Fraud investigation targets recruiting program for Army National Guard, Reserves

March 13, 2012

A recruitment campaign to boost the Army National Guard and Reserve at a difficult time in Iraq and Afghanistan is the focus of a wide-ranging Pentagon fraud investigation, including allegations of kickback schemes involving military personnel, internal documents show.

The alleged fraud involves programs that paid $2,000 bounties to soldiers or civilians who signed up as “recruiting assistants” and brought in new enlistees. Investigators have found evidence that recruiters for the Guard and Reserve who were not eligible for the bounties worked with some recruiting assistants to secretly secure and split up the money.

More than 1,700 recruiters and hundreds of recruiting assistants are under scrutiny for $92 million in potentially fraudulent transactions — more than a quarter of all the bounty money paid, according to an internal Army Audit Agency document. Investigators have found that dozens of the recruiters apparently shared bank accounts with individuals who received bounties.

Faced with a report on the abuses, Army Secretary John McHugh canceled the programs and ordered a probe of “systemic weaknesses and shortfalls, some of a potentially criminal nature,” according to an internal memo signed by McHugh on Feb. 9.

In response to questions from The Washington Post, an Army spokesman said the investigation is ongoing.

“If additional allegations of criminal conduct are found, the Army will take appropriate action,” spokesman George Wright said. “Because of the sensitivity of the criminal investigation, providing any further details or comment would be inappropriate.”

The Recruiting Assistance Programs, launched in 2005, were billed as an innovative way to supplement active-duty units strained by the demands of the two wars. At the time, tens of thousands of servicemen and women were required to serve extended tours of duty because of the shortfall of troops to relieve them.

The campaign offered bounties of up to $2,000 per recruit to soldiers or civilians who referred enlistees to the Guard or Reserve. Pentagon investigators started hearing allegations that some recruiters for the Guard and Reserve were taking advantage of the program. Over the past several years, investigators have opened at least 17 criminal cases and have called for a broader audit.

A subsequent Army Audit Agency investigation showed that more than a quarter of the $339 million in bounties paid over the past six years “were at risk for fraud,” according to an audit briefing given to McHugh on Feb. 2.

The transactions involved at least 1,706 recruiters and hundreds of the recruiting assistants — individuals who allegedly made the referrals and applied for the bounties. The alleged schemes involved the sharing of bank accounts between recruiters and recruiting assistants, who sometimes took credit for referring individuals who had already decided to enlist. In one case, dozens of recruiters and recruiting assistants shared a single bank account.

“Recruiters potentially stole the identity of personnel to circumvent controls or many have colluded with recruiting assistants to bypass controls,” auditors told McHugh.

The document lists several breakdowns in internal control, including a failure to verify relationships between enlistees and recruiting assistants and to determine whether the two had ever met.

“Our evaluation showed that for 88 percent of enlistments one or more key internal controls weren’t operating as intended,” auditors reported.

An Alabaster, Ala.-based contractor, Document and Packaging Brokers, also known as Docupak, ran the program for the Pentagon. For more than a decade, the company has handled recruiting programs and other promotions for the Guard and Reserve, under contracts totaling $1.3 billion. Docupak received a $345 “administration fee” for each recruit who enlisted under the bounty program.

Auditors found that the company did not report all instances of “potential fraud or collusion” listed in the firm’s internal records. Company officials referred 25 recruiting assistants to Pentagon criminal investigators, even though Docupak had fired 245 for such conduct, the briefing document states.

Docupak President Philip Crane said his company officials reported to Pentagon investigators the wrongdoing that they felt needed to be addressed. He said some of those reports led to criminal prosecutions.

He said the company had a “very thorough risk-mitigation program” that checked enlistee identities and payments against National Guard databases.

“We have been as transparent as we possibly can,” Crane said.

One case of fraud involved Thomas Kaszas, a recruiting sergeant for the Georgia Army National Guard. As a recruiter, Kaszas was not eligible to receive any bounties, but he set up a bank account with a recruiting assistant at the First Bank of Georgia, according to a federal indictment.

Over nine months in 2007, Kaszas’s partner claimed credit for more than a dozen new recruits and deposited $24,000 in bounties into the joint account. Virtually all of it was later wired to another bank account controlled by Kaszas, the indictment stated. Kaszas pleaded guilty in September 2010 to five counts of wire fraud and was ordered to repay $26,000 to Docupak.

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