Calif. Guard auditor blows whistle on slush fund

By Charles Piller
Sunday, October 10, 2010; A5

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. But the treats she handed out to members of the California Army National Guard are now the subject of a criminal investigation.

From 1986 until her retirement last year, Jaffe’s job with the Guard was to give away money – the federally subsidized student-loan repayments and cash bonuses that the Guard is supposed to use to attract recruits and encourage Guard members to reenlist.

Instead, according to a Guard auditor turned federal whistleblower, 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.

The Guard documents describe a high-speed assembly line for bonuses and loan repayments, in which Jaffe single-handedly processed about 8,600 payments over a 16-month period in 2007 and 2008 – about 25 per workday.

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. Captains and majors were among those whom auditors think benefited improperly.

A McClatchy Newspapers investigation, including a review of thousands of Guard documents gathered or prepared by auditors and other officials and sworn statements from managers who replaced Jaffe, found evidence that from 2001 until last year Jaffe often provided improper or illegal bonuses and loan payments.

The documents show that her actions were overlooked or ignored by recruiters and officers up the chain of command. Some recruiters appear to have benefited personally. The documents also show that state Guard officials failed to fix the incentives program despite warning signs going back years.

In comments to McClatchy Newspapers laced with profanity and evident bitterness toward former superior officers, Jaffe denied wrongdoing, insisting that she had followed regulations “by the book.”

“They are still trying to blame me for [expletive] I didn’t do,” she said in a phone interview from her home near Sacramento. “I wish I never joined the Guard. I regret it, and I hate the Guard.”

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. He called it “war profiteering.”

In late August, after Clark came forward, the Justice Department, 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.

– McClatchy Newspapers