Fraud, waste in Reservist housing cost army $277 million, review finds

Wasteful and fraudulent claims for temporary housing from Army Reservists have cost the Army at least $277 million since 2001, according to an internal review.

The fraudulent and excessive claims occurred "because of serious ethical lapses on the part of some soldiers and because of what appears to have become an attitude of entitlement on the part of others," concluded the Army report, which was completed last year and obtained this week by The Virginian-Pilot.

The report describes in detail the results of a 14-month nationwide investigation that resulted in 35 soldiers' being sent to court-martial. Last month, a lieutenant colonel at Fort Eustis was convicted on fraud and theft charges.

The review looked at reservists serving stateside tours on temporary change of station, or TCS, orders - typically filling in for active-duty soldiers sent to Iraq or Afghanistan. It found that more than 58 percent of those reservists submitted potentially fraudulent, wasteful or abusive claims for lodging expenses.

"Apparently, a culture has developed... whereby they believe they are always entitled to the maximum reimbursement possible from the government," the report stated.

Fraud and waste occurred at the highest levels, the report said. Almost 60 percent of soldiers submitting potentially fraudulent claims were field-grade officers (majors through colonels) or senior non commissioned officers (sergeants first class through sergeants major.)

Two generals and a third officer since promoted to that rank received more than $600,000 combined in housing stipends they were not entitled to, the report found. It was unclear whether they remain on duty, have repaid the money or faced punishment.

Reforming the system could reduce travel expenses by more than $225 million annually, the report said. That's a small fraction of the Army's budget as it struggles to manage wars in Iraq and Afghanistan - but it's enough to pay for 1,250 armored Humvees, or 15 Blackhawk helicopters.

David Small, a spokesman for the Reserve Officers Association, said that while the group doesn't condone fraud or abuse, the reimbursement regulations were confusing.

Tens of thousands of reservists were called up to serve after the terror attacks on Sept. 11, 2001 - many leaving home for multiple tours, he noted. "Most soldiers served with integrity, and any effort to blame the honest soldier for living within the letter of the rules is also misguided," he said.

Investigators examined 4,197 travel pay claims among the 43,000 paid between September 2001 and October 2007.

They checked every claim made by soldiers who incurred more than $80,000 in travel pay during that time, and statistically sampled the rest.

About 11 percent of soldiers were found to have submitted potentially fraudulent claims, costing the government an estimated $24.2 million.

Far more - 47 percent of reservists - submitted wasteful or abusive claims, which cost the Army $253 million, the report said.

Soldiers took advantage of the system in many ways.

Some rented multiple-bedroom apartments - and the furniture to fill them - though the standard calls for renting a single-bedroom facility.

Others claimed to be paying rent for a home they actually owned. Some changed their address so it would appear they'd been assigned away from their homes.

Still others rented furniture under rent-to-own agreements, but continued claiming the expense even after they fully owned the furnishings.

Soldiers found guilty of fraud can face jail time. At Fort Eustis, Lt. Col. Ben A. Murphey was convicted of submitting false documents, fraud and theft. He is currently serving a three-month sentence in the Norfolk brig and was fined $50,000.

Other examples from the report include a colonel who claimed to have spent $4,500 to $5,800 a month on housing for more than four years, while he was actually living with his sister.

A lieutenant colonel rented the priciest unit at the Lenox Club in Arlington for $316,000 over nearly four years. The 1,600-square-foot penthouse was furnished with "The Presidential" bathroom, kitchen and bedroom packages.

An Army official briefed the House and Senate armed services committee members on the findings last year, a spokesman said.

Officials also moved to curb the abuse by reclassifying reserve soldiers tapped for more than six months of duty away from home. Instead of being on TCS orders, they're given "permanent change of station" orders, which result in far less generous reimbursements.

Those serving six months or less also face cut-backs: They now receive only 55 percent of the maximum per diem for meals and incidentals. That change has been unpopular at posts like the Pentagon, where Army Reservists serve side-by-side with Navy and Air Force Reservists, who receive the full amount.

The report found that the Pentagon was a hotbed of wasteful spending by reservists.

It was one of a small number of commands and bases that experienced repeated problems, leading the report to fault leadership in those places.

"It appeared that the leadership within the organizations with soldiers on TCS did not always set a tone for ethical behavior and integrity," the report said. "Moreover, many of the officers and senior enlisted soldiers entrusted to set a positive ethical standard in their organizations were frequently involved in potential fraud or wasteful spending activities."

Fort Eustis was the sixth-most-common location for combined offenses, with 13 cases of potential fraud and 74 cases of wasteful spending. The Newport News base is home to the Army's Surface Deployment and Distribution Command, which has many reservists assigned.

Ranking ahead of Fort Eustis were the Washington, D.C., metro area; MacDill Air Force Base in Florida, Fort Jackson, S.C.; Fort Sam Houston, in Texas, and Charlottesville, home to the National Ground Intelligence Center.

Sometimes identical acts of fraud or abuse occurred by soldiers in the same office, leading investigators to conclude that "the methods used to obtain maximum reimbursements were discussed and shared," the report said.

Investigators were told that "soldiers were sometimes advised by senior NCOs that they should automatically claim the maximum allowed for laundry and ATM fees, regardless of whether or not the expenses were incurred."

Soldiers and commanders weren't the only ones at fault. Investigators found a "total breakdown in internal controls over travel associated with the program."

The personnel who processed travel pay reimbursements were generally entry-level employees with a high turnover rate. They weren't properly trained and sometimes created duplicate reimbursements, paying soldiers twice for a submitted expense.

To rectify that, the defense finance service has issued collection notices to recover $313,000 in overpayments.

Kate Wiltrout, (757) 446-2629, kate.wiltrout@pilotonline.com