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Army identifies up to $100 million in fraud in recruiting payments
Wednesday - 2/5/2014, 3:45am EST
Army officials disclosed details Tuesday of a multi-year criminal investigation that tarnishes one of the military's most successful recruiting programs in recent memory.
Investigators have uncovered tens of millions of dollars in fraudulent payments, and the program itself appears to violate federal law and procurement regulations in several ways.
The Guard Recruiting Assistance Program (G-RAP) began in the Army National Guard in 2005.
That component of the Army was in the midst of a recruiting crisis, shorthanded by almost 17,000 soldiers, during the most intense period of the Iraq war. Millions of dollars in new spending on traditional marketing campaigns wasn't working, so Guard officials decided to try something new. In what was essentially a "refer-a- friend" program, drilling guardsmen could receive payments of between $2,000 and $7,500 if they successfully persuaded someone they knew to join the Guard.
The program worked just as its designers had hoped. It brought in 130,000 new soldiers, and the Army Guard started meeting its recruiting goals soon after it implemented it. Between 2005 and 2012, the Guard received about 38 percent of its new guardsmen through G-RAP.
But the Army now finds G-RAP was rife with fraud that went almost entirely undetected for at least five years. The program is the subject of one of the largest criminal investigations in the Army's history, and officials think it will be another two years before they understand the full extent of what went on during the program's run.
"The scope of this investigation is complex and far reaching," Lt. Gen. William Grisoli, the director of the Army Staff, told the Senate Homeland Security and Governmental Affairs subcommittee on financial and contracting oversight Tuesday. "The Army has taken aggressive and comprehensive steps leading to corrective actions to prevent future occurrences and is committed to working with Congress as we move forward in this matter. The Army will also identify and take action against individuals who should be held accountable."
Grisoli and other Army officials who testified Tuesday declined to speak to reporters, but documents the Army provided to senators in advance of the hearing provide a detailed view of the scale of an investigation the service has kept from public scrutiny for at least two years.
In the worst case scenario, the Army's auditors believe up to $100 million of the $339 million in payments the Army made under G-RAP — and similar, smaller programs in the active Army and Army Reserve — were fraudulent. But officials currently believe a figure of about $50 million is more likely.
The RAP programs, which tried to turn currently serving rank-and-file soldiers into surrogate recruiters under the title "Recruiter Assistant," operated under the radar of Army investigators from 2005 to 2010.
CID had been handling cases of fraud in the single digits per year in the program's early years, but it wasn't until 2010 that an agent in Huntsville, Ala., began to notice trends that might point to a systemic problem.
CID asked the Army Audit Agency (AAA) to look deeper, and after a year of examination, it confirmed the Huntsville agent's suspicions.
While the vast majority of recruiting assistants (RAs) were operating on the up-and-up, the agency flagged thousands of cases that were at risk for fraud and found severe problems with internal controls and oversight of the RAP programs.
In early 2012, Army Secretary John McHugh saw AAA's findings and canceled the program outright.
Auditors found several potential ways for guardsmen to get bogus incentive payments.
In many cases, they registered as RAs and then submitted the names and Social Security numbers of guardsmen who had already enlisted without the knowledge of the new soldier, in order to receive payments — in essence, a form of identity theft.
But in the majority of cases, actual Army Guard recruiters were in on the schemes, said Maj. Gen. David Quantock, the commander of Army Criminal Investigation Command.
Under the program, recruiters were legally ineligible to get the bonuses, since recruiting was already their job. But to get the payments, they would solicit other guardsmen to register as RA's, provide them en masse with the names and Social Security numbers of new enlistees who had recently walked into their recruiting office, and split the payments between them, all without the knowledge of the new soldiers.
"We could tell that, because when they went online to put their names in the system, they were all coming from the same IP address," Quantock said. "Either that, or you had many people putting money into the same bank account."