Navy Sailors Used Government Credit Cards to Hire Prostitutes, Attend Adult Clubs

WASHINGTON (AP) - Navy personnel used government credit cards to hire prostitutes at brothels, buy jewelry, gamble and attend New York Yankees and Los Angeles Lakers games in fraudulent purchases exceeding $200,000, congressional investigators have found.

Lower-paid enlisted personnel earning between $12,000 and $27,000 were the biggest abusers but the Navy itself bears responsibility for failure to monitor the travel card program, the General Accounting Office concluded.

The GAO report was prepared for a House hearing on Tuesday and obtained Monday by The Associated Press.

The study shows the abuses continued many months after the investigators first publicly reported on problems with the travel cards. From October 2000 through March 2002, the new survey found 1,180 Navy transactions for personal items totaling $206,700.

The Pentagon has stepped up its efforts to control use of the cards. Some 400,000 inactive accounts that were unused during the previous year have been canceled. Those who abused the cards have had money involuntarily deducted from their paychecks.

Officials who grant security clearances now are notified when a card holder comes under investigation. And the military has promised to step up civil and criminal prosecutions.

Last summer, the GAO found that some 200 Army personnel had used the cards to get $38,000 in cash that they spent on lap dances and other forms of entertainment at strip clubs near military bases.

The new Navy study found additional use of the cards to obtain cash at adult clubs - money normally used to tip dancers, waitresses and bartenders.

"Once again the bottom line is the same: no controls, extensive abuse and no accountability," said Sen. Charles Grassley, R-Iowa, one of the recipients of the GAO study along with Rep. Stephen Horn, R-Calif.

Grassley, referring to the use of credit cards in two legal Nevada brothels, added, "This time around there was a new twist. The GAO found abuse taken to new depths."

In testimony prepared for a House Government Reform subcommittee chaired by Horn, GAO officials Gregory Kutz and John Ryan sharply criticized the Navy's lack of scrutiny.

"The Navy's practice of authorizing a travel card to be issued to virtually anyone who asked for it compounded an already existing problem by giving those with a history of bad financial management additional credit," said the officials.

During the fiscal year that began Oct. 1, 2000, the Navy had about $510 million in travel card charges and about 395,000 individually billed travel card accounts.

The Pentagon's credit card program has faced increasing scrutiny since 2001, when auditors disclosed that more than 46,000 Defense Department employees had defaulted on $62 million in official travel expenses charged to the government cards.

After the Pentagon began docking the pay of soldiers and defense workers with unpaid credit card debts last year, the average bad debt write-off dropped from $1.7 million a month to $300,000 a month.

The Navy report said there were 80 transactions totaling $13,250 at the two Nevada brothels; 199 purchases for $20,800 at two jewelry stores; 247 transactions totaling $28,700 at three adult clubs; 80 gambling transactions for $34,250; 72 cruises for $38,300; and 502 purchases of tickets, worth $71,400, to entertainment events, including "The Phantom of the Opera," Yankees and Atlanta Braves baseball games and Lakers basketball games.

The Navy's delinquency rate from the cards fluctuated from 10 percent to 18 percent, about 6 percent higher than for federal civilian agencies, the report said. As of March 31 this year, more than Navy 8,400 cardholders had $6 million in delinquent debt, the report said.

The GAO said some personnel holding security clearances had difficulty paying their travel bills and could be security risks because of their financial situations. Despite this, Navy security officials were unaware of these financial problems and could not consider their potential effects in determining whether to grant a security clearance.

Yes, I think they do need to conduct some intensive training. During my navy days, I've seen enlisted and junior officers that have gone out and blown 3/4 of their paycheck on the Friday after payday at the titty bar, then blow the rest on Saturday night drinking. God only knows what they would have done with a credit card. On my boat, we had two disbursing clerks (DKs) that were absconding with re-enlistment bonus checks worth about $10,000 each. By the time the authorities caught up with them, which didn't take very long, they had blown every nickel. They stole $60,000 each.

I've heard it said the Michael Jordan has more money than he can spend. He should send a big fat check to your average 21-year-old. They'll show you how to spend it.

Thereare two separate issues here, which the promoters of this study are combining.

The financial dimension. That is, people are not paying their card bill and sticking DOD with it, supposedly, and;
The moral dimension. Some people are using the cards for things that the Powers That Be consider immoral.

If it's OK for Sailor Sam to draw a cash advance on his card (presuming he pays it back) it should be a matter of official indifference if he draws it in the ATM in the lobby of a church (not that I have ever seen such a thing, but then I've been out of Catholicism for a while) or if he draws it in a cathouse. To whoever wrote this, that's not the case.

The other side of the coin, that GAO is not disposed to investigate, is the crookedness of the DOD card system, which grew and which became mandatory to use for official travel during the Clinton administration.

The principal causes of delinquencies are two: the DOD is very slow to reimburse travel expences, and some guys, mostly junior guys, are simply too dumb to understand that they can't charge forever without paying.

The delays in paying the troops for their travel vouchers, which are routine, are simply a way to get the troops to loan part of their pay back to DOD interest free, and to bear personal responsibility for any resulting delinquencies.

Example: one of our guys, Joe, attended a school where he was required to stay in a hotel. A specific hotel (probably another FOB kickback in there). Joe was there three plus months. All on the GI credit card. It took three more months for the clerks who make up 95% of the Army to get around to cutting Joe a check (actually direct-depositing some $9,000 in overdue travel pay), by which time his hiney was in Afghanistan. Meantime he did not have the spare cash to pay the bill (since he had been dragged out of his profitable civilian job, activated, and put to work for some $5,000 less a month than he made before). His wife and kid are stressed out, and his credit now is ruined.

But hey, the way DOD manages this helps buy the clerks typewriter ribbons.

The reason the use of the card is mandatory is that it is affiliated with some "connected" bank corp (paging Mr Rubin?) and the bank profits hugely by the use of the card, and kicks back a portion of its profit to DOD. The last thing DOD wants is PO3 Smith or SGT Jones charging his lap dance (can you do such a thing?) on his private card and then getting the cash back or frequent flyer miles himself.

The reason the GAO is doing this investigation is because the high delinquency rate is making the bank and the DOD leave money on the table -- for every dollar they can screw out of a senior guy (at the cost of his credit) they are losing one to young folks' fiscal irresponsibility. So the bank uses its connexions to scream, "do something," and the Congress reacts and sends its GAO scurrying.

The troops are good, but there's a bucket of corrupt leadership in the Pentagon.

d.o.l.

Criminal Number 18F

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