[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
[H.A.S.C. No. 114-144]
CALIFORNIA NATIONAL GUARD BONUS REPAYMENT ISSUE
__________
HEARING
BEFORE THE
SUBCOMMITTEE ON MILITARY PERSONNEL
OF THE
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
DECEMBER 7, 2016
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
U.S. GOVERNMENT PUBLISHING OFFICE
23-762 WASHINGTON : 2017
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SUBCOMMITTEE ON MILITARY PERSONNEL
JOSEPH J. HECK, Nevada, Chairman
WALTER B. JONES, North Carolina SUSAN A. DAVIS, California
JOHN KLINE, Minnesota ROBERT A. BRADY, Pennsylvania
MIKE COFFMAN, Colorado NIKI TSONGAS, Massachusetts
THOMAS MacARTHUR, New Jersey, Vice JACKIE SPEIER, California
Chair TIMOTHY J. WALZ, Minnesota
ELISE M. STEFANIK, New York BETO O'ROURKE, Texas
PAUL COOK, California
STEPHEN KNIGHT, California
Dave Giachetti, Professional Staff Member
Craig Greene, Professional Staff Member
Danielle Steitz, Clerk
C O N T E N T S
----------
Page
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
Davis, Hon. Susan A., a Representative from California, Ranking
Member, Subcommittee on Military Personnel..................... 2
Heck, Hon. Joseph J., a Representative from Nevada, Chairman,
Subcommittee on Military Personnel............................. 1
WITNESSES
Baldwin, MG David S., USA, Adjutant General, California National
Guard.......................................................... 4
Kadavy, LTG Timothy J., USA, Director, Army National Guard,
National Guard Bureau.......................................... 3
Levine, Hon. Peter, Performing the Duties of Under Secretary of
Defense for Personnel and Readiness, accompanied by Alissa M.
Starzak, General Counsel, Department of the Army, and Teresa A.
McCay, Director, Defense Finance and Accounting Service........ 25
APPENDIX
Prepared Statements:
Baldwin, MG David S.......................................... 47
Heck, Hon. Joseph J.......................................... 41
Kadavy, LTG Timothy J........................................ 42
Levine, Hon. Peter........................................... 51
Documents Submitted for the Record:
[There were no Documents submitted.]
Witness Responses to Questions Asked During the Hearing:
Ms. Speier................................................... 63
Questions Submitted by Members Post Hearing:
[There were no Questions submitted post hearing.]
CALIFORNIA NATIONAL GUARD BONUS REPAYMENT ISSUE
----------
House of Representatives,
Committee on Armed Services,
Subcommittee on Military Personnel,
Washington, DC, Wednesday, December 7, 2016.
The subcommittee met, pursuant to call, at 2:18 p.m., in
room 2118, Rayburn House Office Building, Hon. Joseph J. Heck
(chairman of the subcommittee) presiding.
OPENING STATEMENT OF HON. JOSEPH J. HECK, A REPRESENTATIVE FROM
NEVADA, CHAIRMAN, SUBCOMMITTEE ON MILITARY PERSONNEL
Dr. Heck. I will go ahead and call the Military Personnel
Subcommittee of the House Armed Services Committee to order. I
want to welcome everyone to the subcommittee's hearing on the
``California National Guard Bonus Repayment Issue.'' We are
here today to hear from the California National Guard, the
National Guard Bureau, and the Office of the Secretary of
Defense [OSD], on an issue that we must get right, in fairness
to not only the California guardsmen that this affected but for
all service members going forward.
Compensation, whether it is a bonus for a service agreement
or a regular pay, is an obligation to our service members and
their families that they should not have to worry about.
I find it unacceptable that we would place the additional
burden of years of concern about the legitimacy of a bonus
payment, or student loan repayment, on those who volunteer to
serve. The Armed Services Committee has taken action in the
2017 National Defense Authorization Act [NDAA] to address this
issue, and this subcommittee is taking every opportunity to
thoroughly review and discuss the way forward so that we can
prevent such a widespread problem or abuse in the future.
Our purpose today is to gain an understanding from those
involved on why this happened and what we can do to prevent it
going forward.
Before I introduce our panel, let me offer Congresswoman
Davis an opportunity to make any opening remarks.
[The prepared statement of Dr. Heck can be found in the
Appendix on page 41.]
STATEMENT OF HON. SUSAN A. DAVIS, A REPRESENTATIVE FROM
CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON MILITARY PERSONNEL
Mrs. Davis. Thank you, Mr. Chairman. And I would also like
to welcome our witnesses today. I actually regret that we have
to have this hearing to discuss a major pay issue that impacts
17,000 soldiers from one State, from my home State of
California. Were it not for the L.A. Times article in October,
Congress would not know the extent of this 12-year-old issue,
nor would the issue have been elevated to the Department of
Defense [DOD].
Our understanding after this was first brought to our
attention in 2010 was that a process was in place to adjudicate
the issue, but 6 years on, we are still trying to fix it.
Numerous investigations, audits, and briefings have
informed us of how we got to this point. My focus today is to
ensure through the legislation just passed by the House last
week as part of the 2017 NDAA, and updates from the DOD, that
we guarantee that those who should keep their bonuses do so,
and that the systems and controls are in place to prevent an
incident of this magnitude from happening again.
While it is important that we perform oversight of the
process moving forward, it is also critically important that we
do not forget the service members and their families that have
been deeply affected by this. Once these families had
encountered financial hardships, we know it could be truly
difficult to recover. Even if we return their bonus, we have
already upended their lives by creating unnecessary emotional
stress and financial instability.
Our military families, as we all know, have a tough enough
time without the added burden of having to repay service-
related debts that they received in good faith.
On another note, since this is his last hearing with us, I
want to thank Dr. Heck for his leadership and his dedication to
serving our troops, our families, and retirees over the past 2
years as chairman of the subcommittee. It has been a great
privilege to work with him, and he will be missed.
Dr. Heck. Thank you, Ms. Davis. Thank you.
I now ask unanimous consent that non-subcommittee members
be allowed to participate in today's hearing after all
subcommittee members have had an opportunity to ask questions.
Without objection, so ordered.
We are joined today by two panels. The first from the
National Guard. The second will be from the Office of Secretary
of Defense and the Army. We will give each witness an
opportunity to make opening comments, and each subcommittee
member an opportunity to question the witnesses. I respectfully
ask the witnesses to summarize to the greatest extent possible
the high points of your written testimony in no more than 5
minutes. Your complete written statements will be entered into
the hearing record.
We are joined on panel 1 by Lieutenant General Timothy
Kadavy, Director of Army National Guard, National Guard Bureau,
and Major General David Baldwin, Adjutant General of the
California National Guard.
General Kadavy, you are recognized for 5 minutes.
STATEMENT OF LTG TIMOTHY J. KADAVY, USA, DIRECTOR, ARMY
NATIONAL GUARD, NATIONAL GUARD BUREAU
General Kadavy. Thank you. Chairman Heck, Ranking Member
Davis, distinguished members of the subcommittee, thank you for
the opportunity to discuss the readiness of Army National Guard
personnel matters.
On behalf of the Army National Guard, I would like to thank
you for your support and commitment to our soldiers, their
families, to our veterans, wounded warriors, and those who have
made the ultimate sacrifice. For your Army National Guard is
today mobilized with more than 11,000 soldiers both abroad and
here at home. Our soldiers are our Nation's and our Army's
greatest assets, and should be treated that way.
This subcommittee's interest in recruiting retention
incentives programs is understandable. In 2008, the California
National Guard discovered inaccuracies in a number of incentive
contracts awarded and launched an investigation in 2010.
The investigation revealed that the California Guard's
incentive program had been grossly mismanaged, and there were
instances of fraud which were discovered.
As a result, California took measures to ensure these
individuals engaged in the perpetration of fraud were punished.
In 2011, the California incentive task force identified more
than 17,000 California Army National Guard cases that were
potentially linked to the unethical management of the
incentives program between 2004 and 2011.
In 2011, the California National Guard, with assistance
from the National Guard Bureau, established a soldier incentive
assistance center to assist any California National Guard
member affected by the mismanagement of the incentives program.
Every California National Guard soldier impacted received a
formal written letter to inform them of this option. This
center will continue to provide assistance to each affected
soldier.
As a result of the issues with the California incentives
program, the Army National Guard took numerous steps to improve
oversight within our incentives process. In 2010, the chief of
the National Guard Bureau, then General Craig McKinley, ordered
a review of all Army National Guard recruiting and retention
incentives programs across all States, territories, and the
District of Columbia, which found no systemic fraud.
In 2012, the Army National Guard completed the fielding of
the Guard Incentive Management Systems, known as GIMS, to all
States, territories, and, again, the District of Columbia,
which now provides a centralized oversight program for bonus
and incentive payments. In 2016, an external review of the
Army--by the Army Audit Agency of GIMS, validated its
effectiveness and found the system substantially improved the
controls throughout eligibility, monitoring, and payment phases
of the incentive process. State adjutant generals have provided
annual statements of assurance since 2012 documenting internal
controls processes to help prevent similar situations from
occurring.
Additionally, based upon reviews and assessments of the
entire Army National Guard, fraud in the incentives program is
not a nationwide problem.
In November 2016, the United States Property and Fiscal
Officers provided additional assurances while reviewing their
State incentive programs that there are no issues outside of
what we know to be normal.
Currently, Mr. Peter Levine, performing duties as the Under
Secretary of Defense for Personnel and Readiness, is chairing a
cross-functional team with the National Guard Bureau, the
United States Army, the Office of Secretary of Defense general
counsel, and the Defense Finance and Accounting Service, DFAS.
This team is leading the effort to expeditiously resolve the
cases involving the affected California Army National Guard
members. I understand you will hear from Secretary Levine a
little bit later this afternoon.
Secretary of Defense Carter's guidance is to adjudicate all
cases by July 1, 2017. The National Guard continues to support
the cross-functional team's process to ensure each soldier's
case is fairly and equitably reviewed with due process afforded
to each and every soldier.
In closing, I assure you that the National Guard has worked
hard to implement appropriate, effective internal controls
across the 50 States, the three territories, and the District
of Columbia, and to prevent similar systemic fraud from
occurring in the future.
Thank you, and I look forward to your questions.
[The prepared statement of General Kadavy can be found in
the Appendix on page 42.]
Dr. Heck. Thank you, General.
General Baldwin, you are recognized for 5 minutes.
STATEMENT OF MG DAVID S. BALDWIN, USA, ADJUTANT GENERAL,
CALIFORNIA NATIONAL GUARD
General Baldwin. Thank you, Mr. Chair, and Ranking Member
Davis, and the members of the committee. I do appreciate very
much you taking up this important issue to be able to help our
soldiers.
As General Kadavy mentioned, in 2010, a whistleblower and a
very astute auditor uncovered signs of potential fraud within
our incentives programs in the California National Guard. That
resulted in a fairly broad investigation by the Federal
Department of Justice that went through the course of 3 years.
The Governor relieved my predecessor in March of 2011, and
recalled me from Afghanistan in April of that year in order to
take charge of the disorganization and with a mandate of
cleaning up this and some other challenges.
I immediately ordered a full investigation on our side into
this matter to do a couple of things: One is, I wanted to see
if there are any other cases of fraud that were out there that
the Federal Government had not begun to investigate or picked
up on.
The second was to hold leaders accountable to find out why
did this happen and what--what were the problems. We found that
there was a complete lack of internal controls, so we
instituted an internal control system in order to prevent these
problems from happening again, and then we held the leaders
accountable that failed to provide the proper oversight or
create a command climate.
In that, we punished within the California National Guard
61 people, including firing 4 general officers and 2 full
colonels. The Feds prosecuted 44 soldiers. Some of those
prosecutions continue to go on, and several people were put in
jail for the fraud that they had committed.
But as General Kadavy mentioned, we also recognized that
there were a lot of soldiers that got caught up in this that,
through no fault of their own, had taken money from the Federal
Government that they were not necessarily due or couldn't
document why they did deserve that money. So we established the
Soldier Assistance Task Force in 2011 in order to address those
problems.
Because of the fact that we had found a 91 percent error
rate in the initial audits that we had done, we were compelled
to review every record. There were 17,000 soldiers and about
30,000 records. We were able to get through about 12,000 of the
records. Of the 12,000, we found 4,000 soldiers that we were
able to help keep their money to the tune of about $39 million,
because they had minor errors or problems in their contracts.
And I am very proud of the work that our task force did in
order to help those soldiers keep the money that they, in fact,
deserved.
Of the remaining soldiers, there were 1,400, only 1,400,
that we actually sent to recoupment. Those were soldiers that
did not contact our task force for assistance, but also we
determined had problems that were probably insurmountable, and
we couldn't support an appeal.
We submitted another 1,200 soldiers that did contact us for
appeal, because we felt that they--even though there were
problems in their contracts or maybe they may not have met the
letter of their contract, we felt that they had served
honorably and should be able to keep their money. Of those, 400
cases were adjudicated by either the National Guard Board--
Bureau or the Army Board for the Correction of Military
Records. So 400 soldiers were able to win their appeals, and
they were able to keep about $4 million between those 400
soldiers.
Another 400 soldiers, even with our endorsement to help
them keep their money, unfortunately, lost their appeal and
have not gotten their money back. They lost about $3.3 million
amongst them. And then, finally, there are 400 cases that are
remaining.
We are very encouraged today by the actions of the Congress
and the legislation that has gone into the NDAA that we think
goes a very long way to help address some of the problems that
we face, and the frustrations that we face in trying to help
our soldiers get through this. We are also very encouraged by
the actions that Secretary Carter and his team at OSD have
taken in order to increase the bandwidth to be able to
adjudicate cases quickly, fairly, and with standards that err
on the side of honoring the soldiers and their service and
helping them keep their money.
And, again, thank you very much for the opportunity to
discuss this today.
[The prepared statement of General Baldwin can be found in
the Appendix on page 47.]
Dr. Heck. Thank you, General Baldwin.
So, first, my first question is for General Kadavy.
Concerning the key recommendations and the U.S. Army Audit
Agency's [AAA's] follow-up review that was issued in May of
this year, they noted that while NGB [National Guard Bureau]
had made progress in implementing many of the control
procedures outlined in their prior audit, that not all of the
internal controls had been put into place. Can you please give
us an update as to where NGB is in implementing the final
recommended controls as put forward by the AAA?
General Kadavy. Yes, Chairman. Thanks for the question.
Dr. Heck. Can I just ask you to pull that microphone
directly, kind of like a rock star.
General Kadavy. Okay. So there were 15 initial
recommendations, of which the 2016 Army Auditing Agency follow-
up reported that all 15 initial recommendations were being
implemented, and then they recommended 4 new additional
recommendations, of which 1 will be fully implemented by the
end of this calendar year, by the end of month in December, and
the other 3 will be implemented by the end of this fiscal year.
It is about running software and updating systems to get at
that. Particularly, it is related to officer bonuses and Army
medical recruitment of experts to make sure we are tracking
their contracts as we do with all others.
Dr. Heck. Great. And I would ask that you keep this
subcommittee apprised of the progress in implementing those
final four controls.
General Kadavy. We will, Chairman.
Dr. Heck. And while you noted in your testimony that there
was no systemic fraud across the National Guard, has there been
a review to look at whether or not there is widespread
administrative errors? And General Baldwin mentioned 91 percent
error rate in what they reviewed in California. So while there
may not be criminal fraud taking place, what about the
administrative errors that might be more common across the
National Guard enterprise?
General Kadavy. So, Chairman, the Chief, National Guard
Bureau at the time, General Craig McKinley, asked us to do a
survey of the other 53 States, territories, and the District of
Columbia, which began late 2010 and completed 2011. And we did
identify some--some systemic problems, particularly related to
lack of oversight, no separations of duties, inadequate
training, outdated regulations, lack of manpower, and no
overall tracking. But it said no widespread fraud.
So we were already working on the GIMS system, and we
believe GIMS accounted for most of that, as done--as shown
through the Army Auditing Agency's follow-on recommendations
and where we are at. And I can just give you a quick update.
So on average, we do about 16,000 incentive contracts
between 2011 and 2015, the latest year, 2016. We do about 1,200
recoupments on average for normal processes, which is about 7
percent. And you listen to some of the errors that were
previously, and we have cut that down significantly. And the
majority of those recoupments are for contractual issues, when
a soldier leaves before the end of their enlistment.
Dr. Heck. Thank you.
General Baldwin, you listed some of the other numbers of
individuals that were either disciplined or charged. Certainly,
we have only heard in the open media about the one NCO
[noncommissioned officer] that seemed to bear the brunt. Can
you, again, just list, for the record, the numbers of
individuals other than that one NCO, who was incarcerated,
whether it be administrative reprimand, or other disciplinary
procedures?
General Baldwin. Yes, Mr. Chairman. I will start with the
cases that were prosecuted by either the Feds, or, in some
cases, some district attorneys took up the fraud cases. That
was 44 soldiers in total. Of those, 26 were prosecuted and
found guilty and convicted. There was another 15 or so that are
pending prosecution, is still ongoing, and then the remainder
cases were either dismissed, which is just a handful. I think
it was only four that were dismissed or acquitted.
And then on our side within the military, we have two
options. We can do UCMJ [Uniform Code of Military Justice]
action, which can include up to and including courts-martial or
administrative action. We initiated courts-martial on seven
personnel. It was six officers and one enlisted soldier. Those
cases were dismissed by the military judge, either for lack of
jurisdiction, or for lack of evidence.
But we did go after 61 people, both on the receiving side,
so people that we had evidence that had committed fraud but
didn't rise to the threshold that one of the civilian
prosecutors would take--would apply the resources to take the
case, so we took the case. And then there were also many, many
cases of people that were in the chain of command that we
couldn't prove had committed fraud, but as I mentioned before,
were lax in their oversight or established a poor command
climate that we took action against.
The most common action we took against the senior leaders
was to give a formal reprimand and fire them. And that, again,
included four general officers and two colonels.
Dr. Heck. And of all the cases that you found scattered
across the California Guard, did it seem like these were cases
whether--it was up to one individual in a particular unit, or
did there seem to be collusion? Like, was this a ring of
individuals of all the folks that you mentioned that were
actually doing this on purpose, or just happened in units apart
from some type of organized activity?
General Baldwin. So it was state--it was statewide. It was
across nearly every unit. And where there were cases of actual
fraud, it was a bilateral arrangement between the master
sergeant that ended up going to prison and the soldier that was
receiving the money. And in those cases, either we or the
Federal Government were able to prove and show evidence that
there had been collusion where the incentive was offered and
one or both parties admitted that they shouldn't be doing it,
and it violates the rules of regulations, and they did it
anyway.
Dr. Heck. And just real quick, you mentioned there were
1,400 cases that had insurmountable problems. Can you give an
example of what some of those might have been that prevented
them from going forward on appeal?
General Baldwin. Sure. Most common would be people that
failed to serve the term of their contract egregiously, not
falling short just by a few days or months, but by years.
People that enlisted and never showed up to basic training.
People that we had to throw out for methamphetamine use,
incarcerations, those types of problems that are not compatible
with military service.
Dr. Heck. And problems that would happen regardless of
component, regardless of the California National Guard, things
that are not isolated just to issues within the California
Guard?
General Baldwin. That is correct.
Dr. Heck. And then my last question, you said 400 of the
cases you reviewed had lost their appeal or their appeal was
not approved; is there another step, or is that the end of the
line for those individuals?
General Baldwin. I would defer that question to the second
panel. But our request, which we think they are going to honor,
is to go back and relook at those cases, because the Secretary
is applying new standards, and we are hopeful that many of
those people would make it through the process now, too.
Dr. Heck. Thank you.
Mrs. Davis.
Mrs. Davis. Thank you, Mr. Chairman. Actually, I was going
to ask about that as well in terms of those that you actually,
in your words, endorsed but did not make it through the
process, so we will deal with that later.
You know, one of the things I wanted to just ask you about,
because in your written testimony, you stated that Congress
should establish a streamlined adjudication process to
distinguish between those soldiers who, through no fault of
their own, got involved in this, and then others who had failed
to meet the condition.
But the California Guard control those records. Is that
correct? I mean, that you had control over those records?
General Baldwin. Yes, ma'am. We would control the initial
contract, but then it would go to the United States Property
and Fiscal Accounting Officer, who is a representative of the
National Guard Bureau in each State, who would actually
formally make the payment. So the payment threshold to get
approved was by California guardsmen; the payment was made by
the Federal representative.
Mrs. Davis. Okay. But the incentive assistance center,
could they make those--that judgment?
General Baldwin. The authority to--we didn't--we at the
State level do not have the authority to forgive any debts, and
we don't have the authority for any of the waivers. They reside
at the National Guard Bureau level, at General Kadavy's level
now.
And then, further, if cases are not able to get approved
for a waiver at the National Guard Bureau level, the recourse
is to go to the Army Board for Correction of Military Records.
My authority, as the adjutant general, was very, very limited
to help soldiers. And the 4,000 soldiers we did help were cases
where they may have been just missing one signature or some
initials on an otherwise good contract, and that was many of
the errors.
Mrs. Davis. Had that been different, had you had more
authorities--because I--it kept feeling like everybody was
passing the buck a little bit. And I am wondering what you see.
What is ideal? Because as we look at some of the cases, I
really was struck by the long-lasting impact this was having on
our military families.
General Baldwin. So if we had had the authority, we could
have--we would have been able to act more quickly. Because by
the time we were making an endorsement, instead, it would have
been an approval. But I think the way the system is set up now
is appropriate. It is appropriate for the Federal Government to
withhold that authority from the States, because after all, it
is the Federal Government's money.
In addition, the other substantive changes, the National
Guard GIMS system that General Kadavy and the chairman were
just discussing earlier has been a very elegant solution to
help correct a huge, huge amount of administrative errors and
neck it down to a very small number of administrative errors.
And when you have a small administrative error rate, it is
a lot easier to root out fraud, because you don't have to sift
through tons and tons of documents.
So I think the authorities are where they need to be. I am
very encouraged that OSD has increased the bandwidth to be able
to adjudicate cases. And under General Kadavy's watch, before
he got in, it used to take 9 months to get an exception to
policy approved. At his level, they now knock them out in 6
weeks. So that is hugely helpful.
Mrs. Davis. General Kadavy, would you want to comment on
that in terms of how you see the system working now, and I
guess why we didn't change it before?
General Kadavy. Well, I can just speak to the exceptions to
policy, which I have authority for, because they were written
in Army National Guard policy. So I--I can do an exception to
policy on skill, different, you know, infantrymen to an armored
crewman, and from one unit to another, if they re-enlisted for
a specific bonus to a unit.
I would say just the sheer magnitude of the--the overall
problem, I would think, caught us off guard. It took us a while
to get back to apply the resources to adjudicate them faster.
But, you know, it is--we follow the policy and directives.
And right now, the only thing I have the ability to is to do
exceptions to policy, as General Baldwin said, then it moves
forward to ABCMR [Army Board for the Correction of Military
Records].
I would like to just--you know, to talk about GIMS just a
little bit more. It does. It identifies through electronic
searches in the database, which we didn't have prior to 2011.
So it checks all those administrative data that is required to
ensure that a soldier is eligible. So it does that, and it also
tracks during an entire period. So when a soldier maybe changes
an MOS [military occupational specialty], it flags and sends,
you know, a message to the administrative officer or NCO, who
then takes action, you know, if it was a directed change, then
we do an exception to policy in a timely process.
I think many of the things that are impacting what happened
in California between 2004 and 2011, and then looking at the
current investigation and work that they are--the California
task force has been doing, I think today, we don't see those
types of issues anymore. Thank you.
Mrs. Davis. Okay. Thank you, Mr. Chairman. I would just
follow up, and maybe someone else can ask about what other
assistance we are providing. I know there was an issue around
credit ratings, and I think we were trying to fix that issue as
well.
But, again, I am concerned about how this impacted
families, and if there's been sufficient outreach to know that
there is help, there is support there, and we hope that they
get it. Thank you.
General Kadavy. I will leave the majority of that comment
to the next panel. I will just say from my perspective, we have
had overwhelming support, partnership, from the Office of the
Secretary of Defense, DOD, Army. Everybody wants to get this
right for the soldiers.
Mrs. Davis. Thank you.
Dr. Heck. Mr. Cook.
Mr. Cook. Thank you, Mr. Chairman.
I want to thank the generals who are testifying today.
And, you know, this goes back a long ways. I was the chair
of the Veterans Committee, and Senator Denham, at the time, had
the Senate Committee, and it brings back the memories, and I
think part of it when we did this was just the shock of what
was happening.
And, of course, General Baldwin, I am very, very happy with
what you have done since you have taken over. So this is not an
inquisition against you or anything else. And we have had a
conversation, and where I am coming from is going to be the
same thing over and over again. And I am not so worried about
the officers so much as the troops.
We have--everybody that's been in the military knows that
we have--everybody always says, ``recruiters.'' And because you
put your life in the--the hands of the recruiters. You trust
them. You trust the Army. You trust the National Guard. You
trust whatever service. And people, once they do that, it is
like you are giving them your entire life.
So my problems, which I would like you to talk about, are
on some of these cases where there have been troops that,
through no fault of their own, are suffering the consequences.
And maybe I am wrong, but it sounds like we are nitpicking,
particularly where some of these people don't have the economic
means to repay these things or what. We have got it--you know,
it is our fault. Now, I use that word collectively on behalf of
all officers that are in positions of authority, we betrayed
the trust of the troops, and there is no excuse for that.
And, so, obviously, I am hearing how we are going to change
this, and I still don't have a warm and fuzzy feeling about
that is being done. I don't want it to be too bureaucratic. And
after saying that, I do want to comment, once again, our Guard
is so, so important not just to California, but to all the
operations that we are doing. And everybody on this committee
knows the exercises in Europe and the commitments and the op
plans and everything else. We have got to get this right.
So, once again, I am going to ask a very broad question,
and--well, in fact, I am going to skip, because I have been
ranting and raving, and I do want to yield my time to
Congressman Denham before it runs out. But, eventually, if you
could comment on the trust issue over and over again.
Jeff, sorry I talked so long.
Mr. Denham. Thank you, Colonel Cook. And he and I, while we
served in the State legislature together, chair of the Senate
Veterans Committee, Assembly Veterans Committee on his behalf,
we did work on this issue. I would say that the difference that
he and I may have is the difference in how we both--how we
first got into the military.
I was 17. I signed a contract that was put in front of me.
In fact, at 17, you have to take it home to your mom to have
her sign it as well. So for the military to take the position
that the soldier is guilty and must prove, a decade later, that
there was some fault of their own--I mean, we still continue to
have conversations that you have got to still carry your yellow
shot records around from decades before because it is not an
automated system.
So to presume that the soldier is guilty and, therefore,
responsible for a decade-old contract that they signed in good
faith and put their life on the line, to me, is--to me, it is a
big black mark on our Department of Defense's record.
And I only have a short amount of time, but I would ask you
to just respond to both of our statements.
General Baldwin. Congressman, first, I want to thank both
you and Congressman Cook for your leadership role in addressing
this, and being very aggressive about it. And we really
appreciate the support. And our soldiers, airmen, and families
appreciate both of you very, very much.
I would agree wholeheartedly, Congressman Cook, that we do
have a problem that we are going to have to re-establish trust
with our soldiers, with their families, and with potential
recruits. I am very encouraged by--as I mentioned before, by
the actions that the Congress have taken. I think that they go
a long way to address some of the issues that you just brought
up, Congressman Denham, and the steps, again, that OSD are
taking in order to be able to show that soldiers--we are going
to trust the soldiers up front. And if we have a problem with
it, the burden is on us to prove that the soldier did something
wrong, rather than the soldier having to prove from their
innocence that they are innocent.
Dr. Heck. Thank you. The gentleman's time has expired.
Mr. Walz.
Mr. Walz. Thank you, Mr. Chairman. And I would like to take
a moment, too, to thank you. General Heck's service and
integrity and effectiveness to this--not just to this
committee, but to our veterans and our citizens. It is
something I am proud to have stood beside you as you did it.
Oftentimes around here, we talk about my good friend. I
certainly mean it this time. And it is--you have set an example
of how we understand that our services here are for those
that--that we are charged to look out for and our veterans. So
I want to thank you, sir, for that.
Thank you both for being here. And I was just discussing
with the gentlelady from California. General Baldwin, you made
a case of this, and I think we are trying to get at it. And I
think the two gentlemen here obviously know this issue very
well. But having been involved with this, both receiving
bonuses and being part of a group that gives them--also being
there when pay errors are made, when I would have to tell my
soldiers, you knew you were divorced; you weren't to get that
BAQ [Basic Allowance for Quarters], and kept it anyway, so you
are going to have to pay it back, because that is the way
things work.
I know this is a touchy subject, because when somebody gets
paid, all the issues that the ranking member put out is, this
has huge impacts on families. It has huge impacts as it goes
down the line. Just a couple of questions.
General Baldwin, you talked about this, where people got
bonuses. Did I hear you right, even before they went to basic
training, they got paid?
General Baldwin. Yes, Congressman.
Mr. Walz. How did that happen? Because I am thinking back
to me. $1,500 bonus, I completed basic and AIT [Advanced
Individual Training], I got $750; 2 years later, I got $375. On
the fourth year, I got $375. That kept me in. When did that
change, or how does that authority differ?
General Baldwin. I don't know when it changed, because when
I joined, it was the same as you. You had to serve before you
got all or some of your bonus.
Mr. Walz. Correct.
General Baldwin. Somewhere around 2006, the National Guard
Bureau changed its policy in order to provide a bigger
incentive to get massive amounts of troops in, and they would
pay the bonuses up front. And that was a very poor business
rule that doesn't exist anymore.
Mr. Walz. Okay. So that--so a lot of these--I shouldn't say
a lot. I am trying to get the numbers on this. Many of them
fell in that category?
General Baldwin. That is correct.
Mr. Walz. But there was a section of these, as you said,
that where someone knew they were getting a bad bonus, they
colluded with a recruiter, and there was a kickback, basically,
to take this bad bonus?
General Baldwin. That is correct.
Mr. Walz. Now, could I ask--could you give me these numbers
again, the error rate when you went back through and did your
audit, the error rate in contracts in general?
General Baldwin. So there were two--there was an audit done
by the Army Audit Agency, and then an inquiry, which was a
precursor, as you know, to an investigation that was initiated
by my predecessor. First, with the Army Audit Agency that I
didn't mention before, they found a 55 percent error rate in
the sample that they looked at. I don't know how large that
sample was.
In the inquiry that was occurring in the month before I
took command, they reviewed, I want to say it was 153 records,
and in the case of those records, they found a 91 percent error
rate. And that was enough that I felt compelled that we had to
continue to look at every single record.
Mr. Walz. What accounted for that? You know, and having
done these before and the detail that went into them--I am
still from the old age of carbon paper, and everything had to
be exact or it was no good, and they threw them back out. How
could you have a 91 percent--I mean, were these small errors,
large errors, misinterpretations of the regulations?
General Baldwin. It was all of that. But the root cause
problem was lack of oversight of control, and lack of
resources. So they had one person doing incentive managements.
And the number of incentives had grown very rapidly from just a
handful of incentives they would offer for critical MOSs, or
bonuses, to a very, very broad pallet of incentives that ranged
everything from medical professionals to people that are going
to join the band and everything in between.
And at the time, they had one person managing these
incentives. She was overwhelmed. She was under tremendous
pressure to help meet--get the numbers to disburse the money,
and she had no good oversight. Only people pressing on her to
get money out, no one checking to see if she needed help, no
one checking to see if she was doing things correctly.
Mr. Walz. Which is a recipe for disaster.
General Kadavy, if I could move to you on this. When you
did a systemwide NGB audit of this, if I am reading this
correctly, you only found irregular bonus activity to a total
of about $58,000. Is that correct? Am I reading this right?
General Kadavy. Congressman, so when we did the 53 other
States, territories, and District of Columbia, we did a
sampling of about 9,600 records. We found 689 that had errors
across the other 54 for a percent of about 14, and that was
actually 2.4 million. Where, you know, General Baldwin
mentioned the Army Auditing Agency, they did a sampling of 159
in California. They discovered 97 errors.
Mr. Walz. See, this one--and if my time is going to come
up, but somewhere I would like to come back to this. Most
often, when you have an issue like this, I find it systemwide,
whether it is the VA [Department of Veterans Affairs] or DOD.
This is very odd.
Does that strike--we will come back to it. I know the fraud
may be a piece of that, but that is a very interesting
statistic. So I will get more when we come back on my time, but
thank you.
Dr. Heck. Mr. Knight.
Mr. Knight. Thank you, Mr. Chair. And I have just a brief
question, and I am going to yield some time.
I, too, would like to thank Congressman Heck for his
leadership. He has been invaluable.
My only question is on the GIMS system, because we are
talking about trust. And when I went down and signed when I was
18 years old--I don't know that I was a whole lot smarter than
Congressman Denham when he was 17, probably a lot smarter, but,
you know, it is kind of a contract that you are going down
there and you are trusting and believing what the recruiter is
saying is the truth. So I think it is a trust issue that we are
trying to build back.
But, General Kadavy, you talked about the GIMS system a
little bit. And I am going to give you a little bit of time and
tell us how that is going to build back some of the trust that
we can have, and how the recruiting process is going to go, and
how we can be assured that some of--all of these problems if
not--are going to be caught before they become a problem?
General Kadavy. So, Congressman, I think GIMS puts trust
back into the system. I think what we are really talking about
is trust between leadership and soldiers. And in that--that is
earned, and the system isn't going to fix that. And so we do a
tremendous amount of training out in our professional education
center for all recruiters. We are not getting our recruiters
there in a timely fashion. We are working on that. We provided
additional guidance to ensure they are getting the training,
and then we have also implemented a program called POSTA
[Positions of Significant Trust and Authority]. And I will have
to get you the exact name of it.
So the adjutant general has reviewed each and every
recruiter to make sure they are ethically, morally, the right
folks to be talking to young men and women that potentially
could join our Army National Guard. And when there's issues,
that they think the soldier's still good, it comes up to me.
And I read each and every one of the POSTA requests for any
waivers. And I think the time I have been the director, I have
approved one. Because you are absolutely right, our very best,
most trusted professionals must be the ones that are recruiting
our young Americans.
Mr. Knight. Very good.
And Mr. Chair, I am going to yield the balance of my time
to Congressman Denham.
Dr. Heck. If the gentleman will suspend. I was informed by
staff that subcommittee members cannot give their time to a
non-subcommittee member. They have to wait until after all
subcommittee members had an opportunity to ask their questions.
Mr. Knight. I am going to keep my time.
So, General Kadavy, on the same kind of vein, I know that
Congresswoman Davis was talking us down this road of when the
folks of--have been given a bonus, and then they have had to
repay the bonus, but under the appeal, they were awarded the
bonus. They should have gotten the bonus. They should have kept
the bonus. But some of these folks have now paid back a bonus,
and maybe their credit approval has been hurt. Some of the
things that, because of paying back that bonus, it put them in
some hardship. I mean, that is going to be part of the trust
issue, too, how we can make those soldiers whole moving
forward.
Is that--obviously, that is going to be a big part of what
you do. But is that also part of how we can help in this issue?
General Kadavy. Congressman, I can tell you that it is very
important to the cross-functional team that Mr. Levine is
leading. It is one of the key issues we are looking at. At this
point in time, what I am hearing is we think we have all the
authorities and the abilities to make a soldier whole,
particularly in the instances that you were talking about. But
I would say the subject-matter experts on this particular
question are probably on panel 2.
Mr. Knight. Okay.
And very good. Mr. Chair, I am going to yield back.
Dr. Heck. Ms. Speier.
All right, then we will go to Mr. Coffman.
Mr. Coffman. Thank you, Mr. Chairman.
First--so, let me understand this right. So you have got a
recruit coming in, and it takes a certain MOS for a certain
length of time under the bonus, under--to--in order to get a
bonus. That individual is placed, for whatever reason, in a
different MOS. Is that--or occupies a different position in a
unit that is different from that MOS. Is that individual
required to pay back the bonus?
General Kadavy. It depends. So we give bonuses for three
reasons; for a skill, a grade, or a unit. It--if that is a
critical MOS, and the soldier elects to change on their own, in
general, yes, that is a recoupment. If we direct the change,
or, for instance, we just had a number of units that changed
their structure from military police to others. That was
directed by us. There is no recoupment. And then a soldier, of
course, can always provide an exception to policy request, and
many have, that indicates if there were some issues--I can't go
that far to drill; it is too far of a drive; we take all those
considerations, and then a decision is made. But it doesn't
necessarily mean that.
But in the GIMS system, there is a flag that goes up, which
means it needs to be adjudicated one way or another with
exception to policy, or a termination of a contract.
Mr. Coffman. Okay. What is the status of these recruiting
bonuses to pay others--other soldiers? That practice has
stopped, right?
General Kadavy. Yes. That's been stopped for quite some
years by my predecessor.
Mr. Coffman. What is the status of the bonus structure now
for recruiting people, say, first-term enlistees?
General Kadavy. I guess I don't understand the question.
Mr. Coffman. What is it--so I assume there is still a bonus
structure for first-term enlistees?
General Kadavy. Right. There are enlistment bonuses for
certain units, certain skill sets, and then retentions bonuses
for certain grades where we don't have enough, for instance,
maybe staff sergeants and et cetera.
Mr. Coffman. And how dynamic is that process? Because I
think it is--it seems like--I know in 2005, it was very tough
to fill the ranks of the military across the board, and then,
obviously, it is much easier today than it was back then.
General Kadavy. Right. So, Congressman, it is very dynamic
today. We are taking a look at it. I think it is almost too
dynamic that it gets to be a bit confusing.
You know, I just talked to a few of the adjutant generals
that are on the general officer advisory committee. And we are
likely going to go to talk to the States, and they provide us
where their holes are at the beginning of the year and midyear.
We will adjust it if need be, so that it stabilizes and doesn't
change the skill sets and the grades in the units on a
continual basis that maybe is confusing and causes some of
these issues. So we are going to try to----
Mr. Coffman. Right. But those enlisted soldiers that sign
up for an MOS specialty, and they get moved, are--or they--how
is that--I guess they elect to move. Are they--I just want to
make sure that they are fully cognizant of----
General Kadavy. No. What I am talking about is initial
enlistment----
Mr. Coffman. Right.
General Kadavy [continuing]. That you sign. We are going to
limit how often we change which skill sets. So we might have a
different one every month. And sometimes it gets confusing to
recruiters, or a recruit walks in thinking they are going to
get a bonus, but they wait to make a decision a couple of
months later, and that skill is no longer there as far as a
recruiting.
What you talk about is once a soldier signs a contract,
GIMS verifies that. And, you know, as long as they live up to
that contract, there are no issues. If something changes, GIMS
flags it, and we adjudicate it either through an exception to
policy, ABCMR, or if the soldier, for instance, doesn't
complete a set of training and decides to no longer serve out
their enlistment period in the Army National Guard, then, by
statute and policy, we must recoup for any unexecuted portion
of that contract.
Mr. Coffman. Right. When you said if an enlisted soldier
elects--first-term enlistment elects to change an MOS, then
they would be responsible for recouping, and if it was a
critical MOS, how would the command structure allow them to
change--to elect to change their MOS?
General Kadavy. Well, you know, I can't speak to every
case. But, in general, you know what you signed up for. So in
most cases, in my observation, is it is more related to changes
in force structure, and force design updates that the Army
provides. So you are in an MOS, in a unit, in a location today,
and that changes. We do not collect from that particular
soldier.
And I don't see that as an issue that is related as much as
it was in the past.
Mr. Coffman. Sure.
Chairman, I yield back.
Dr. Heck. Thank you.
Mr. Garamendi.
Mr. Garamendi. Mr. Chairman, thank you for the privilege of
sitting with your committee and now asking a question. I
appreciate the information that has been elicited thus far in
the testimony.
We now have an NDAA that has a new law--a new section that
will eventually become law, and it may affect--is certainly
meant to affect those men and women that took a bonus in good
faith, carried out their responsibilities, even though it may
not have been to the strict MOS or other criteria, and have
faced a clawback of their bonus.
I agree with, I think, every member of this panel that that
is unconscionable that that could happen, or did happen. But my
real question is going forward.
General Baldwin, you gave a bunch of statistics and numbers
at the outset. I would like you to quickly review those in the
context of how does the new, hopefully soon-to-be new law, in
the NDAA, affect those men and women that are under review as a
result of the bonus question that has arisen in California? If
you could run through that quickly.
And I also understand there is certain criteria that are in
the soon-to-be law as well as criteria that you--excuse me--
that the Army may use to eliminate from the clawback, or
potential clawback. Could we go through that, please?
General Baldwin. Sure. So for, I think, the important step
that is in the law is it--as OSD is putting together their
team, and they will discuss it in the next panel that is going
to be able to more rapidly adjudicate the cases and review
soldiers to find the ones that the many, many, thousands,
perhaps, the ones that deserve to keep their money. One of the
main things that it does is that it relieves the notion that
for that targeted group of individuals, that we have to have a
presumption of guilt in order to review their case. They are
going to review every case that they take before them. So that
is very, very encouraging.
The other thing the law does that I think is very, very
helpful is that--and as I understand it, this would impact not
only the soldiers that are in this population that we are
addressing here, but National Guardsmen ostensibly both in the
Army and the Air National Guard, from time forward, that if
you--if DFAS establishes a debt for a National Guard soldier or
airman, prior to this current NDAA, the National Guardsman
could not go to DFAS to ask for a sum total financial relief
for financial hardship. They could do it in the case if they
had loss or damage coming from property, but in the case when
they had been overpaid or paid bonus that they weren't due,
they couldn't get relief if they were suffering from financial
hardship. Title 10 Active Duty personnel could. Title 32
couldn't. The current NDAA corrects that, and we are very, very
happy to see that in there.
Mr. Garamendi. I understand that there were other criteria
that would eliminate from the clawback, certain men, guardsmen,
Guards people, could you--is that the case? Are there--is it
only this issue of financial hardship or does it have to do
with rank, position?
General Kadavy. If I could take this one, Dave?
General Baldwin. Oh, sure.
General Kadavy. Congressman, as a member of the cross-
functional team being led by OSD, we are still reviewing, and
the next panel, Mr. Levine can tell you exactly where we are on
this. But we are building criteria, and I think, based on the
Secretary of Defense's guidance and what is in the NDAA, the
intent is to only find those that were ineligible for a bonus
and should have, or did know they were ineligible. The intent
is not to recoup from soldiers that did not understand what was
going on. It was only--it is only to get after those that were
ineligible and accepted the bonus knowing they were ineligible.
Mr. Garamendi. Will that criteria significantly reduce the
number of Guards people that are affected?
General Kadavy. So I have been asked if you could refer
that question to the next panel.
Mr. Garamendi. I will do so.
Mr. Chairman, I want to thank you, and I want to thank this
panel for writing into the NDAA the language that will
significantly solve most of the problem, perhaps not all of it.
And I would ask that in the future, this panel continue to
observe and watch as this plays out. Thank you very much.
Dr. Heck. Ms. Speier.
Ms. Speier. Thank you, Mr. Chairman. Let me add my words of
praise to you for your service to our country and to this
Congress, and thank you as well for bringing this issue to the
forefront today.
Let me start with you, General Baldwin. You met with me
yesterday, and I appreciated that. You took over in 2011,
correct?
General Baldwin. Yes, ma'am. April of 2011.
Ms. Speier. And you took over, in part, because the
Governor saw this as a problem, and wanted to relieve the
general before you and put you in that position, correct?
General Baldwin. That is correct.
Ms. Speier. All right.
So from 2011 until 2016, the only time this was ranked as
an issue, and it was ranked number six, was in 2014 to the
foreign--to the Armed Services Committee. And there was no
impetus to take this seriously enough to fast-track it. And it
was only until the Los Angeles Times did a story that this
issue got some traction.
So my question to you is, while you are not responsible for
what happened before your watch, you are responsible for what
happened after you took over. And why didn't you elevate this
to a high enough level in 2012, in 2013, in 2015, and again in
this year?
General Baldwin. So for the first 2 years you mentioned,
2012 and 2013, we weren't aware of the amount of time it was
going to take to get through the adjudication process. We first
started pushing cases forward after doing a review in late
2012. And since it was taking 2 years for cases to run their
course, it wasn't until the end of 2013 to 2014 that we
realized the scope of the problem we had based on the amount of
time it was taking to get relief for soldiers. That is why in
2014, we first brought----
Ms. Speier. Okay. I am going to shortcut this a little bit,
because I have a limited amount of time. I just want to make
the point that while your--you have made it a priority on a
list, you didn't make it a priority to the committee so it
wasn't dealt with as it should have been.
Now, you had mentioned to me that some of the largest
bonuses went to physicians, the 40-, the 50-, the $60,000
bonuses. And in those cases, they have not--they committed to 6
years, served, in some cases, less than 2 years, got the bonus
up front.
Now, that decision to offer that bonus up front before you
had committed the 6 years seems like a no-brainer. Why would
anyone do that in an administrative role when the likelihood of
someone skipping is pretty high?
General Baldwin. Yes. So that was--that is a great example,
because those cases, because the dollar amount were amongst the
most egregious. The way that the program for benefits--for
incentives for medical professionals worked at the time is they
could actually get up to an $80,000 bonus, and it was paid out
in tranches, so every couple of years as they served more time,
they would get paid part of the bonus. And that was in
accordance with the regulation.
What happened is the incentive manager, though, would just
push the button to pay the whole lump sum in 1 year, or maybe
after 2 years. So if they had made a 6-year commitment, that
medical professional served 2 years, got their 60-, $80,000,
whatever it was, and then----
Ms. Speier. Okay. So I want to go on record that those
medical professionals that got those bonuses with a commitment
to serve 6 years and only served 2, that we should claw back
every single dime.
Now, for those--you also told me that you were under the
impression that for noncommissioned personnel, that are list--
who were--who were enlisted, that, for the most part,
especially if they were over 10 years in length, that that is
going to be waived, and that requirement for enlisted will not
be clawed back? Is that true?
General Baldwin. So that--I think that is one of the
business rules that they are going to discuss in the next
panel, that for certain ranks and for certain time in service,
for more junior people, they are going to apply some rules that
are more forgiving for people that may have been more senior,
or perhaps worked in recruiting that should have known the
rules.
Ms. Speier. Okay. I have always had a problem with this
``should have known,'' because if you received it, you didn't
know that you weren't supposed to receive it, but you should
have known, and it is 10 years past. That is, I think, an
expectation that we should not require those individuals to pay
it back, particularly if they committed to a contract and
served for the requisite period of time.
And with that, I yield back.
Dr. Heck. Mr. Aguilar.
Mr. Aguilar. Thank you, Mr. Chairman. I don't serve on this
panel. Thank you for allowing me the opportunity to ask a few
questions, and thank you for--it's been a pleasure to serve
with you on the full committee as well.
General Baldwin, can you explain--again, maybe this is
getting into the should-have and did-know that you mentioned.
Can you explain the process that was gone through to determine
whether the incentive pay or the student loan needed to be
recouped, and then immediately thereafter, once that decision
was made and the notification was given, what were the next few
steps along the process?
General Baldwin. Sure. So I will address those cases where
we did not find fraud or suspect fraud. So for the
preponderance of the soldiers, what we would do is overlay the
paperwork that they had that showed, here is their contract,
here is what the regulation says in order for them to receive
that certain benefit, in order for them to establish an
eligibility, what other documents are required, and whether
they--or not they had all that paperwork.
By the rules that were in place on time--at that time, if
someone was missing one of those elements, it voided the
contract, and that forced us to then send them to the National
Guard Bureau for an exception to policy, which we, again, sent
with the ones that we did send where we are working with the
soldiers we sent with endorsements recommending approval.
If they did not get approved--if their exception to policy
got approved by the National Guard Bureau, that was then within
General Kadavy's predecessor to allow them to keep the money,
and then we were done.
If the National Guard Bureau did not or could not approve
the exception to policy, it did give us the ability to help the
soldier go to the Army Board of Corrections of Military
Records, where the case would then go and get reviewed by an
administrative law judge that would then make a determination
of whether or not they would approve it. We have about a 50
percent success rate.
I will give you one concrete example of a fairly common
problem that we found was for soldiers that were first-term
enlistees, as with the case of Congressman Denham, where you
can join the National Guard or the military when you are only
17 years old, a lot of these soldiers hadn't graduated from
high school when they enlisted. For the National Guard, you
could do that. You could join the National Guard before you
graduate from high school. However, in order to be eligible for
the bonus, you have to produce a high school diploma.
And in many cases, the soldier served and served well, but
we just didn't have a high school diploma in their records, and
in that case, we were--we had to take action. And those are
cases that were fairly easy for us to go back to either
exception to policy, or up to the ABCMR to get relief.
Mr. Aguilar. What kind of time period were they given in
order to correct the document side, the deficiency that you
saw, whether it was a high school diploma or whether it was any
other document?
General Baldwin. So the only soldiers that we sent to
recoupment were the soldiers that did not contact us. So the
soldier contacted us, we worked with them and have continued to
work with them, and to my knowledge, have not sent any soldier
to recoupment for any benefit that we could assist them on.
Mr. Aguilar. General Kadavy, do you want to talk a little
bit about that from a process perspective, those that came
through, you know, within that flowchart, those that came
through that your office and your predecessor reviewed, you
know, what did--what did that look like from the documentation
standpoint? That is what I am concerned about are those folks
that were dinged because of the lack of documentation but met
the criteria for the bonus.
General Kadavy. Yes. So I believe, I can't really speak for
my predecessor, but our guidance, our intent is to work as hard
as we can for an exception to policy for each and every
soldier, and quite honestly, if they had served the term and
met the agreements, an exception to policy was almost always
provided.
Mr. Aguilar. Okay. I appreciate it. I will yield back, Mr.
Chairman.
Dr. Heck. Ms. Graham.
Ms. Graham. Thank you, Mr. Chairman.
I think you touched on this. I will direct my question to
General Kadavy. Did I pronounce your name correctly?
General Kadavy. Kadavy.
Ms. Graham. Kadavy, okay. It was one way or the other. I
picked the wrong way. But you discussed in your initial--in
your opening comments that you have not seen wide--this concern
widespread across the country. It is limited to California.
I am from Florida, and reached out to our National Guard as
soon as I heard of this to just see where they thought that
they were with any challenges with bonus recoupment with our
National Guard, and we have about 12,000 in Florida. I just
want to confirm that you don't see any--any of these concerns
in Florida that have come to the attention of those here
regarding California?
General Kadavy. Well, specifically related to the fraud, we
have given no guidance to any other State, district or the
territory, or District of Columbia or any of the territories to
do any audits or any inspections. As I said, through GIMS, we
always have ongoing recoupments for generally those that don't
meet the term of their enlistment.
So specifically, I can't talk specifically to Florida and
what is going on in Florida, but we have not directed any type
of work, and we have not discovered any type of systemic
problem related to fraud that we are aware of.
Ms. Graham. Well, that answer kind of concerns me because I
thought in the beginning that you stated that there weren't
concerns across the country, that this was limited to
California. Could this be something that the wonderful men and
women that serve in our National Guard in Florida have to be
worried about, because I certainly, as I think the only
representative from Florida here, want to give them some
assurances that that will not be the case.
General Kadavy. Well, I----
Mr. Levine. Congresswoman, we have conducted audits for
the----
Dr. Heck. State your name.
Mr. Levine. I perform the duties of Under Secretary of
Defense for Personnel and Readiness, Peter Levine, and I
apologize. I am on the next panel.
Ms. Graham. No, thank you for stepping in.
Mr. Levine. I apologize for jumping on this, but because we
have done some reviews and we have identified zero cases in
Florida, I thought it would be helpful for me just to mention
that.
General Kadavy. Right.
Ms. Graham. Zero cases is very good. Thank you. Thank you
very much. So I will take, from your testimony, that the men
and women that serve on our National Guard in Florida do not
have to be worried about this same concern.
Thank you. I appreciate that, and I yield back, Mr.
Chairman. Thank you.
Dr. Heck. Mr. Johnson.
Mr. Johnson. Thank you, Mr. Chairman, and thank you,
gentlemen, for being here today. I am troubled. Between 2006
and 2008, National Guard senior noncommissioned officers
improperly provided student loan repayments and bonuses to
numerous California National Guard members, and one person,
sergeant, master sergeant--female, Toni--I can't come up----
General Kadavy. Toni Jaffe.
Mr. Johnson. Toni Jaffe was the only person to be
criminally sanctioned. But dozens of personnel, including
senior leaders and general officers were punished by the
California National Guard for this illegal activity. Is that
correct?
General Baldwin. That is correct, Congressman, but an
additional 43 soldiers were charged and prosecuted by the--
either the Federal Government or district attorneys for fraud
also. Master Sergeant Jaffe is not the only person that served
jail time. She served far more time in prison than anyone else
that did jail time, but there were other officers and some
noncommissioned officers that were given sentences that
included some jail time.
Mr. Johnson. All right. Thank you. What was the highest
ranking official to be found to have engaged in this
misconduct?
General Baldwin. So on the receiving side or the people
that we actually had evidence that committed fraud or colluded
to commit fraud, I believe it was a captain was the highest
ranking individual that received money. Higher ranking officers
weren't eligible for the bonuses.
Mr. Johnson. Yeah. Actually, I am getting at those who were
responsible for initiating the payments, not those who received
them.
General Baldwin. So the only person held responsible for
initiating the payments was Master Sergeant Jaffe. I held many,
many people responsible, though, for their failure to provide
proper oversight or leadership. That included three two-star
generals, one two-star general, and one colonel that was in the
California National Guard, and then the National Guard Bureau
fired a colonel that was working for the National Guard Bureau.
Mr. Johnson. Why were not the others charged criminally? It
appears that the master sergeant may have been made the fall
guy from a criminal standpoint.
General Baldwin. You would have to ask the U.S. attorney
that question, Congressman, because they did those
prosecutions, and they actually had seized all of the evidence
related to that case. So if there was any evidence that senior
leaders had actually colluded, I haven't seen that evidence. If
I was presented with evidence like that, I would take the
appropriate action.
Mr. Johnson. What was it about the sergeant major's case
that made it actionable from a criminal standpoint whereas
others were not?
General Baldwin. I don't know the details of the case. As I
understand it, they had physical evidence, whether it was
copies of contracts or it was emails where--or some forms of
conversations which they can prove that she had actually
colluded with officers and enlisted people to do this.
Mr. Johnson. All right. The criminal cases now, is criminal
prosecution--has the criminal investigation ended, or is it
still ongoing?
General Baldwin. I don't know. Again, you would have to ask
the U.S. attorney that question.
Mr. Johnson. Did you--did your office make any
recommendations as to who or who would not be prosecuted? Who
should or should not be prosecuted?
General Baldwin. They did not have that conversation with
us. And again, they seized all the evidence, so any
recommendation that we did have would have to be based on the
evidence. They seized all that evidence before I came back from
Afghanistan.
Mr. Johnson. Major General Baldwin, in your testimony, you
stated that the--that service members--you stated service
members that should be required to repay their bonuses should
be made to do so.
Can you describe in more detail in what cases would service
members actually have to repay the bonuses that they have
received, especially since in most cases it seems they got the
bonuses through no fault of their own?
General Baldwin. It would be in those cases where the
service member egregiously violated the contract for which they
said that they would serve. For example, they signed up and
they never went to basic training, or they signed up for 6
years and only performed 2 years of Guard duty and then either
went AWOL [absent without leave] or left the Guard for some
reason.
Mr. Johnson. Do you have the numbers?
Dr. Heck. The gentleman's time is expired.
Mr. Johnson. Thank you.
Dr. Heck. Mr. Denham.
Mr. Denham. Thank you, Mr. Chair. General Baldwin,
annually, you put together a list of priorities through your
office; that is something you do every year?
General Baldwin. That is correct.
Mr. Denham. When do you start working on that?
General Baldwin. Generally, we start working in the late
fall, early spring, in order that we can present those
legislative priorities to the Congress around the March
timeframe so they are ahead of the mark.
Mr. Denham. And I have got here in front of me your list
from fiscal year 2015, so you would have started this in spring
of 2014, address Congress later that year?
General Baldwin. We would have presented it in the spring
of 2014 and started working on it in the fall of 2013.
Mr. Denham. So you got your fiscal year 2015--I just want
to be clear. Fiscal year 2015 NDAA priorities, you present that
to Congress when?
General Baldwin. Around March of--it would have been around
March of 2014.
Mr. Denham. 2014. So you start working on that in 2013?
General Baldwin. That is correct.
Mr. Denham. And this year, in particular, fiscal year 2015,
you list as priority number 6, your final priority, service
member debt relief equity, that is the issue that we have now--
I introduced legislation on this issue. We have now included it
in the NDAA this year, but I was surprised to see that in
fiscal year 2016, your list of priorities, it wasn't in here.
You have got six priorities, and this debt repayment was not
one of them. Why did it fall off of the list?
General Baldwin. So it fell off because in 2014, the item
had been scored by the CBO [Congressional Budget Office] and we
weren't successful in getting it through because of the cost
that was involved. It was a tough sequestration year. In 2015--
--
Mr. Denham. We are still under a tough sequestration year.
General Baldwin. I understand that, Congressman. I regret
not including it in the 2016--in the 2016 year. I am very
encouraged that the committee, again, with your leadership
assisting, is helping to get this legislation passed.
Mr. Denham. Why wasn't it included in 2017? You would have
started working on that 2 years ago, correct?
General Baldwin. That is correct. Again, we--we felt that
we had asked. We were not able to take that ball across the
goal line, so we directed our time and energy towards trying to
help the soldiers that we could influence. In retrospect, in
hindsight, you are right, I should have continued to make this
a priority.
Mr. Denham. Is that a--your list of priorities, is that at
your sole discretion or does the Governor weigh in on that?
General Baldwin. Ultimately, it is my list, and I take
responsibility for the list.
Mr. Denham. In the language that we have now included in
the NDAA, we have resolution to this. My concern has been--as a
Member of Congress, I don't get a list from the DOD on who
has--who they are going after for this debt forgiveness. I
don't get a--any idea of who is having to repay this, who has
been harassed, until they call my office. So somebody who has
now repaid their debt, how do they go about filing to resolve
this issue going forward?
General Baldwin. So----
Mr. Denham. What is the process? How does the process work
to make somebody financially whole that has now taken a second
out on their house and repaid a debt that they didn't owe?
General Baldwin. I think the second panel will be able to
address much of that. We have--still have our financial--our
soldier assistance team in place. There is a 1-800 number that
we have posted on our web page that people can call that have
been in this so that we can get to work, that if they have
suffered from this, or they are on the list of people that
potentially may have or had a problem with it, that we can then
refer them to the lawyers and the people, whether it is in
California or at the Army or at OSD to get help.
Mr. Denham. And what if there is an individual that is
still serving that either in the Guard or Reserves that is
being asked to repay a debt, but in their chain of command,
they are asking them not to go to a legislator or a Member of
Congress, what would you--what your opinion of that be?
General Baldwin. That violates--that violates the policies
that are in place that are both OSD policies and policies that
I have within the military department. No one can interfere
with an individual's right or ability to make a protected
communication between themselves and their elected officials.
Mr. Denham. Thank you. I look forward to following up with
you on that as we resolve this issue for a constituent.
One final question, and you and I had a discussion about
this earlier. I have a big concern with--when somebody takes a
government document, a private email, and puts that out for the
press to see, my concern in this case wasn't about the
legislation itself. My concern is with the issue with
recruitment and retention that it has now had on the Department
of Defense, and even the VA in this case. I would like to
follow up with you on this release of emails from your
subordinates to get a further clarification on why they felt a
need to go outside their chain of command on this issue as
well.
General Baldwin. I look forward to that, Congressman, and
if there is anyone in the California military department that
violated any laws, rules, policies, or regulations, we will
take the appropriate action.
Mr. Denham. Thank you.
Dr. Heck. I would like to thank both of you for taking the
time to be here today to review this important issue, and at
this time, we will switch out the panels, and we will hear from
representatives from the Office of Secretary of Defense.
I would now like to introduce our second panel. We have Mr.
Peter Levine performing the duties of the Under Secretary of
Defense for Personnel and Readiness from the Department of
Defense, Ms. Alissa Starzak, general counsel for the Department
of the Army, and Ms. Teresa McKay, director of the Defense
Finance and Accounting Service.
Mr. Secretary, you are recognized for 5 minutes.
STATEMENT OF HON. PETER LEVINE, PERFORMING THE DUTIES OF UNDER
SECRETARY OF DEFENSE FOR PERSONNEL AND READINESS, ACCOMPANIED
BY ALISSA M. STARZAK, GENERAL COUNSEL, DEPARTMENT OF THE ARMY,
AND TERESA A. McCAY, DIRECTOR, DEFENSE FINANCE AND ACCOUNTING
SERVICE
Mr. Levine. Mr. Chairman, Ranking Member Davis, first of
all, thank you for holding this hearing, and I really
appreciate the discussion that I heard with the first panel. It
shows some serious engagement on what is really an important
issue.
I would also like to join your colleagues, Mr. Chairman, in
thanking you for your service. You have been very good to the
Department of Defense. Your focus on these personnel and
readiness issues has been really important to us and really
helpful to us, so thank you.
I can't also--I would also like to, if I may, thank
Chairman Thornberry for being here and for continuing to
listen, on occasion, to my good friend, Mr. Simmons, who I see
also on the back row there. You have my written statement, and
I won't read any of it, but there are a few points that I would
like to focus on, some of which have already been discussed but
I think deserves some attention.
First of all, recoupment is an ordinary fact of life in the
military. Our pay systems aren't as perfect as we would like
them to be, and we have run into any number of issues, from the
person we heard about earlier, who might be divorced and still
getting a BAH [Basic Allowance for Housing] as if they were
married, to somebody who has got the wrong paycheck or fails to
pay a bill, fails to pay a travel bill. We are recouping
against as many as a 100,000 soldiers, sailors, airmen, and
marines at any given time, civilians as well.
The California Army National Guard cases are a particular--
particularly the ones that have been in the press, have been
reported in the press are particularly egregious set of cases,
but I wouldn't want members of the committee to think that this
is the nature of recoupment and that we always have this
problem with recoupment.
There are a number of reasons why these cases are
particular--the cases we read about in the press are
particularly troublesome. One is that many of them are based
just on a technical deficiency. We have heard about wrong MOS
cases where, also where the soldier may have been misled as to
whether that wrong MOS mattered, whether they needed to have a
high school diploma. Technical absence of paperwork, which
seems like a pretty minor reason for recoupment, particularly
in the case--in cases like this where we have service members
who made a commitment on the basis of a bonus, and then served
out that commitment. So when we come in later after somebody
has fulfilled their commitment and then question on a technical
ground why they received a bonus in the first place, that is a
particular hardship.
What I hope you will understand is, that that is not all
the cases that we are dealing with even with the California
National Guard. We heard about some of the medical
professionals who may have received bonuses and then not served
out their commitment. We have a significant number of other
cases in this pile of recoupment cases where we had service
members make a commitment and receive a bonus on the basis of
commitment, and then not fulfill that commitment.
So as a matter of basic fairness to those who did serve out
their commitment, we need to take a very close look at those
cases, and those would tend to be cases in which we would
expect to uphold--in most cases, uphold the recoupment if the
service member didn't fulfill the terms of the commitment, the
terms of the contract.
The second point I would like to focus on briefly is just
how the process of recoupment sets up. We read in the press
that the Pentagon ordered recoupment; the Pentagon means a lot
of different things to a lot of people. It could mean the
Secretary or OSD, or people in Washington, or could mean the
entire Department of Defense.
The way we work on these kinds of issues, and it is not
just limited to recoupment issues or pay issues. We have an
auditor come in and look at an issue, an auditor identifies a
problem, and they have standards to which they work to identify
those problems, but auditors do not make decisions for the
Department of Defense. Auditors do not determine that we are
going to recoup or not going to recoup. Auditors make
recommendations.
So if you are in a contract matter, an auditor would make a
recommendation to a contracting officer and the contracting
officer would make a decision.
In this case, the auditor would make a recommendation to
the property and financial accounting official who is
technically an employee of the National Guard Bureau but is
appointed by the California National Guard and is--a California
National Guard member appointed by the California National
Guard, but then serves as a Federal role because they are
activated when they are appointed to that position.
As we look at the way these cases set up, we had the Army
Audit Agency do an audit and make a recommendation with regard
to a limited number of cases and found an error rate, I think
we heard, of 50-something percent. California National Guard
looked at that. We have--when we look at these things, we have
discretion, we have enforcement discretion. We don't have to
say, ``Yes, the auditor said to do this; we are going to do
every one of these things.''
Before we get to the point of establishing a debt, we can
determine whether it is in our interest to establish a debt or
not. So as we have looked at other States where we had smaller
numbers and lower error rates, we see that some of the other
States with the National Guard where you had 8 cases, only 2 of
them were sent for recoupment; or 10 cases, only 3 were sent
for recoupment; or 40 cases, only 5 were sent for recoupment.
Some States sent all the cases for recoupment. They make those
judgments.
What California did, and it was within their discretion,
and given that they said that they did another review and found
a 91 percent error rate, I can't say it is wrong for them to do
this, but they not only referred all the cases that they had
for recoupment, but they also said, ``We are going to do 100
percent review of everybody else.'' So we are not only going to
refer for recoupment those cases that were in our sample, we
are going to go to the rest of the universe, which brought in
about 17,000 more individuals.
I think that what the California National Guard discovered
over a period of years after they did that was that they didn't
have the bandwidth to deal with those cases. And so they dealt
with some of those cases and put some of them into recoupment.
Some of them should have put into--they should have put into
recoupment, some of them maybe not, but they left thousands of
other cases hanging out there with the threat of recoupment
over them, which I think adds to the unfairness of this
process.
Now, I have to say, we have oversight over the California
National Guard. Army--Army has audit--has oversight, the
National Guard Bureau has oversight. We were not aware of this
until we read it in the newspaper, and that is on us. We missed
this. But when we became aware of this, the Secretary
specifically directed me to go in and address this, do this, do
this fairly, do this expeditiously, get it done by next summer.
So we are going through a process where we are going to be
looking at--we are going to be looking at these cases to figure
out which ones should be subject to recoupment, and we are
going to do it as expeditiously as possible. As your
legislation requires, we are going to favor the soldier
wherever possible, but we are going to--we are going to account
for the differences in different types of cases.
Now, we have two basic categories of cases that we have to
deal with. One is those cases that were already determined to
have a debt and sent to DFAS for recoupment. DFAS is just sort
of the receiver here. They get the cases. They implement it.
Somebody else tells them that they are supposed to recoup. So
we have about 1,400 cases in that category.
Then we have a second category of cases that were
essentially put under suspicion or threat of recoupment, about
16,000 more cases in that category. For those cases that are in
recoupment, we have the question of, are we going to dismiss
the case? Are we going to forgive the debt? Are we going to
repay the soldier if we decide it was improper?
We are--we are--we put those through a screening process.
We have already had the Army Audit Agency look at all 1,400
cases through a preliminary screen. Through that preliminary
screen, we think that we can eliminate about a quarter of them,
which we will be able to recommend for forgiveness without
further action.
We are going to go through a second review, which is going
to get us into a more detailed review to look at those cases.
It is my hope that we can pare those cases down to--by about
half before we put the remainder in front of a further review
process, which I will describe in a moment.
So it is my hope we get from 1,400 down to about 1,700
before we--just based on our reviewing the paperwork without
involving the soldier at all and tell half of them you are off
the hook. That is a goal. I don't know what exact numbers we
get to.
Turning to the second category, the 15,000, the larger
category, in that case, we have greater discretion because we
haven't yet established the debt. So we have our enforcement
discretion at this point, and so we are going to establish a
number of rules of thumb, which were referred to earlier, and
these will be my recommendations. It will be up to the
Secretary of the Army to accept those recommendations, but I
expect that he is going to have the same objective that I do
and the Secretary of Defense does, which is that we want to
pare these cases down to the most serious ones.
So we are going to screen out cases that are more than 10
years old. That is consistent with your legislation. I expect
we are going to screen out cases with some exceptions--we are
going to have to be careful about soldiers who have gone AWOL
or have other kinds of problems--but we are basically going to
try to screen out cases with a debt of $10,000 or less.
We are going to screen out cases with--we are going to try
to screen out most of the cases with enlisted members and lower
ranking members, members without prior service on the basis
that it is unlikely that they would have a basis to know that
they were going to be--to read and understand their contract.
This was an issue that came up earlier.
So as we go through those screens, I think we will get--
from that second universe of 16,000 or so cases, I expect to
reduce that by about 90 percent, so we get down to about 10
percent of those. So about something between--something on the
order of 2,000--1,500 to 2,000 cases. We will then put that
universe through the kinds of screens, substantive screens,
substantive review of that, and I hope to get that down
further.
It is my hope that by the end of the year, we will have--we
will have something between 1,000 and 2,000 cases total out of
the total universe of 17,000 that are subject to review. Those
are the cases that we will then put in front of BCMRs [Boards
for the Correction of Military Records] and allow soldiers to
come in and make their case that they shouldn't be subject to
recoupment.
But the objective is to find the easy ones first, get rid
of those, tell people we are not pursuing you, so we don't have
to tell you you have to come into a BCR [Board for Correction
of Records] or you can come into a BCMR. We are telling you you
are off the hook, we are done with you, and do that on the
basis of paper so that we can focus our resources on those
cases that are most significant where we really need to
understand the facts better.
The Army has already staffed up the BCMRs, they have
identified the people who will be serving in this role, so we
are going to add resources. They are in the training process.
We expect to be up and running by beginning of the year, and
that the staffing numbers that they have established, we
believe, are sufficient so that if we have 2,000 cases, we will
be able to handle that number of cases by the July 1 deadline
that was set by the Secretary.
That concludes my testimony, Mr. Chairman. I would be
happy--we would all be happy to answer any of your questions.
[The prepared statement of Mr. Levine can be found in the
Appendix on page 51.]
Dr. Heck. Ms. Starzak, Ms. McKay, do you have any opening
comments? No. Great. Thank you. And thank you, Mr. Secretary,
for taking time to be here and running us through the process.
So one of the questions that I asked General Baldwin, which
he deferred to the second panel, was of those 400 who they had
recommended being relieved but lost, did not get--seek--I guess
were not granted relief, do they have another appeal avenue, or
is that it? They are done----
Mr. Levine. Let me say two things: First, I don't
necessarily tracked all of General Baldwin's numbers. Not that
his numbers are wrong, but we are trying to develop our own
database and go through the numbers in our own way, so I can't
identify necessarily those 400 cases.
What I can say is we will provide an avenue for everybody
here. In the cases of those who have been committed--who have
already been convicted of fraud, that may be a narrower avenue,
but we will provide an avenue for everybody.
Dr. Heck. And then my only other question is for those that
are in collections, let's say, and they are having wages or
something garnished by the IRS [Internal Revenue Service] or
who may have been turned over to a credit agency, whose--you
know, where is the rose getting pinned to make sure that the
IRS stops taking money or that we help get credit ratings
restored?
Mr. Levine. This is a DFAS function, and we believe that
has already been taken care of in terms of stopping action. Ms.
McKay may want to respond to that in greater detail.
Ms. McKay. That is correct. When the Secretary asked us to
stop the recoupment, we were able to do that within a week for
the cases that had been identified to us by the California
National Guard.
That included the cases that we had internal to DFAS where
we were recouping from their military pay as well as any
voluntary repayments that were underway, as well as any cases
that we had turned over to the Treasury for recoupment, and
that would include the category of private collection agencies.
We also took action to rescind any reporting to the credit
reporting bureaus, and so those--those--for those cases that
were identified by the California National Guard to us, those
credit ratings have been restored as if these debts never
occurred.
Dr. Heck. Thank you. Thank you very much.
Mr. Levine. The one thing I would like to add, Mr.
Chairman, is in terms of the 1 week, there are a handful of
cases that lagged the 1 week, only because we had trouble
identifying the individual involved. We had erroneous Social
Security numbers and things like that that we have been trying
to clean up as we went along.
Dr. Heck. All right. Thank you. Mrs. Davis.
Mrs. Davis. Thank you, Mr. Chairman, and thanks for being
here. Of all the changes that have been suggested, and some are
in the legislation and that you have been working on, is there
an area that you have seen, by virtue of correspondence from
guardsmen or women or others that is still hanging out there,
still an issue that you are not sure that you could tell me
confidently that you have resolved?
Mr. Levine. Congresswoman, I am confident that we have the
authority that we need to clean up this situation. We need to
put the resources into it that we are now putting into it, and
we will address this, I think, in a way that is fair to
everybody.
The--we would, of course, always prefer to see legislation
before it goes into law because we can help head off unintended
side effects, but we believe that we can work with the
legislation that you have enacted and do what we need to do.
Mrs. Davis. Anybody else have a concern?
Okay. One of the issues, and we had the opportunity to see
a number of pieces of correspondence from those who were really
affected by this, some from California, not necessarily all,
and certainly our offices had had several inquiries and we had
casework around this, but minimally so that there wasn't a
sense that this was anything systemic at that particular time,
and I think the issue over, you know, whether or not, you know,
it was number six on a list of issues that the Guards were
looking at, but we do have a number--you know, quite a bit of
correspondence, I think, that you all have received over the
course of time that suggests to me that perhaps it wasn't
followed through on a number of occasions.
And so, to what extent do you take another look at some of
that correspondence and see what was happening in the lives of
the men and women who were writing, why they weren't getting
any response whatsoever, whether the hotline or either the--and
the assistance center wasn't responding? Why was that?
Mr. Levine. Honestly, I don't know the answer to that. I
have been asked by the Secretary to take a forward look and
clean this thing up going forward. I have not been asked to go
back and retrace the history of how we got to where we are
today. I agree with you that we--and that is why I pointed out
that we have an oversight role here. I think that we should
have seen this before now, and I don't know why we didn't.
Mrs. Davis. Thank you. So I guess, going forward, because I
am for that as well, I think that that is what is really
important. We don't want this to happen again. But I am a
little concerned that we have these cases, and do you--do you
receive inquiries on the part of the men and women for
additional assistance, whether it is mental health or financial
assistance, whatever that may be? I mean, does there seem to be
that--a group of individuals who clearly, this made a
difference in their lives?
Mr. Levine. So we obviously have all sorts of mechanisms
through the Department of Defense for receiving complaints.
There were any number of avenues of appeal for these soldiers
that are established avenues of appeal; appeal to DFAS, appeal
to the Secretary of the Army, appeal to BCMR, those are
official channels they can go through. In addition, we have,
obviously, abilities to complain to Members of Congress,
ability to go to hotlines. We have--we have pressure valves for
those kinds of things. I can't tell you why those pressure
valves didn't raise this case to a higher level before now. I
just don't know.
Mrs. Davis. I think what I am wondering about is going
forward, and as this law changes, and we can be grateful that
at least in the numbers that we have seen, we are not going to
see this kind of occurrence, I hope, again, but we still have
all these cases out there that, in fact, perhaps people really
could have used some assistance and can still use assistance.
How do we deal with that?
Mr. Levine. So going forward, I think that the Guard really
has--the National Guard Bureau really has taken important steps
in instituting this automated system, which will--which should
automatically pop up places where we have improper payments and
instituting a double-check system so you don't have the one
person who can sign off on something and get in the kind of
problems we had in California there.
So while I can't be 100 percent confident that we are going
to avoid any problems, I think we are much more likely to
identify these kind of payment errors early, and I think the
big problem here was not that we had the payment errors. It is
that we made these errors and then let somebody sit--serve out
their service and then came back to them after they served out
their service and said, ``Oh, by the way, we made a mistake, we
want our money back.''
Mrs. Davis. Right. Yeah.
Mr. Levine. If we identify that problem in a timely manner,
then as a matter of--then at that point, I think it is much
more appropriate to recoup than it is when you come back 5
years later and say I want my money back.
Mrs. Davis. Right. Because I think as we look at the
timeframe, and even the timeframe from 2011 until 2016, under
the general's command, I think that there are a lot of cases
there that people were hurting, and I don't know whether there
is also a mechanism within the Guard, there should be, to check
up on people just the same way that we check up on people that
are going through transition and have returned and do not
request the assistance of a mental health provider or any kind
of health provider, that there is a sense that they have--we
have to check up on them.
Mr. Levine. I appreciate that. That is part of a
commander's responsibility.
Mrs. Davis. Okay. Well, let that--and I think, going
forward, I suspect that the committee is going to want to have
another opportunity really to talk about this perhaps in 6
months, and see how everybody is doing, okay. Thank you very
much.
Dr. Heck. Mr. Coffman.
Mr. Coffman. Thank you, Mr. Chairman. Mr. Levine, and if
anybody else wants to answer this, but I am surprised, from
members of the National Guard, that we would go for these, and
let's just call it deficiencies, or whatever you want to call
it, that we were going after them civilly and affecting the
credit union. Does that affect Active Duty people as well when
there is a mistake on a bonus?
Mr. Levine. So again, this is a fairly unique case because
we were going after people on technical grounds. Some people,
at least on technical grounds years after this technical
mistake was made when they had already served out. We refer
cases for recoupment all the time. As I indicated, there are
probably 100,000 cases under recoupment at any given time. We
pursue them.
They are large cases and small cases. I think that the
numbers show that most of them are relatively small cases. I
mean, we could have recoupment cases for lost or damaged
equipment. We could have recoupment cases because you failed to
pay for your travel. We could have recoupment cases because you
were getting--you are getting aviation incentive pay when you
weren't a pilot, you know, any number of different kinds of
reasons we could have recoupment cases.
When the debt is certified, I--in this case, the property
and financial officer for the National Guard out in California,
when the debt is certified, it goes to DFAS, and I believe DFAS
would follow the same procedures in each case. So I would defer
to Ms. McKay to speak to that.
Ms. McKay. Yes, sir. You asked specifically about Active
Duty. So as long as the--when a debt is established on an
Active Duty member, it is handled within the military pay
system. Debts are recouped against the payments going to the
military members at a predetermined statutory rate, and so it
would come out of their Active Duty pay.
As long as an account is not delinquent, and in these
cases, there will be active collections against the debt, they
are not considered delinquent, there wouldn't be any credit
reporting against them.
Mr. Coffman. Mr. Levine, in your testimony you address the
comparative recoupment amounts between California and other
States as $11 million in California alone and a total of only
$2 million between all of the States. I understand that a
special audit team was sent to the State of Colorado,
Washington, Texas, and the territory of Puerto Rico to check
100 percent of the records in each of those States and
territories. The records check revealed that the automated
systems' internal controls were not working as intended,
resulting in management of the system being brought to the
National Guard Bureau level as a short-term solution.
Would you describe for us how those systems were not
working as intended, and what the results of that were in each
of those States, particularly perhaps for the State of
Colorado?
Mr. Levine. So I am unable to answer the question as to the
specific internal control deficiencies in the State of
Colorado. We did have the Triple A [Army Audit Agency] and the
National Guard Bureau conduct reviews across the States. They
did determine that there were internal weaknesses, lack of
oversight, lack of multiple signoff, the kinds of weaknesses
that we discovered in California. What we didn't discover was
the kind of exploitation of the weaknesses or systematic
problems of weaknesses, where in California they determined
that there was fraud involved.
With regard to Colorado, I am interested by the 100 percent
review because, again, as with Florida, I have--I asked the
National Guard Bureau and the Triple A to look at whatever
cases we had elsewhere, and I have got a rack-up of those,
which is what the $2 million comes from. I show the same thing
for Colorado that I do for Florida, which is no cases of
recoupment.
So if you have something different on that on Colorado
recoupment, I would be very interested in seeing that. I can't
guarantee that I have got 100 percent accurate information, but
I would certainly like to know if there is a significant number
of recoupment cases in Colorado, because I don't show any based
on the information we have been able to gather at this point.
Mr. Coffman. On the recruiting bonus side, we do.
Mr. Levine. Okay. I would be--if you have information on
that, I----
Mr. Coffman. Sure.
Mr. Levine [continuing]. Would appreciate it if you share
it with us so we can go back to the National Guard Bureau and
the Triple A and see where that fell through the cracks.
Ms. Starzak. Actually, I would like to distinguish between
the two. The recruiting bonuses are a different issue----
Mr. Coffman. Okay.
Ms. Starzak [continuing]. Than this enlistment bonus issue.
So when Triple A looked at those questions, it did do an audit
of several States. I think it was Missouri----
Mr. Coffman. Okay.
Ms. Starzak [continuing]. Indiana, Pennsylvania, and a
couple of others potentially. They did not find systemic
problems. They did identify some concerns with internal
controls. The National Guard Bureau also had sent audit teams
out to different States and they asked their internal folks to
audit. Those came out with some results, but again, there was
no--there was no finding of the type of systemic problems that
they had in California.
Mr. Levine. Having said that, the numbers that I got from
Triple A and National Guard Bureau are supposed to cover both
of those reviews, so if you have something else, I would really
appreciate seeing it.
Mr. Coffman. Absolutely.
Mr. Levine. Thank you, Congressman.
Mr. Coffman. Thank you. Oh, and I just--before I yield
back, I just want to thank you, Mr. Chairman. Thank you so much
for your service to this committee. It has been a privilege to
work with you, despite the fact that you greatly outrank me in
terms of being in the military.
Dr. Heck. Ms. Speier.
Ms. Speier. Thank you again. The issue of counseling those
who now have issues around their credit and the like, is that
something that is going to be undertaken by the Guard or by a
separate office?
Mr. Levine. We do financial counseling for members, for
service members generally. We provide that as a service. My
expectation would be it would be done through the National
Guard Bureau, but we would have to check that for you.
Ms. Speier. All right. Because the National Guard indicated
to me that they feel that since they are in close proximity to
them, that they would like to pursue providing that counseling.
Mr. Levine. It would be my expectation that in the normal
course of events, that it would be the California National
Guard that would counsel California National Guard soldiers,
but again, we will have to check that for you.
[The information referred to can be found in the Appendix
on page 63.]
Ms. Speier. All right. When the general was kind of running
through those that were prosecuted and pending cases, most of
them from the U.S. attorney, when he referenced the court-
martials, seven of them, six officers, one enlisted, I guess,
he made the statement that both because of lack of evidence and
just the UCMJ itself, prevented them from pursuing court-
martials of those individuals. What would have to be changed in
the UCMJ in order to allow the military justice system to work?
Mr. Levine. The military justice system has the same
presumption of innocence that the civilian justice system does,
and so we have the same issues of proof that we have in the
civilian justice system, and often, they are cases which we
might have a suspicion that somebody did something wrong, but
when we have prosecutors look at the case, they say there is
just not enough here to pursue it, to pursue it to trial.
I think that given the way our justice system works, that
is to be expected, and I don't think that we are in--that any
of us want to change the fundamental premises of our justice
system.
Ms. Speier. Oh, no, no, but I just wondered based on what
you said whether there was something within the UCMJ that we
needed to look at.
Mr. Levine. I don't think there is anything unique to the
UCMJ that I would look to. I would look to the difficulty of
prosecuting cases where there is tough evidentiary questions,
which we run into in general.
Ms. Speier. All right. And then, I guess, finally, I am
still somewhat confused by the fact that this was a California-
only problem, and it appears that the National Guard chose to
distribute these bonuses in a manner that was inconsistent with
other National Guards in an effort to, I guess, get their
numbers up, but to somehow offer a recruitment bonus that is
given 100 percent at the beginning of the tour as opposed to in
increments seemed quite foolish. Should there be more
uniformity among the various National Guards?
Mr. Levine. So the way I would describe it is that we had a
system at that time that was vulnerable to abuse, and that
system was vulnerable to abuse not only in California, but in
other States, too. It was in California that they identified
abuse and that they went after it, pursued it for that reason.
It is not that the other States didn't have the same system, it
is that they didn't find that same evidence of abuse that led
into this 100 percent audit and review that they did in
California.
Ms. Speier. I see. So, but moving forward, that is not
going to be able--that abuse cannot take place?
Mr. Levine. I can never tell you that we won't have
mistakes or problems in the Department of Defense. I think we
have addressed this one, but where we will make a mistake the
next time, I can't tell you.
Ms. Speier. All right. Well, thank you all for your
service, and I yield back.
Dr. Heck. Thank you. Thank you, Mr. Levine and Ms. Starzak
and Ms. McKay for being here. I know it is a very difficult
issue but one we want to make sure we get our hands around to
ensure that we take care of the guardsmen and women in
California and make sure we don't have any similar issues
across the defense enterprise, so we appreciate you being here.
Before we adjourn, I just want to take a moment of personal
privilege, as this is my last subcommittee hearing, and one--I
thank my ranking member, Mrs. Davis, for all of her help over
the last 2 years. You know, when we set out an agenda for this
Congress, what we were going to accomplish in this
subcommittee, we had quite a few major issues, and people said
we were crazy for thinking we could get even one of them done.
Whether that be UCMJ reform, retirement reform, healthcare
reform, commissary reform, and due to your support, the hard
work of all of the committee members, and the incredible staff,
we got all four of them done, and that would not have happened
had it not been for the great working relationship that we all
have.
I also, although he is not here, want to thank the Sergeant
Major, Mr. Walz. We know standing beside every officer is an
NCO making sure he gets the job done right, and Mr. Walz was
that person for me. And I really want to thank the staff,
everybody who made the last 2 years as successful as it has
been. It has been a great honor to serve, and it shows this
committee's commitment to taking care of our men and women in
uniform, their families, our retirees, and our survivors. There
being no further business, the hearing is adjourned.
[Whereupon, at 4:05 p.m., the subcommittee was adjourned.]
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A P P E N D I X
December 7, 2016
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PREPARED STATEMENTS SUBMITTED FOR THE RECORD
December 7, 2016
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[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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WITNESS RESPONSES TO QUESTIONS ASKED DURING
THE HEARING
December 7, 2016
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RESPONSE TO QUESTION SUBMITTED BY MS. SPEIER
Mr. Levine. Currently, Soldiers are directly contacting the Soldier
Incentives Assistance Center (SIAC), which is part of the California
National Guard created to assist affected soldiers, to access the
following four types of trained and certified financial counseling
resources listed below. Indeed, it is the primary contact point for
affected Soldiers to be directed to the most suitable and available of
the four types of counseling resources. The counselors receive Office
of the Secretary of Defense (OSD)-approved training and meet fiduciary
standards (i.e., best interests of member).
1. Personal Financial Management (PFM) Services: The Military
Services provide full-time PFM services at active duty installations to
meet the long-term financial readiness needs of Service members.
National Guard (NG) members and families may utilize PFM services.
2. Personal Financial Counselors (PFCs): OSD provides accredited
PFCs by request to meet the financial readiness needs of the active and
reserve component. ``On demand'' PFCs are available for short-term
requirements of 3 days or less. ``Surge'' PFCs are available for 30 to
90 days. ``Rotational'' PFCs are available for medium-term requirements
of 180 days to 365 days. PFCs provide in-person counseling only.
3. Military OneSource: Military OneSource (MOS) provides a referral
service to all Service members and family members (any status) to in-
person, telephone, or online (chat) financial counseling. Additionally,
MOS maintains a database of all counseling resources nationwide (i.e.,
PFM and PFC), which users can search by zip code to find the nearest
counselor.
4. Community Partners: National Guard State Family Program
Directors (SFPDs) and Airman and Family Readiness Program Managers
(AFRPMs) sustain referral networks of financial professionals willing
to donate time or reduce fees to counsel NG members and families. These
community partners comply with DODI 1344.07, ``Personal Commercial
Solicitation on DOD Installations,'' rules and requirements.
Additionally, The California Army National Guard (CAARNG) is
working directly with the California Franchise Tax Board to provide
assistance based on pending legislation.
The Army National Guard (ARNG) is experienced in handling the
entire spectrum of Soldier financial issues. Typically, the majority of
phone calls taken by our Family Assistance Centers (FACs) involve
financial issues. The 17 FACs in California assist Soldiers in finding
local resources for everything from paying the rent and buying
groceries to long-term debt and credit management. [See page 33.]
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