Watchdog: $1 million improperly charged by defense workers

WASHINGTON — U.S. troops and Defense Department employees improperly used their government charge cards to spend more than $1 million in casinos and strip clubs in one year, and the government is still struggling to stop it, according to a new report released Monday by the top Pentagon watchdog.

The Defense Department inspector general found that in the 12 months ended June 30, 2014, $952,258 was improperly spent using government charge cards in casinos and $96,576 was spent in “adult entertainment establishments.” The numbers would have been even higher, the watchdog found, but some credit card transactions were declined.

The charges examined included 4,437 made in casinos and 900 made in adult entertainment venues, the inspector general found. The Army had the most adult-entertainment charges flagged by the watchdog, followed by the Air Force.

Investigators discovered the transactions by combing through charges made at casinos and adult entertainment establishments. They found $3.26 million was spent in such locations, but eliminated transactions with official purposes, like dinners in a casino restaurant. The inspector general then focused even more closely on seven card holders with seemingly outlandish spending habits on government cards.

In one Nevada example, an enlisted senior airman at Seymour Johnson Air Force Base in North Carolina traveled to Nellis Air Force Base in Las Vegas and made three purchases totaling $4,686 at Sapphire Gentlemen’s Club using his government card. Citibank declined an additional $920 on the card because it would have exceeded the spending limit, the inspector general found.

“The cardholder later admitted that he used his (government card) at the Sapphire Gentlemen’s Club VIP room for himself and several friends,” the inspector general report said.

In that case, the Air Force discovered the charges on its own after about 48 days later. The card holder was reduced in rank from senior airman to airman first class.

In another Nevada example, an Air Force civilian from Georgia on travel to Hill Air Force Base in Utah drove 300 miles round trip and used his government-issued credit card at an ATM at a casino in West Wendover, auditors said.

On four occasions, the cardholder used his card seven times and withdraw $1,500. Another nine transactions were denied.

He admitted obtaining the cash “to pay for food and drinks while he attended car races, shows and local events,” according to the audit report. “The cardholder denied he used the money to gamble.”

Air Force officials did not take action against the cardholder because the card use was not investigated within 45 days as stipulated in the employee’s labor agreement.

In an example in Texas, an enlisted sailor with Naval Special Warfare Group made 12 transactions on a government credit card totaling $1,116 at adult entertainment establishments while traveling on a 17-day business trip to El Paso. The same sailor charged an additional $648 on the same card for food, drinks and ATM withdrawals at other businesses on the same trip, the inspector general found.

“While in El Paso, the cardholder spent more than six times his total (allotted money for expenses), which included Dreams Cabaret, Jaguars Gold Club, Tequila Sunrise, and Red Parrot Gentlemen’s Club,” the report said.

The Navy took disciplinary action against the sailor when the inspector general highlighted the expenses, but had not done so previously, the report added.

The inspector general recommended that the government use more data-mining to find potentially improper charges. One option, the watchdog said, is Visa Intellilink, a program that tracks credit card spending. Investigators also recommended improving oversight more broadly, and explicitly forbidding using government travel cards at casinos and strip clubs.

The Pentagon’s Defense Travel Management Office responded to the findings by saying that the report did not call attention to the overall strength of the Defense Department’s screening for problems. The improper use identified in the report “amounts to 0.0307 percent of the total card spend of $3.417 billion” during the one-year period audited, it said.

The travel management office agreed with the inspector general on a few findings, and said it would investigate whether Citibank, which manages the card program, should block card usage at specific casinos and strip clubs in the future.

Auditors identified 2,150 questionable transactions by Air Force cardholders, totaling $442,166. There were 2,025 such transactions by Army personnel, totaling $383,375. For the Navy, inspectors found 690 potentially troublesome transactions totaling $125,084. There were 357 questionable charges totaling $71,763 on cards used by Marine Corps personnel.

Washington Post writer Dan Lamothe and Las Vegas Review-Journal Washington Bureau Chief Steve Tetreault contributed to this report.