[Senate Hearing 113-377]
[From the U.S. Government Publishing Office]
S. Hrg. 113-377
FRAUD AND ABUSE IN ARMY RECRUITING CONTRACTS
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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
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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
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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.
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\1\ The prepared statement of Mr. Grisoli appears in the Appendix
on page 41.
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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.
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\1\ The prepared statement of Mr. Vaughn appears in the Appendix on
page 48.
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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.
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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.
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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.
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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.]
A P P E N D I X
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