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California National Guard Student Bonus Program Riddled With Corruption

October 10, 2010

SACRAMENTO — Master Sgt. Toni Jaffe was known as “the M&M lady” because she decorated her office cubicle with keepsakes of the confection’s advertising characters.

However, the treats she dispensed were sweeter than candy and are now the subject of a criminal investigation.

From 1986 until her retirement last year, Jaffe’s job with the California Army National Guard was to give away money — the federally subsidized student-loan repayments and cash bonuses — paid for by federal taxpayers nationwide — that the Guard is supposed to use to attract new recruits and encourage Guard members to re-enlist.

Instead, according to a Guard auditor turned federal whistle-blower, as much as $100 million has gone to soldiers who didn’t qualify for the incentives, including some who got tens of thousands of dollars more than the program allows.

For years, the auditor and other Guard officials alleged in interviews or internal documents obtained by McClatchy Newspapers, California’s incentives program was operated as a slush fund that was doled out improperly to hundreds of soldiers with fabricated paperwork, scant supervision and little regard for the law.

Most student loan repayments, the documents show, were drawn from money designated for combat veterans. Yet a large portion of those funds went to Guard members who hadn’t served a day at war.

The documents also show that state Guard officials failed to fix the incentives program despite warning signs going back years.

On July 8, the managers who replaced Jaffe briefed Capt. Ronald S. Clark, a federal auditor who oversees funds spent by state Guard organizations, about her alleged lapses. A former police investigator, FBI agent and U.S. Secret Service officer, Clark has fought white-collar crime for years.

Still, he said, the scale and audacity of the corruption he encountered in reviewing the California program shocked him: Excluding $43 million in improper payments recently halted by Jaffe’s replacements, Clark estimated that $100 million was misspent.

In late August, after Clark came forward, the U.S. Department of Justice, the FBI, the IRS and the Army Criminal Investigation Division launched a criminal probe into the California program, in the process taking over Clark’s audit, which was never completed.

A spot check by Clark’s office for Kight examined 62 individuals who received $1.2 million in loan repayments and bonuses during the past several years. Auditors found that at least 52

In managing the programs, Jaffe was supposed to begin with a review of applications forwarded by soldiers, their superior officers or recruiters. She was obliged to verify that applicants’ claims of eligibility were valid.

Instead, contracts that certify eligibility, required by Defense Department regulations, were often absent, as were tracking data in systems designed to catch errors. Processing forms show that payments sometimes were boosted in sloppy handwritten notes.

Auditor Clark said, based on his knowledge of how the Guard operates, it was implausible to him that a sergeant could authorize what he estimated were thousands of fraudulent payments without detection by any superiors.

“There were leaders — officers — willing to look the other way,” he wrote, “as long as it supported the strength objective.”

In fact, Guard documents show that for years, Jaffe’s supervisors had reason to know about problems with her work and failed to intervene.

Clark’s decision to contact outside authorities, he said, was based partly on the response of California leadership to Douke and Lathrop’s concerns.

The two sergeants had been “screaming like crazy about this to any leader who would listen,” Douke wrote to Clark in an e-mail, but were “disregarded as overreacting” until Clark’s federal office stepped in.

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