the Chief of 
the Bureau and the Secretary of the Army Chief's staff of the 
Army do not know about this in order to make a mid-course 
correction?
    The other thing, of course, you are going down the road on 
is what were the authorities that they were operating under 
with all their lawyers--and again, that is a legal and 
contracting issue that belonged over with the National Guard 
Bureau.
    Now, to look at your report real quick, and I know I am 
running short, but this is very important, especially for some 
of the things that you covered a while ago. They covered the 
fact that the CID learned about this in phases all the way out 
and so it was hard to pick up. Here is an amazing thing, and 
sometimes we lose sight of this, and I think I have heard you 
talk about it a couple times and also had the CID agent.
    They open the cases up on everybody that received payments, 
of 106,364 individuals, right out of your report. And they also 
told you a few minutes ago that they had cleared the cases with 
the exception of 20,000. There are still 20,000 out. That 
leaves the figure of 1,219 that they are now investigating or 
have been adjudicated, which means, looking at it from another 
way around, which I do not see anyplace, and based on what he 
said, it means approximately 84,800, which is 98.5 percent, of 
our great soldiers and some of the greatest patriots in America 
did the right things, and there were some dunderheads, about 
1.5 percent, that have caused us the problems. And by causing 
us the problems, they shifted money around. And at the center 
of this, for the most part, were full-time recruiters.
    But, we do not lose sight of the fact that it was a 
tremendous recruiting program and we got the people. And we 
reached 350,000 soldiers in May 2007. I retired in 2009, and I 
was dismayed to see that article in the Washington Post, and I 
kept thinking, what is there that we missed? How in the world 
did that happen?
    And so I am pleased that you have had the hearing. I would 
look forward to talking to anybody in great detail about what 
occurred here so it can be sorted out.
    The one thing, I am not sure it would even have made a 
difference, but one thing I guess I should have, looking 
backward at it, is had an informal relationship with CID. Now, 
CID, of course, has a command line to the Chief of Staff of the 
Army and Secretary of the Army. For some reason, I guess if I 
had to do it--and I know they do not talk to anybody, because 
you have been in this business where they are trying to 
prosecute folks, but somehow, I probably, if I had done 
anything over again, I would have probably done that, and I 
still do not know if we would have been able to make course 
corrections mid-term because of the way it occurred, and it 
looks like it really peeled out a little later in the cycle 
past my retirement.
    Senator McCaskill. Thank you.
    General Vaughn. That concludes----
    Senator McCaskill. Thank you, General. We will have some 
questions for you. Colonel Jones.

    TESTIMONY OF COLONEL MICHAEL L. JONES (RET.),\1\ FORMER 
   DIVISION CHIEF, ARMY NATIONAL GUARD STRENGTH MAINTENANCE 
                            DIVISION

    Colonel Jones. Chairman McCaskill, Ranking Member Johnson, 
and Members of the Subcommittee, thank you for inviting me to 
testify before you today to help educate and provide more 
context of the program.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Jones appears in the Appendix on 
page 52.
---------------------------------------------------------------------------
    First of all, my name is Michael Jones. I am a retired 
Colonel from the Army National Guard. I had the honor to work 
and lead the Army Strength Division between the years of 2006 
and 2009.
    The G-RAP program, to me, I believe, was an excellent 
program, and as I sit here today, as the General had talked 
about, dollar for dollar, it was one of the best bang for the 
buck, as you referred to earlier, ma'am, that the taxpayers 
had.
    In 2006, the Department of Defense released a report that 
said that the Army was paying, on average, $18,327 for every 
new accession, and G-RAP reduced that down to approximately 
$2,400, a savings of $15,927, roughly. Now, if you were to say 
130,000 accessions, as documented in your staffers' memo 
yesterday, you can quickly do the math on what that savings 
was. Well, it is well over a billion dollars of potential 
savings and real savings for the government.
    Despite these savings, and I just have recently heard, when 
Jackson e-mailed me the notification last Friday, that the 
Committee had heard or been told of alleged widespread fraud, 
which, according to the numbers--and, ma'am, Jackson did 
provide us, and I do not know why the Army did not have it, we 
do have the State-by-State breakdowns of those percentage of 
recruiters and those that are still to be adjudicated. So, it 
is completely analyzed and I am sure that the Army can be 
provided or will be--or I will provide them what I have on that 
State by State.
    In my opinion, this was a very successful program, perhaps 
one of the most effective peer-to-peer recruiting programs. 
After all, these were not our full-time Guard members. These 
were those citizen soldiers that worked and lived and went to 
church and school exactly in the places where we needed to be. 
And in 2005 and 2006 and then on into the Afghanistan surge, 
recruiting was so difficult and the ability to just pile on 
deeper and deeper with advertising money and more direct mail, 
it just was not working. And so the Adjutant Generals came up 
with a program some have said was ill-conceived. Ma'am, I think 
it was brilliantly conceived because it allowed us to use the 
greatest resource we have to tell the Guard's story, and that 
is that traditional Guard soldier.
    All I have seen is a claim that there are roughly 100 
adjudicated cases out of the 130,000. I did hear and respect 
the general officers that testified, ma'am. I know there is 
more to be done and it is a process that goes on there. But, 
based upon what the staffers provided and running the numbers 
by State, it shows that--and I think General Vaughn talked 
about it--approximately 1 percent of potential fraud there, 
and, ma'am, that is 1 percent too many. One case is one case 
too many.
    It was only yesterday that I realized, or received 
information which informed that there was alleged direction of 
the methods and pressure put on contracting. It has also been 
alleged that there was undue influence and command pressure. 
Ma'am, this is sheer nonsense, and here is why.
    According to the reports I have read, those claiming that 
this happened--these people claiming that had at least seven 
options available to them if they felt some vague pressure. No. 
1, they could have looked at me, Colonel Jones, and said, ``You 
are not our boss.''
    No. 2, these warranted Contracting Officers could have done 
the acquisition plan correctly.
    No. 3, these same warranted Contracting Officers could have 
gone to their senior level of command, of which I was not in. I 
was on the Army Guard side of command working for my three-
star, not on their side of command working for their three-
star.
    Or, they could have gone to the NGB-IG. Or, ma'am, they 
could have gone to the Army Inspector General. Or, these 
warranted Contracting Officers could have simply not done it 
because, ma'am, I had no authority, no control, no supervision, 
no oversight, and no power to direct them or make them do 
anything inappropriate.
    In closing, ma'am, the few comments that have alleged that 
the concept was not well conceived, I would like to be able 
to--hopefully, that will come up and talk to you about that.
    In my opinion, Senator, we have done a great job of 
cooperating with your staff, Jackson and his team--I hope he 
will corroborate that--and look forward to attempting to 
address the value of G-RAP, address what I think are some maybe 
misconceptions, address any issues of weakness.
    Thank you, ma'am.
    Senator McCaskill. Thank you so much. Mr. Crane.

        TESTIMONY OF PHILIP CRANE,\1\ PRESIDENT, DOCUPAK

    Mr. Crane. Good morning, Chairman McCaskill, Ranking Member 
Johnson, and Committee Members. Thank you for allowing me the 
opportunity to testify today. I am Philip Crane, President of 
Docupak, an integrated marketing company founded in 1998 that 
provides marketing and production capabilities within a single 
firm to meet client needs with program management design, 
packaging, production, inventory control, warehousing, and 
distribution. Our company also provides other services, 
including information technology, print on demand, and 
development of promotional products. Docupak does not sell 
prepackaged products, but tailors our solutions to each 
individual client's needs.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Crane appears in the Appendix on 
page 58.
---------------------------------------------------------------------------
    Madam Chairman, at the outset, I would like to correct the 
record to reflect that it has come to my attention in 
preparation for my appearance today that we previously stated 
that the staff that we contacted Army CID initially. As a 
matter of fact, our review has indicated that an agent within 
the Defense Criminal Investigative Service (DCIS) contacted us 
and focused on the program with various investigative agencies. 
We have at all times remained available and transparent to 
government authority.
    Today, I am here to discuss the program that we provided to 
the National Guard Bureau for the Guard Recruiting Assistance 
Program. Since the inception of G-RAP, Docupak has established 
and informed government and contracting offices of internal 
controls used to mitigate fraud, waste, and abuse, and through 
these efforts, we identified and suspected--we identified and 
reported suspected fraud cases to the Army CID for 
investigation and potential prosecution.
    While the contract was terminated for convenience in 2012, 
we have continued to assist Army CID and other government 
agencies in identifying potential fraudulent activities. To 
date, we are aware of approximately 28 convicted RAs out of the 
more than 300,000 that participated in the program. Since its 
inception, G-RAP has achieved in excess of 149,000 total 
accessions and achieved a 92 percent successful ship rate to 
basic combat training.
    We have consistently made our program records available for 
review and audits. As I have mentioned in my letter to the 
Committee requesting the opportunity to testify, our records 
and our employees remain available to the Committee Members at 
the staff's convenience.
    Throughout the history of the contract, Ernst and Young was 
retained to audit and to provide assurance that our company's 
financial statements were precise, complete and accurate. Those 
audits include an examination of evidence supporting the 
amounts and disclosures in our financial statements and an 
assessment of the accounting principles used by our company.
    I am truly grateful to the Committee to allow me to testify 
today. Thank you.
    Senator McCaskill. Thank you, Mr. Crane. Colonel Hensen.

TESTIMONY OF LIEUTENANT COLONEL KAY HENSEN (RET.)\1\, CORPORATE 
 COMPLIANCE OFFICER, DOCUPAK, AND FORMER CONTRACTING OFFICER, 
                     NATIONAL GUARD BUREAU

    Colonel Hensen. Good morning, Chairman McCaskill. I am Kay 
Hensen, former National Guard Bureau Contracting Officer and 
now the Corporate Compliance Officer of Docupak. I would like 
to take a brief moment to provide some background on my 
experience directly related to my current position at Docupak, 
where I am responsible for contract procedures and ensuring 
compliance with applicable laws and regulations.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Hensen appears in the Appendix on 
page 61.
---------------------------------------------------------------------------
    Before my employment with Docupak, I served for 27 years in 
the military. During my tenure in the military, I served 
various duties, including logistics, administration, 
contracting, contract policy, and supervisory positions. My 
last duty assignment was as the supervisory Contracting Officer 
for the Montana National Guard. After receiving my post-
employment clearance from the Montana National Guard Ethics 
Counselor, I accepted a position at Docupak conducting contract 
audits, reviewing and updating compliance requirements, and 
developing corporate policy guides for government purchasing.
    I have more than a decade of experience in government 
procurement from both a government and corporate perspective. 
My areas of expertise include Federal Acquisition Regulation 
(FAR), long-term contractual planning, proposal writing, 
compliance, negotiations, and budget forecasting. In addition, 
I have a Level III certification in contracting from the 
Defense Acquisition University. I received my Bachelor's of 
Science (BS) degree in sociology from Regions College and a 
Master in Business Administration (MBA) from Touro University.
    Today, I am here to discuss my duties as both a Contracting 
Officer for the National Guard Bureau as well as my current 
role at Docupak. Thank you for allowing me to participate in 
this hearing.
    Senator McCaskill. Thank you.
    I will go over your numbers and see the 1-percent, but our 
numbers say the G-RAP program, in total, was $338 million. The 
Reserve RAP was $28 million and the Active Army was $7 million. 
You add that up, it is just shy of $400 million. And you just 
heard the General in charge of all criminal investigations in 
the Army say that his estimate was this is going to be $50 
million. Well, I am not a mathematician, but $50 million of 
less than $400 million is a hell of a lot more than 1 percent. 
I mean, north of 10 percent of the total amount of money spent 
on this program has been identified as fraud. Now, I do not 
think you think that is acceptable, that level of fraud.
    Colonel Jones. No, ma'am.
    Senator McCaskill. Correct?
    General Vaughn. Ma'am, I was talking about if you take the 
total number, the 106,000, and you subtract out what they have 
investigated, you get to a figure of 86,000. Of that, they have 
cleared 84,800. What he said in here was about 81,000 or 82,000 
soldiers they have cleared. And what that means, that 1,219 
that is on your document is about 1.5 percent of that first 
tranche of 86,000 people.
    Senator McCaskill. So, what you are saying is----
    General Vaughn. I am talking----
    Senator McCaskill [continuing]. The number of people who 
participated in this----
    General Vaughn. Yes, ma'am.
    Senator McCaskill [continuing]. Was small, but the amount 
they ripped us off for was pretty darn big.
    General Vaughn. It could be. It certainly could be, and 
they could have shifted it around. I do not see the numbers 
because I do not have access to that.
    Senator McCaskill. OK. I wanted to make sure I understood 
that.
    General Vaughn. No, I certainly was not claiming it was 1 
percent that was fraudulent.
    Senator McCaskill. Yes. OK.
    General Vaughn. OK.
    Senator McCaskill. And, listen, I get it that if you 
incentivize people with money, you are going to get results. I 
get that. There is no question that you got results with this 
program. I do not think anybody is here to argue that. What we 
are here to argue about is whether or not it was designed in a 
way that would have prevented people making money while not 
adding value.
    General Vaughn. Right.
    Senator McCaskill. It is one thing if somebody goes to 
their church and recognizes that there is someone there who is 
an engineer that we need in the Guard and they say to them, 
hey, have you thought about the Guard, and they bring them in. 
It is a whole another ballgame when the recruiter is providing 
personal information so they can grab some money when that 
person signs up and does not even know the recruiter.
    I know you all are here, and I am proud of you for being 
here and you have cooperated, but we have to realize that this 
could have been prevented. We could have stopped this from the 
beginning. This did not have to happen. All you had to do is 
when a recruit came in, they would be required to name their 
recruiter.
    General Vaughn. If you are asking the question, and the 
responsibility for that happens to lay down at the Adjutant 
General's Office through their command chain. You hit a great 
point a while ago. Many, States are going to come out of this, 
in my view, pretty good, and why? Because they had great 
leadership and they had a lot of integrity and they continually 
talked about the things that you have just addressed. And it 
all hurts us to hear that, but that is exactly what the issue 
is.
    Senator McCaskill. OK. I have to argue with you a little 
bit, Colonel Jones. You said that it is $18,000 per recruit. 
Well, you do not do away with some of that base cost if you go 
totally to a bounty system. In that $18,000 is the 
administrative costs of actually processing people through the 
system, correct?
    Colonel Jones. Chairman McCaskill, I did not mean to argue 
with you and certainly would never try to argue with you. I was 
just referring to the number that was put out as the cost per 
recruit at the time in 2006 that was rising steadily. All of 
the factors, whether that included the manpower cost----
    Senator McCaskill. Advertising----
    Colonel Jones. Yes, ma'am.
    Senator McCaskill [continuing]. Marketing----
    Colonel Jones. Yes, ma'am. But, I do--to the best of my 
ability, it does not include the manpower cost. But, yes, 
ma'am, with great respect, ma'am,$2,400, there was still some 
additional cost to process them. Yes, ma'am.
    Senator McCaskill. Right. Then the question is not was the 
$2,400 nice and low, but is the $18,000 too high, and what I 
would love to do at the end of this whole process is to come up 
with some recommendations that would be adopted by the National 
Guard Bureau and by the States and by the Army and the Army 
Reserves as to how you could run a recruiting program with 
adequate controls.
    Colonel Jones. Ma'am, may I address that?
    Senator McCaskill. Yes.
    Colonel Jones. To echo what you had said, ma'am, the 1-
percent--I just wanted to clarify, because I did not want to in 
any way mislead you or be disrespectful--was I meant the number 
of people that were involved.
    Senator McCaskill. The bad apples.
    Colonel Jones. Yes, ma'am. I am a soldier. I sacrificed. My 
family sacrificed. And my buddy on the left and right of me, 
they were not all bad. That was what I was trying to say.
    Senator McCaskill. Of course.
    Colonel Jones. And, yes, ma'am, a dollar misspent is a 
dollar misspent, and I apologize for that.
    Back to your question about effectiveness and cost 
effectiveness, we were converting three-to-one, so for every 
three what were called potential soldiers, when a recruiting 
assistant brought in someone, that was one. The next two that 
came in, so we had three. For every three that were brought in, 
one became an accession. On all of our other advertising 
programs, ma'am, and I have enormous documentations down to 
this particular direct mailing had all of this metrics that I 
will provide to Jackson, we had that on everything we did. The 
traditional advertising, which Congress was so gracious--during 
these years, ma'am, not you, but the Congress was giving us----
    Senator McCaskill. A huge amount of money.
    Colonel Jones. It was, what can we avoid to do to avoid a 
draft, because of all that was happening, and all of the other 
traditional methods that had worked, ma'am, honestly, for 20 
years----
    Senator McCaskill. Were not working.
    Colonel Jones. They were not, and they converted at 18-to-
1. And that was in General Schoomaker's 2007 posture statement. 
And so, ma'am, this is called a high-risk program. And, in my 
heart, during this period, my boss in the Army and the 
Congress, we believed--I do not want to put words in the 
Congress' mouth, but I believed that the highest-risk program 
was deploying our combat units at 70 or 80 percent end 
strength, and that is where we were. And that does not excuse 
anyone, as you said, scheming the system.
    And, ma'am, during this period, the General talked about 
that during the time that I was there, that he found out two, 
five, and two. So, CID only knew about two, five, and two, and 
they were not even briefing us on what was going on. If we had 
known that there was even two, five, and two during the time 
that I was there, that would have been enough to, I think you 
said, send up a red balloon or flag to say, let us take a look 
at this and find out----
    Senator McCaskill. Right.
    Colonel Jones [continuing]. Where can we make this better, 
so that what you said is so that the goodness of the program is 
not shelved because the bad actors that are out there.
    Senator McCaskill. Right.
    Colonel Jones. And, ma'am, honestly, we had recruiting 
assistants that were in college. They were in the middle of the 
market. Our recruiters were not there, but they were there.
    Senator McCaskill. No, I understand. Our problem here is 
not whether or not the idea was a bad idea.
    Colonel Jones. Yes, ma'am.
    Senator McCaskill. It is whether or not the execution of 
the program----
    Colonel Jones. Yes, ma'am.
    Senator McCaskill [continuing]. Was done in a way to 
prevent fraud. That is why we are here.
    Colonel Jones. Yes, ma'am, and----
    Senator McCaskill. And so let me move on----
    Colonel Jones. Yes, ma'am.
    Senator McCaskill [continuing]. And let me ask Colonel 
Hensen, with your background, have you read the audit that Mr. 
Bentz did?
    Colonel Hensen. I did read it one time, ma'am.
    Senator McCaskill. OK. So, I am curious, since you are an 
expert in FAR, did you read that this program did not comply 
with almost any of them?
    Colonel Hensen. I left National Guard Bureau in 2006, in 
January 2006, so all I can speak to is what was going on in the 
office during my tenure, and I believe when I made my decision 
to execute that first task order, that I was in compliance with 
the FAR. And I did have legal and I had policy and my division 
chief approval in writing prior to making that award.
    Senator McCaskill. So, you had legal in writing that you 
could do on a task order for Docupak to do this?
    Colonel Hensen. That is correct.
    Senator McCaskill. Well, you need to help us find that.
    Colonel Hensen. I have no access to it at this point. I did 
call the Contracting Office to make----
    Senator McCaskill. Because that lawyer is in trouble, 
because there is no way you could task this off a marketing 
contract.
    Colonel Hensen. Under the terms that we were executing that 
marketing contract to maintain maximum flexibility in 
developing new programs, new initiatives in order to find a way 
to recruit in a completely different environment, that contract 
was used, basically, to investigate and conduct contract 
research on different new initiatives, and this started off as 
a lead generation initiative.
    Senator McCaskill. Were you there when this contract was 
competed after the task order?
    Colonel Hensen. No, ma'am, I was not. I was in Montana at 
that time.
    Senator McCaskill. Mr. Crane, I want to thank you for your 
cooperation and thank you for correcting and giving us the 
information that it was, in fact, the criminal investigation 
side of the Army that began this as opposed to your company.
    Having said that, you were here and you heard the testimony 
from the first panel that you all got an insider position on 
this competition. I want to give you the opportunity to address 
that. Would you quarrel with that, that you had information 
that no other bidder had?
    Mr. Crane. Well, the bit of information that we did have 
that no one else did was we were the incumbent and we had past 
performance. But beyond that, that was all the advantage we 
would have had.
    Senator McCaskill. So, you are maintaining that the only 
thing about the competition that was unfair was that you were 
the incumbent?
    Mr. Crane. Yes, ma'am.
    Senator McCaskill. But, we have incumbents all the time and 
the auditors do not find that there was an unfair advantage, 
that there was information an incumbent had that was not shared 
with the other bidders.
    Mr. Crane. I am not aware of any information that we would 
have had that would have been not made public during the 
solicitation.
    Senator McCaskill. Well, evidently, the auditors found some 
that was, so we will hunt that down for you and make sure that 
you have a chance to review.
    I have other questions I need to get to, but some questions 
just arose from your testimony. I am a little worried, frankly, 
and I get the points you are making and you have made them very 
well, that there are a lot of things about this program that 
made sense. I get that. But, what worries me a little bit is 
that I am reminded of what I heard around contracting in Iraq 
from the generals. Not my problem. Not in my command. Not my 
issue. The notion that this was a problem for the warranted 
Contracting Officers, do you see any problem with that? Do you 
agree that we need to figure out how to make sure every 
commander in every situation realizes the contracts that are 
being executed that impact their command have to be their 
problem?
    General Vaughn. No, I agree with you. As I discussed 
earlier, probably, there has to be a staffing document to come 
all the way up. All our staffing documents carried a chop, from 
each one of the organizations, whether it was outside of our 
organization or not. And in this particular one, it was outside 
of our organization. But it would have carried a chop from 
them. And to hear Ms. Hensen talk about this thing that there 
has to be a document out there, I would say it is absolutely 
right.
    And not only that, it had to be coordinated with the same 
Army that went down the same road in RAP. I mean, that is why 
if you follow the bouncing ball, I do not quite understand 
this. It was Army that stood side by side with us and rolled 
out Army First when we used the G-RAP program, me and the 
Secretary standing side by side. Now, how can everybody with a 
national press conference, stand there and look at that and 
then some years later say, well, we got that all wrong 
authority-wise and on and on and on. There is more questions 
that need to be asked----
    Senator McCaskill. There is no question, and I agree----
    General Vaughn. Yes, ma'am.
    Senator McCaskill [continuing]. Because the Army did roll 
it out, although much later than you did, and obviously it was 
shut down much more quickly. You all had been in operation for 
a number of years and their time--I think I just said that the 
amount they spent was $7 million compared to $338 million in 
the Guard----
    General Vaughn. Yes, ma'am.
    Senator McCaskill. But, that does not change the fact that 
they signed up, and so there should have been those legal 
authorizations there just as we are asking those questions of 
you.
    General Vaughn. That is exactly right, and I think from a 
regular authority standpoint, the only they could use was their 
Deployed Entry Program (DEP), I believe, and that was only, 
like, 500 soldiers. Those were young soldiers waiting to go to 
basic training, and so they were not Title X soldiers yet and 
they used them in the same program. But they only used it for 
500. But, the fact of it is, the Army Reserve moved into the 
same program, having to use the same authorities with the same 
oversight.
    And so as I look at this years later, and anybody that has 
ever worked with me all the way through, we had never done 
anything where we pressured someone to do something wrong. And 
it is an integrity issue and we would not put up with it.
    Senator McCaskill. In a November 2005 Operations Order that 
you issued that established G-RAP, it identified fraud as a 
potential problem in the contract. Who was in charge? Who did 
you look to as being primarily responsible for finding or 
detecting the fraud that you identified when you rolled the 
program out?
    General Vaughn. When we rolled the program out, as you have 
said, we did a risk assessment. We did a hot wash, a red 
teaming on that, brought all the States in. And, of course, 
that is exactly where those pieces in the op order came from, 
and they are all even today talking about how that rolled out. 
We gave that to the individual States and TAGs and then we 
set--I have spent 1 day a month all day with all 54 States and 
Territories four regions explaining the whole thing. And in 
every instance that we went through one of these regions, I 
would say, OK, now, do not forget, do not kill the goose that 
laid the golden egg here. Stay on top of it. I emphasized every 
piece of this. And every recruiter out there understood that, 
and there were States that took the direction on this and moved 
out and did great things. And then there were other States, as 
I discussed with you, that the really heartbreaking thing is we 
did not have a place to make a mid-course correction in this 
and shut down a program or go in and do some real deep soul 
searching about what they were doing. And you can only imagine 
the embarrassment in a State if they were singled out and we 
had shut them down. We would not have had a problem with that.
    So, who do we hold responsible? We hold, as the CID agent, 
or Commander, pointed out, the ultimate responsibility is that 
TAG, and he has command responsibility down through his 
recruiting commanders.
    Senator McCaskill. So, Colonel Jones, did you disagree with 
the audit finding that there was no effective internals in the 
program?
    Colonel Jones. I did, ma'am.
    Senator McCaskill. You did disagree with that?
    Colonel Jones. Yes, ma'am.
    Senator McCaskill. And what were the effective controls 
that were there?
    Colonel Jones. Ma'am, the Operations Order clearly spelled 
out, the FAQ sheets, the G-RAP document spelled out in great 
detail. It went through and issued, or talked about every 
question, scenario, level of responsibility, tasked to be taken 
all the way down to the non-commissioned officer in charge 
(NCO-IC). That is the E-8 who runs the recruiters. I mean, it 
had specifically in there that they were to conduct continuous 
fraud risk assessment, take proper corrective actions, and 
notify chain of command, and all the way up the chain of 
command to the Recruiting and Retention----
    Senator McCaskill. Well, it is one thing to say you should 
not have fraud in the program, but an effective control would 
be something that would ferret out when somebody was sharing 
personal information in order to get a bounty on somebody who 
they had not recruited. Was there any control like that at all 
in this program?
    General Vaughn. Ma'am, the structural piece that is built 
in is the United States Property and Fiscal Officer (USP&FO) in 
every State. That is a Title X officer put out there that is 
owned by the Chief of the National Guard Bureau and detailed 
out there for that. And inside of his or her----
    Senator McCaskill. That is a Fraud Prevention Officer for 
those of us----
    General Vaughn. Absolutely. He owns all of the pieces. Now, 
how is it possible that, for instance, the center core of all 
these things revolved around full-time recruiters? How is it 
possible as a front-line supervisor that if there is an 
investigation going on, or a commander, that he would not have 
known about the investigation and come up on the other side to 
the Chiefs of the National Guard Bureau, which you know my ex-
boss, General Blum, you know what that would have done over 
there on that other side. That is an explosion. He did not 
know--I do not see how he knew it. I never talked to him.
    But what I am telling you is, that chain did not work. For 
what reason, I do not know. Today, I still do not know whether 
CID ever coordinated and talked to every officer--and I am not 
trying to push any bucks anyplace. I am just telling you, there 
were redundant looks and redundant places that we should have 
been able to get the word and make a correction to this 
exercise. It did not happen.
    Now, they say they did not see it, either, and I am telling 
you, when I left in 2009, it looked like a clean program. They 
did not pick it up until 2011, obviously.
    Colonel Jones. Chairman, there was one thing that we talked 
about that we believed would have prevented this, one system, 
one internal control check. Now, before I get to that one, we 
had internal control checks within the division. We used the 
Army's system of record called the Amateur Radio on the 
International Space Station (ARISS). So, that was check No. 1. 
Was the accession loaded in there? Did it correlate to 
recruiting assistance, recruiter's Social Security number, 
their accession load number?
    Then we said, OK, that is not good enough for payment. Let 
us wait until it is actually loaded into the Standard 
Installation and Division Personnel Reporting System (SIDPERS) 
database, which is the Army Guard's system of record for 
personnel, because we wanted to say, what happens if there is a 
system error and something dropped? A payment would be made. 
That would have been a payment in fraud. So, we waited, and 
that was approximately 30 days.
    Senator McCaskill. Right.
    Colonel Jones. And then we said, OK. Let us give it another 
30 days, because, what we used to call it in the recruiting 
world, buyer's remorse. A kid gets in there, he is ready to go. 
Bad news on the----
    Senator McCaskill. Colonel Jones, I get you explaining all 
that. I get you had controls in there to make sure nobody got 
paid until somebody actually joined. That is the control you 
are talking about. We are not talking about that kind of 
control that was needed.
    We are talking about the kind of control to prevent a 
situation in which somebody was going to join anyway and 
somebody made five-grand off him joining. That is the fraud. It 
is not that somebody did not go all the way through accession 
and report to basic and actually become a member. It is, in 
fact, that for people who were going to do that anyway, 
somebody was paid who did not deserve it. That was the fraud.
    So, I get that you had that control in----
    Colonel Jones. OK, ma'am.
    Senator McCaskill [continuing]. But nobody put a control 
in, and did you realize at Docupak that there was no control 
for that?
    Mr. Crane. Well, may I take just a moment and walk you 
through the controls that we did have in place?
    Senator McCaskill. Sure.
    Mr. Crane. The first primary function was to determine 
whether an RA was eligible to participate in the program. That 
fact was determined by government supplied data which would 
give us the duty status of an individual, and if they could not 
participate, if there were certain programmatic things that 
they were doing within the Guard, such as if they were 
associated with a recruiting office, that would eliminate them.
    Senator McCaskill. Right. You had to eliminate the 
recruiters.
    Mr. Crane. Yes, ma'am. So, the first action was to try to 
make sure that there is a separation off of ARISS files.
    And then, second, we would bounce last names versus last 
names of recruiters to see if it was a spouse of a recruiter or 
a sibling or a dependent of a recruiter. This was community-
based, so we did run across that. So, they would be 
disqualified.
    Second, when an RA nominated----
    Senator McCaskill [continuing]. Which were essentially your 
subcontractors.
    Mr. Crane. Yes, ma'am. That is correct. So, in order to 
nominate a potential soldier, you would have to be in an 
eligible status----
    Senator McCaskill. Right.
    Mr. Crane [continuing]. And you would have to put in PII of 
that individual.
    Senator McCaskill. Right.
    Mr. Crane. In addition to that information, we required--in 
the beginning, it was a radio button, seven questions, where 
you met them, how you met them, and a series of questions. 
After the program was instituted, I do not remember the exact 
date, but we did alter that to be able to put in free typing 
which would require the RA to fill out all of that information 
prior to it being recognized in our system that it was a 
legitimate nomination.
    Senator McCaskill. OK. So, let me make sure I understand 
this. In the beginning, you had to answer questions, where you 
met this person--what else besides where you met them?
    Mr. Crane. What is most likely their Military Occupation 
Specialty (MOS) they would be interested in----
    Senator McCaskill. OK.
    Mr. Crane. And I do not remember all seven, and I 
apologize. What would be a likelihood of a timeframe of him or 
her----
    Senator McCaskill. OK. And then you converted that to them 
having to write some kind of summary as opposed to answering 
questions.
    Mr. Crane. Yes, ma'am.
    Senator McCaskill. OK. And what did the summary have to 
contain?
    Mr. Crane. It would be those same questions, but they would 
not be fixed questions. They would have to free-type that 
information in.
    Senator McCaskill. What kind of check was there that what 
they put in was true?
    Mr. Crane. Well, that leads me to where I was headed, and 
you made mention of it just a few moments about, about trying 
to recognize and identify things that could have helped 
eliminate some of the potential fraud. In looking backward and 
thinking about this an awful lot over the last week and a half, 
if we had created an automated response--it could have been an 
e-mail, because we had to get the potential soldiers' contact 
information--if we would have sent out a verification e-mail to 
that potential soldier who had been nominated basically 
restating the facts that had been put into the system by whom 
it had been put in by, where they would have to certify the 
information that we had was legitimate, I think it would have 
gone a long ways, because----
    Senator McCaskill. This is what kills me about this. This 
is basic. You just assumed that whoever was typing this in was 
telling the truth, and nobody ever checked to see if they were 
lying. You are handing out millions of dollars, no questions 
asked.
    Mr. Crane. I would just like to clarify one thing. We did 
have coordinators on our staff and those individuals were 
making anywhere from 25,000 to 30,000 phone calls a month, 
either reaching out to the recruiting assistants to verify 
information that they had put into our system, and also making 
attempts to contact the potential soldier.
    Senator McCaskill. Well, it has to be really hard to find 
the soldier at that point in time.
    Mr. Crane. That is correct.
    Senator McCaskill. Calling them is going to be hard.
    Mr. Crane. Yes, ma'am.
    Senator McCaskill. And, if you are going to call a liar and 
ask him, are you telling the truth, guess what they are going 
to say? ``Yes.'' They are not going to say, ``No, I lied.'' Did 
it say on the form, after they typed this in, that you could go 
to prison if you lied there?
    Mr. Crane. Yes, ma'am. That was in part of our----
    Senator McCaskill. And that did not stop.
    Mr. Crane. No, ma'am.
    Senator McCaskill. Obviously, I think you would need to 
figure out a kind of control that would not require you to get 
hold of them in person in light of what we were asking them to 
then do. I mean, they were in basic. They have been over the 
country. But this is why I am frustrated----
    Mr. Crane. Yes, ma'am.
    Senator McCaskill [continuing]. That these kind of 
controls, either through contracting at the beginning or 
through oversight through the program, were never put in place. 
And there was a lot of stovepiping here.
    General, you were looking at numbers, and you were looking 
at your contract requirements, and there was an assumption that 
Fraud Prevention Officers in the States were aware of what they 
specifically needed to be looking after. Frankly, they could 
have taken a random sample of the recruits, and pretty quickly, 
they would have found out that there was fraud going on. So, 
that is what is so frustrating about this.
    I think it is really important for me to point out this 
quote that you have in your written testimony, Colonel Jones. 
You said, ``Potential wrongdoing on the part of contracted 
individuals were not believed to be within our authority.''
    Colonel Jones. Yes, ma'am. I should have said 
subcontractors, because we were not allowed to talk to 
subcontractors. It should have been subcontractors, and that 
was at the State level to do the Fraud Mitigation Plan, the 
followup, the investigative work to check on what was happening 
via the contractors.
    The only way that we could have known for sure, ma'am, was 
if we had had access to a recruiter's bank account, even non-
sequentially named, and could have had a list of bank accounts, 
and then we could have monitored any transactions, any deposits 
from a contractor. That would have been the ultimate catch-all 
to say, OK, that is wrong because you know you are not allowed 
to be in the program. When discussed, we were told, you cannot 
have access to anything like that without a court order with a 
known suspicion of wrongdoing.
    Senator McCaskill. Well, at that point, did you feel 
comfortable contacting the Criminal Investigation Division of 
the Army for assistance?
    Colonel Jones. Well, ma'am, we were told--or, we were not 
told. I never knew--again, when I was there, the numbers that 
were available were two, five, and two, that there were a total 
of nine incidents going on.
    Senator McCaskill. So, you did not have any sense that this 
was going on whatsoever.
    Colonel Jones. Well, I had the--what I just told you. It is 
the same knowledge that CID had, that in 2006, there were two; 
in 2007, there were five; and in 2009, there were two more. It 
was not until 2010 and 2011 where they started to see it, and 
then it started to become more prevalent----
    Senator McCaskill. Prevalent.
    Colonel Jones. Prevalent, yes, ma'am. Thank you. Sorry.
    Senator McCaskill. Well, we have dozens and dozens of pages 
of deficiencies that the auditors found in the contract, and we 
have a contractor that does not appear to have taken seriously 
the potential fraud problem here. And I understand, it did not 
impact your bottom line, other than the fact that it went away. 
I assume this was a profitable contract for your company.
    Mr. Crane. Yes, ma'am.
    Senator McCaskill. So, is there anything that I have not 
asked about that you feel has been characterized unfairly here? 
I really do think that there is a systematic failure along the 
way here of people to talk to one another. I think the chain of 
command got in the way on this one. I think that the 
decentralized nature of the Guard contributed to the problem. 
There is a wide variety of things that actually occurred here 
that allowed this fraud to flourish, and we have to figure out 
how to fix it without blowing anything up that we do not want 
to blow up, and that is where I need you all to give us input. 
I need you to talk about how you have some kind of ability, 
some kind of authority over contracting, how you take more 
responsibility for fraud other than just saying it is the TAGs, 
because it is not the TAGs' money. This money is all coming out 
of the central budget, right? This money came straight from 
Washington, did it not?
    So, should we not have some kind of fraud oversight in the 
Guard Bureau that has the specific responsibility of doing spot 
audits for programs with this kind of money that is being paid 
out to civilians who sign up online?
    Colonel Jones. Yes, ma'am.
    Senator McCaskill. There is not that position now, I 
assume.
    Colonel Jones. I do not think so, not that I am aware of.
    General Vaughn. No, not that I am aware of. I do not know 
how the Joint Staff is organized, because, as they deal down to 
touch the United States Property and Fiscal Officers, for the 
most part, they mirror whatever is out there. So, I do not know 
if it exists over there. It certainly did not exist with us 
other than providing overall guidance, and I think we nailed it 
pretty good in our op plan, in our op order. In fact, I read 
somewhere in one of the reports, and I did not know what the 
heck a QASP was, I mean, we had lots of things. We were dealing 
with the $40 billion worth of equipment upgrade and deploying 
lots of soldiers----
    Senator McCaskill. No, there is no question, your plate was 
full. That is why I am saying, it appeared that your fraud 
control was having a VTC with Adjutant Generals every month 
saying, if you get caught with fraud, you are going to screw 
this up. Well, with all due respect, General, that is not 
really aggressive fraud control. I think you were a powerful 
guy and you were in charge of the Guard Bureau, and you did 
have the power of the purse. But, having a VTC once a month and 
saying, do not have any fraud, did not appear to get it done in 
this instance. And I think we probably need to have a more 
aggressive fraud structure at the Guard Bureau.
    General Vaughn. Well, I think that is an excellent point. 
There is no doubt about it. We certainly would not argue with 
it at all.
    Senator McCaskill. Great.
    General Vaughn. But, it still gets back to the issue of 
some States did a remarkably good job, and that is going to 
come out. And one of the things I look forward to when you 
finally bring this to an end is what happened out there in all 
the States.
    Senator McCaskill. Well, we are going to continue to work 
on that, and we will publish a ranking of the States when the 
criminal investigations are completed by virtue of statute of 
limitations or the investigations being complete. Now, they 
have a lot of work still to do. In fact, CID let us know that 
some of these investigations might go all the way to 2016. So, 
it is going to be a while before the dust settles and we really 
figure out how many people we are going to put in jail on this. 
But, at that point in time we are going to publish a report 
card and we will go after the States that did such a poor job 
at this.
    General Vaughn. If you can really make a difference--and I 
really hate to see, in spite of everything that has been 
written about the program, I hate to see the baby thrown out 
with the bathwater. You asked something of Mike a while ago. I 
viewed the whole program as a test program as to whether we 
could move in and cut down the total number of recruiters in 
our force.
    Now, when you do this math if we took, say, the 4,000 
recruiters and cut them to 200 and made them general managers 
out there in the States--and I was working this issue, but we 
had to make sure that we could pull the whole load and recruit 
it with the G-RAP force and we basically proved that. But, if 
you did that, and if you were after 50,000 recruits and you 
paid them, just using $3,000 for the math, that is $150 
million.
    If you took the same 4,000 recruiters and say--and do not 
use the 18,000, take the other piece out of it, because now I 
am giving you the admin load in there, and you save the retired 
pay accrual and panel outs and the whole thing, and just say it 
is 100,000, and you know as well as I do it is much more than 
that, OK, that is $400 million up against 150 using this other 
system.
    And then to get out the bigger issue, what if you took all 
of the Army's stuff, for instance, and just used one 
advertising system rather than three, and, oh, by the way, what 
if you could move that over to where that was the program to 
recruit folks, and that is what we were doing with Active First 
with Secretary Geren and we proved that we could do it----
    Senator McCaskill. Well, listen, I think all those----
    General Vaughn. So, the cost savings is in the billions.
    Senator McCaskill. Yes, and those are all good ideas, and I 
will convey to Guard leadership currently and to the Joint 
Chiefs and to the Secretary of Defense that there are better 
efficiencies we can realize out of our recruiting system. I 
think we have wasted a hell of a lot of money on a lot of 
things that have not worked. And I am not saying that the 
premise of this program is not valuable. But I will guarantee 
you this. I am going to yell at the top of my lungs if somebody 
tries to roll out this program without fraud control in it 
again, because that is what happened. This program got rolled 
out and implemented without fraud control, and you cannot do 
this kind of program without fraud control.
    I know that we can sit here all day and talk about the 
value of the premise, but execution is the problem here, the 
way it was drawn up without controls embedded in it, whether it 
is more fraud prevention at the States, whether it is oversight 
of fraud prevention at the Bureau, or whether it is 
requirements in the contract in terms of recruits having to 
sign off as to who recruited them. There are a variety of 
things that could be done. I think we need to get to the bottom 
of all this and get it straightened out before we even start 
talking about rolling out this program again.
    But, we are not going to end this hearing without 
recognizing there is value to the premise. It is a lot more 
efficient to send people into neighborhoods and to send people 
into churches and to send people into college campuses, and 
members of those communities can sell the Guard much more 
effectively than putting the name on a video game ad. I am all 
for that. I am not big on the video game ads, just so you know.
    Is there anything else anybody wants to add for the record 
before we conclude the hearing? I really appreciate all of you 
being here. We will have followup questions for the record, and 
this will be a continuing area of focus of investigation for 
the Subcommittee until we finally get to the bottom of all the 
fraud that has occurred. I particularly want to reiterate on 
the record, until we find out how many of these leaders, how 
many of these colonels, the major general that has been 
implicated, how we make sure that they are held accountable, as 
they have done a great disservice to the men and women they 
lead.
    Thank you very much.
    Colonel Jones. Thank you, ma'am.
    [Whereupon, at 12:06 p.m., the Subcommittee was adjourned.]








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