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i 

23–762 2017

[H.A.S.C. No. 114–144] 

CALIFORNIA NATIONAL GUARD BONUS 

REPAYMENT ISSUE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON MILITARY PERSONNEL 

OF THE

COMMITTEE ON ARMED SERVICES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

DECEMBER 7, 2016 
(II) 

SUBCOMMITTEE ON MILITARY PERSONNEL 

JOSEPH J. HECK, Nevada, Chairman 

WALTER B. JONES, North Carolina 

JOHN KLINE, Minnesota 

MIKE COFFMAN, Colorado 

THOMAS MACARTHUR, New Jersey, Vice 

Chair 

ELISE M. STEFANIK, New York 

PAUL COOK, California 

STEPHEN KNIGHT, California 

SUSAN A. DAVIS, California 

ROBERT A. BRADY, Pennsylvania 

NIKI TSONGAS, Massachusetts 

JACKIE SPEIER, California 

TIMOTHY J. WALZ, Minnesota 

BETO O’ROURKE, Texas 

DAVE GIACHETTI, Professional Staff Member 

CRAIG GREENE, Professional Staff Member 

DANIELLE STEITZ, Clerk 
(III) 

C O N T E N T S 

Page 

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS 

Davis, Hon. Susan A., a Representative from California, Ranking Member, 

Subcommittee on Military Personnel ................................................................. 2 

Heck, Hon. Joseph J., a Representative from Nevada, Chairman, Subcommittee on Military Personnel .................................................................................... 1 

WITNESSES 

Baldwin, MG David S., USA, Adjutant General, California National Guard .... 4 

Kadavy, LTG Timothy J., USA, Director, Army National Guard, National 

Guard Bureau ....................................................................................................... 3 

Levine, Hon. Peter, Performing the Duties of Under Secretary of Defense 

for Personnel and Readiness, accompanied by Alissa M. Starzak, General 

Counsel, Department of the Army, and Teresa A. McCay, Director, Defense 

Finance and Accounting Service ......................................................................... 25 

APPENDIX 

PREPARED STATEMENTS: 

Baldwin, MG David S. ..................................................................................... 47 

Heck, Hon. Joseph J. ........................................................................................ 41 

Kadavy, LTG Timothy J. ................................................................................. 42 

Levine, Hon. Peter ............................................................................................ 51 

DOCUMENTS SUBMITTED FOR THE RECORD: 

[There were no Documents submitted.] 

WITNESS RESPONSES TO QUESTIONS ASKED DURING THE HEARING: 

Ms. Speier ......................................................................................................... 63 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING: 

[There were no Questions submitted post hearing.] 

(1) 

CALIFORNIA NATIONAL GUARD BONUS 

REPAYMENT ISSUE 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ARMED SERVICES, 

SUBCOMMITTEE ON MILITARY PERSONNEL, 

Washington, DC, Wednesday, December 7, 2016. 

The subcommittee met, pursuant to call, at 2:18 p.m., in room 

2118, Rayburn House Office Building, Hon. Joseph J. Heck (chairman of the subcommittee) presiding. 

OPENING STATEMENT OF HON. JOSEPH J. HECK, A REPRESENTATIVE FROM NEVADA, CHAIRMAN, SUBCOMMITTEE ON 

MILITARY PERSONNEL 

Dr. HECK. I will go ahead and call the Military Personnel Subcommittee of the House Armed Services Committee to order. I want 

to welcome everyone to the subcommittee’s hearing on the ‘‘California National Guard Bonus Repayment Issue.’’ We are here today 

to hear from the California National Guard, the National Guard 

Bureau, and the Office of the Secretary of Defense [OSD], on an 

issue that we must get right, in fairness to not only the California 

guardsmen that this affected but for all service members going forward. 

Compensation, whether it is a bonus for a service agreement or 

a regular pay, is an obligation to our service members and their 

families that they should not have to worry about. 

I find it unacceptable that we would place the additional burden 

of years of concern about the legitimacy of a bonus payment, or student loan repayment, on those who volunteer to serve. The Armed 

Services Committee has taken action in the 2017 National Defense 

Authorization Act [NDAA] to address this issue, and this subcommittee is taking every opportunity to thoroughly review and 

discuss the way forward so that we can prevent such a widespread 

problem or abuse in the future. 

Our purpose today is to gain an understanding from those involved on why this happened and what we can do to prevent it 

going forward. 

Before I introduce our panel, let me offer Congresswoman Davis 

an opportunity to make any opening remarks. 

[The prepared statement of Dr. Heck can be found in the Appendix on page 41.] 
2 

STATEMENT OF HON. SUSAN A. DAVIS, A REPRESENTATIVE 

FROM CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON 

MILITARY PERSONNEL 

Mrs. DAVIS. Thank you, Mr. Chairman. And I would also like to 

welcome our witnesses today. I actually regret that we have to 

have this hearing to discuss a major pay issue that impacts 17,000 

soldiers from one State, from my home State of California. Were it 

not for the L.A. Times article in October, Congress would not know 

the extent of this 12-year-old issue, nor would the issue have been 

elevated to the Department of Defense [DOD]. 

Our understanding after this was first brought to our attention 

in 2010 was that a process was in place to adjudicate the issue, but 

6 years on, we are still trying to fix it. 

Numerous investigations, audits, and briefings have informed us 

of how we got to this point. My focus today is to ensure through 

the legislation just passed by the House last week as part of the 

2017 NDAA, and updates from the DOD, that we guarantee that 

those who should keep their bonuses do so, and that the systems 

and controls are in place to prevent an incident of this magnitude 

from happening again. 

While it is important that we perform oversight of the process 

moving forward, it is also critically important that we do not forget 

the service members and their families that have been deeply affected by this. Once these families had encountered financial hardships, we know it could be truly difficult to recover. Even if we return their bonus, we have already upended their lives by creating 

unnecessary emotional stress and financial instability. 

Our military families, as we all know, have a tough enough time 

without the added burden of having to repay service-related debts 

that they received in good faith. 

On another note, since this is his last hearing with us, I want 

to thank Dr. Heck for his leadership and his dedication to serving 

our troops, our families, and retirees over the past 2 years as chairman of the subcommittee. It has been a great privilege to work 

with him, and he will be missed. 

Dr. HECK. Thank you, Ms. Davis. Thank you. 

I now ask unanimous consent that non-subcommittee members 

be allowed to participate in today’s hearing after all subcommittee 

members have had an opportunity to ask questions. 

Without objection, so ordered. 

We are joined today by two panels. The first from the National 

Guard. The second will be from the Office of Secretary of Defense 

and the Army. We will give each witness an opportunity to make 

opening comments, and each subcommittee member an opportunity 

to question the witnesses. I respectfully ask the witnesses to summarize to the greatest extent possible the high points of your written testimony in no more than 5 minutes. Your complete written 

statements will be entered into the hearing record. 

We are joined on panel 1 by Lieutenant General Timothy 

Kadavy, Director of Army National Guard, National Guard Bureau, 

and Major General David Baldwin, Adjutant General of the California National Guard. 

General Kadavy, you are recognized for 5 minutes. 
3 

STATEMENT OF LTG TIMOTHY J. KADAVY, USA, DIRECTOR, 

ARMY NATIONAL GUARD, NATIONAL GUARD BUREAU 

General KADAVY. Thank you. Chairman Heck, Ranking Member 

Davis, distinguished members of the subcommittee, thank you for 

the opportunity to discuss the readiness of Army National Guard 

personnel matters. 

On behalf of the Army National Guard, I would like to thank you 

for your support and commitment to our soldiers, their families, to 

our veterans, wounded warriors, and those who have made the ultimate sacrifice. For your Army National Guard is today mobilized 

with more than 11,000 soldiers both abroad and here at home. Our 

soldiers are our Nation’s and our Army’s greatest assets, and 

should be treated that way. 

This subcommittee’s interest in recruiting retention incentives 

programs is understandable. In 2008, the California National 

Guard discovered inaccuracies in a number of incentive contracts 

awarded and launched an investigation in 2010. 

The investigation revealed that the California Guard’s incentive 

program had been grossly mismanaged, and there were instances 

of fraud which were discovered. 

As a result, California took measures to ensure these individuals 

engaged in the perpetration of fraud were punished. In 2011, the 

California incentive task force identified more than 17,000 California Army National Guard cases that were potentially linked to 

the unethical management of the incentives program between 2004 

and 2011. 

In 2011, the California National Guard, with assistance from the 

National Guard Bureau, established a soldier incentive assistance 

center to assist any California National Guard member affected by 

the mismanagement of the incentives program. Every California 

National Guard soldier impacted received a formal written letter to 

inform them of this option. This center will continue to provide assistance to each affected soldier. 

As a result of the issues with the California incentives program, 

the Army National Guard took numerous steps to improve oversight within our incentives process. In 2010, the chief of the National Guard Bureau, then General Craig McKinley, ordered a review of all Army National Guard recruiting and retention incentives programs across all States, territories, and the District of Columbia, which found no systemic fraud. 

In 2012, the Army National Guard completed the fielding of the 

Guard Incentive Management Systems, known as GIMS, to all 

States, territories, and, again, the District of Columbia, which now 

provides a centralized oversight program for bonus and incentive 

payments. In 2016, an external review of the Army—by the Army 

Audit Agency of GIMS, validated its effectiveness and found the 

system substantially improved the controls throughout eligibility, 

monitoring, and payment phases of the incentive process. State adjutant generals have provided annual statements of assurance 

since 2012 documenting internal controls processes to help prevent 

similar situations from occurring. 

Additionally, based upon reviews and assessments of the entire 

Army National Guard, fraud in the incentives program is not a nationwide problem. 
4 

In November 2016, the United States Property and Fiscal Officers provided additional assurances while reviewing their State incentive programs that there are no issues outside of what we know 

to be normal. 

Currently, Mr. Peter Levine, performing duties as the Under Secretary of Defense for Personnel and Readiness, is chairing a crossfunctional team with the National Guard Bureau, the United 

States Army, the Office of Secretary of Defense general counsel, 

and the Defense Finance and Accounting Service, DFAS. This team 

is leading the effort to expeditiously resolve the cases involving the 

affected California Army National Guard members. I understand 

you will hear from Secretary Levine a little bit later this afternoon. 

Secretary of Defense Carter’s guidance is to adjudicate all cases 

by July 1, 2017. The National Guard continues to support the 

cross-functional team’s process to ensure each soldier’s case is fairly and equitably reviewed with due process afforded to each and 

every soldier. 

In closing, I assure you that the National Guard has worked 

hard to implement appropriate, effective internal controls across 

the 50 States, the three territories, and the District of Columbia, 

and to prevent similar systemic fraud from occurring in the future. 

Thank you, and I look forward to your questions. 

[The prepared statement of General Kadavy can be found in the 

Appendix on page 42.] 

Dr. HECK. Thank you, General. 

General Baldwin, you are recognized for 5 minutes. 

STATEMENT OF MG DAVID S. BALDWIN, USA, ADJUTANT 

GENERAL, CALIFORNIA NATIONAL GUARD 

General BALDWIN. Thank you, Mr. Chair, and Ranking Member 

Davis, and the members of the committee. I do appreciate very 

much you taking up this important issue to be able to help our soldiers. 

As General Kadavy mentioned, in 2010, a whistleblower and a 

very astute auditor uncovered signs of potential fraud within our 

incentives programs in the California National Guard. That resulted in a fairly broad investigation by the Federal Department of 

Justice that went through the course of 3 years. The Governor relieved my predecessor in March of 2011, and recalled me from Afghanistan in April of that year in order to take charge of the disorganization and with a mandate of cleaning up this and some 

other challenges. 

I immediately ordered a full investigation on our side into this 

matter to do a couple of things: One is, I wanted to see if there are 

any other cases of fraud that were out there that the Federal Government had not begun to investigate or picked up on. 

The second was to hold leaders accountable to find out why did 

this happen and what—what were the problems. We found that 

there was a complete lack of internal controls, so we instituted an 

internal control system in order to prevent these problems from 

happening again, and then we held the leaders accountable that 

failed to provide the proper oversight or create a command climate. 

In that, we punished within the California National Guard 61 

people, including firing 4 general officers and 2 full colonels. The 
5 

Feds prosecuted 44 soldiers. Some of those prosecutions continue to 

go on, and several people were put in jail for the fraud that they 

had committed. 

But as General Kadavy mentioned, we also recognized that there 

were a lot of soldiers that got caught up in this that, through no 

fault of their own, had taken money from the Federal Government 

that they were not necessarily due or couldn’t document why they 

did deserve that money. So we established the Soldier Assistance 

Task Force in 2011 in order to address those problems. 

Because of the fact that we had found a 91 percent error rate in 

the initial audits that we had done, we were compelled to review 

every record. There were 17,000 soldiers and about 30,000 records. 

We were able to get through about 12,000 of the records. Of the 

12,000, we found 4,000 soldiers that we were able to help keep 

their money to the tune of about $39 million, because they had 

minor errors or problems in their contracts. And I am very proud 

of the work that our task force did in order to help those soldiers 

keep the money that they, in fact, deserved. 

Of the remaining soldiers, there were 1,400, only 1,400, that we 

actually sent to recoupment. Those were soldiers that did not contact our task force for assistance, but also we determined had problems that were probably insurmountable, and we couldn’t support 

an appeal. 

We submitted another 1,200 soldiers that did contact us for appeal, because we felt that they—even though there were problems 

in their contracts or maybe they may not have met the letter of 

their contract, we felt that they had served honorably and should 

be able to keep their money. Of those, 400 cases were adjudicated 

by either the National Guard Board—Bureau or the Army Board 

for the Correction of Military Records. So 400 soldiers were able to 

win their appeals, and they were able to keep about $4 million between those 400 soldiers. 

Another 400 soldiers, even with our endorsement to help them 

keep their money, unfortunately, lost their appeal and have not 

gotten their money back. They lost about $3.3 million amongst 

them. And then, finally, there are 400 cases that are remaining. 

We are very encouraged today by the actions of the Congress and 

the legislation that has gone into the NDAA that we think goes a 

very long way to help address some of the problems that we face, 

and the frustrations that we face in trying to help our soldiers get 

through this. We are also very encouraged by the actions that Secretary Carter and his team at OSD have taken in order to increase 

the bandwidth to be able to adjudicate cases quickly, fairly, and 

with standards that err on the side of honoring the soldiers and 

their service and helping them keep their money. 

And, again, thank you very much for the opportunity to discuss 

this today. 

[The prepared statement of General Baldwin can be found in the 

Appendix on page 47.] 

Dr. HECK. Thank you, General Baldwin. 

So, first, my first question is for General Kadavy. Concerning the 

key recommendations and the U.S. Army Audit Agency’s [AAA’s] 

follow-up review that was issued in May of this year, they noted 

that while NGB [National Guard Bureau] had made progress in 
6 

implementing many of the control procedures outlined in their 

prior audit, that not all of the internal controls had been put into 

place. Can you please give us an update as to where NGB is in implementing the final recommended controls as put forward by the 

AAA? 

General KADAVY. Yes, Chairman. Thanks for the question. 

Dr. HECK. Can I just ask you to pull that microphone directly, 

kind of like a rock star. 

General KADAVY. Okay. So there were 15 initial recommendations, of which the 2016 Army Auditing Agency follow-up reported 

that all 15 initial recommendations were being implemented, and 

then they recommended 4 new additional recommendations, of 

which 1 will be fully implemented by the end of this calendar year, 

by the end of month in December, and the other 3 will be implemented by the end of this fiscal year. It is about running software 

and updating systems to get at that. Particularly, it is related to 

officer bonuses and Army medical recruitment of experts to make 

sure we are tracking their contracts as we do with all others. 

Dr. HECK. Great. And I would ask that you keep this subcommittee apprised of the progress in implementing those final four controls. 

General KADAVY. We will, Chairman. 

Dr. HECK. And while you noted in your testimony that there was 

no systemic fraud across the National Guard, has there been a review to look at whether or not there is widespread administrative 

errors? And General Baldwin mentioned 91 percent error rate in 

what they reviewed in California. So while there may not be criminal fraud taking place, what about the administrative errors that 

might be more common across the National Guard enterprise? 

General KADAVY. So, Chairman, the Chief, National Guard Bureau at the time, General Craig McKinley, asked us to do a survey 

of the other 53 States, territories, and the District of Columbia, 

which began late 2010 and completed 2011. And we did identify 

some—some systemic problems, particularly related to lack of oversight, no separations of duties, inadequate training, outdated regulations, lack of manpower, and no overall tracking. But it said no 

widespread fraud. 

So we were already working on the GIMS system, and we believe 

GIMS accounted for most of that, as done—as shown through the 

Army Auditing Agency’s follow-on recommendations and where we 

are at. And I can just give you a quick update. 

So on average, we do about 16,000 incentive contracts between 

2011 and 2015, the latest year, 2016. We do about 1,200 recoupments on average for normal processes, which is about 7 percent. 

And you listen to some of the errors that were previously, and we 

have cut that down significantly. And the majority of those recoupments are for contractual issues, when a soldier leaves before the 

end of their enlistment. 

Dr. HECK. Thank you. 

General Baldwin, you listed some of the other numbers of individuals that were either disciplined or charged. Certainly, we have 

only heard in the open media about the one NCO [noncommissioned officer] that seemed to bear the brunt. Can you, again, just 

list, for the record, the numbers of individuals other than that one 
7 

NCO, who was incarcerated, whether it be administrative reprimand, or other disciplinary procedures? 

General BALDWIN. Yes, Mr. Chairman. I will start with the cases 

that were prosecuted by either the Feds, or, in some cases, some 

district attorneys took up the fraud cases. That was 44 soldiers in 

total. Of those, 26 were prosecuted and found guilty and convicted. 

There was another 15 or so that are pending prosecution, is still 

ongoing, and then the remainder cases were either dismissed, 

which is just a handful. I think it was only four that were dismissed or acquitted. 

And then on our side within the military, we have two options. 

We can do UCMJ [Uniform Code of Military Justice] action, which 

can include up to and including courts-martial or administrative 

action. We initiated courts-martial on seven personnel. It was six 

officers and one enlisted soldier. Those cases were dismissed by the 

military judge, either for lack of jurisdiction, or for lack of evidence. 

But we did go after 61 people, both on the receiving side, so people that we had evidence that had committed fraud but didn’t rise 

to the threshold that one of the civilian prosecutors would take— 

would apply the resources to take the case, so we took the case. 

And then there were also many, many cases of people that were in 

the chain of command that we couldn’t prove had committed fraud, 

but as I mentioned before, were lax in their oversight or established a poor command climate that we took action against. 

The most common action we took against the senior leaders was 

to give a formal reprimand and fire them. And that, again, included four general officers and two colonels. 

Dr. HECK. And of all the cases that you found scattered across 

the California Guard, did it seem like these were cases whether— 

it was up to one individual in a particular unit, or did there seem 

to be collusion? Like, was this a ring of individuals of all the folks 

that you mentioned that were actually doing this on purpose, or 

just happened in units apart from some type of organized activity? 

General BALDWIN. So it was state—it was statewide. It was 

across nearly every unit. And where there were cases of actual 

fraud, it was a bilateral arrangement between the master sergeant 

that ended up going to prison and the soldier that was receiving 

the money. And in those cases, either we or the Federal Government were able to prove and show evidence that there had been 

collusion where the incentive was offered and one or both parties 

admitted that they shouldn’t be doing it, and it violates the rules 

of regulations, and they did it anyway. 

Dr. HECK. And just real quick, you mentioned there were 1,400 

cases that had insurmountable problems. Can you give an example 

of what some of those might have been that prevented them from 

going forward on appeal? 

General BALDWIN. Sure. Most common would be people that 

failed to serve the term of their contract egregiously, not falling 

short just by a few days or months, but by years. People that enlisted and never showed up to basic training. People that we had 

to throw out for methamphetamine use, incarcerations, those types 

of problems that are not compatible with military service. 
8 

Dr. HECK. And problems that would happen regardless of component, regardless of the California National Guard, things that are 

not isolated just to issues within the California Guard? 

General BALDWIN. That is correct. 

Dr. HECK. And then my last question, you said 400 of the cases 

you reviewed had lost their appeal or their appeal was not approved; is there another step, or is that the end of the line for those 

individuals? 

General BALDWIN. I would defer that question to the second 

panel. But our request, which we think they are going to honor, is 

to go back and relook at those cases, because the Secretary is applying new standards, and we are hopeful that many of those people would make it through the process now, too. 

Dr. HECK. Thank you. 

Mrs. Davis. 

Mrs. DAVIS. Thank you, Mr. Chairman. Actually, I was going to 

ask about that as well in terms of those that you actually, in your 

words, endorsed but did not make it through the process, so we will 

deal with that later. 

You know, one of the things I wanted to just ask you about, because in your written testimony, you stated that Congress should 

establish a streamlined adjudication process to distinguish between 

those soldiers who, through no fault of their own, got involved in 

this, and then others who had failed to meet the condition. 

But the California Guard control those records. Is that correct? 

I mean, that you had control over those records? 

General BALDWIN. Yes, ma’am. We would control the initial contract, but then it would go to the United States Property and Fiscal 

Accounting Officer, who is a representative of the National Guard 

Bureau in each State, who would actually formally make the payment. So the payment threshold to get approved was by California 

guardsmen; the payment was made by the Federal representative. 

Mrs. DAVIS. Okay. But the incentive assistance center, could they 

make those—that judgment? 

General BALDWIN. The authority to—we didn’t—we at the State 

level do not have the authority to forgive any debts, and we don’t 

have the authority for any of the waivers. They reside at the National Guard Bureau level, at General Kadavy’s level now. 

And then, further, if cases are not able to get approved for a 

waiver at the National Guard Bureau level, the recourse is to go 

to the Army Board for Correction of Military Records. My authority, as the adjutant general, was very, very limited to help soldiers. 

And the 4,000 soldiers we did help were cases where they may 

have been just missing one signature or some initials on an otherwise good contract, and that was many of the errors. 

Mrs. DAVIS. Had that been different, had you had more authorities—because I—it kept feeling like everybody was passing the 

buck a little bit. And I am wondering what you see. What is ideal? 

Because as we look at some of the cases, I really was struck by the 

long-lasting impact this was having on our military families. 

General BALDWIN. So if we had had the authority, we could 

have—we would have been able to act more quickly. Because by 

the time we were making an endorsement, instead, it would have 

been an approval. But I think the way the system is set up now 
9 

is appropriate. It is appropriate for the Federal Government to 

withhold that authority from the States, because after all, it is the 

Federal Government’s money. 

In addition, the other substantive changes, the National Guard 

GIMS system that General Kadavy and the chairman were just 

discussing earlier has been a very elegant solution to help correct 

a huge, huge amount of administrative errors and neck it down to 

a very small number of administrative errors. 

And when you have a small administrative error rate, it is a lot 

easier to root out fraud, because you don’t have to sift through tons 

and tons of documents. 

So I think the authorities are where they need to be. I am very 

encouraged that OSD has increased the bandwidth to be able to adjudicate cases. And under General Kadavy’s watch, before he got 

in, it used to take 9 months to get an exception to policy approved. 

At his level, they now knock them out in 6 weeks. So that is hugely 

helpful. 

Mrs. DAVIS. General Kadavy, would you want to comment on 

that in terms of how you see the system working now, and I guess 

why we didn’t change it before? 

General KADAVY. Well, I can just speak to the exceptions to policy, which I have authority for, because they were written in Army 

National Guard policy. So I—I can do an exception to policy on 

skill, different, you know, infantrymen to an armored crewman, 

and from one unit to another, if they re-enlisted for a specific bonus 

to a unit. 

I would say just the sheer magnitude of the—the overall problem, I would think, caught us off guard. It took us a while to get 

back to apply the resources to adjudicate them faster. 

But, you know, it is—we follow the policy and directives. And 

right now, the only thing I have the ability to is to do exceptions 

to policy, as General Baldwin said, then it moves forward to 

ABCMR [Army Board for the Correction of Military Records]. 

I would like to just—you know, to talk about GIMS just a little 

bit more. It does. It identifies through electronic searches in the 

database, which we didn’t have prior to 2011. So it checks all those 

administrative data that is required to ensure that a soldier is eligible. So it does that, and it also tracks during an entire period. 

So when a soldier maybe changes an MOS [military occupational 

specialty], it flags and sends, you know, a message to the administrative officer or NCO, who then takes action, you know, if it was 

a directed change, then we do an exception to policy in a timely 

process. 

I think many of the things that are impacting what happened in 

California between 2004 and 2011, and then looking at the current 

investigation and work that they are—the California task force has 

been doing, I think today, we don’t see those types of issues anymore. Thank you. 

Mrs. DAVIS. Okay. Thank you, Mr. Chairman. I would just follow 

up, and maybe someone else can ask about what other assistance 

we are providing. I know there was an issue around credit ratings, 

and I think we were trying to fix that issue as well. 
10 

But, again, I am concerned about how this impacted families, 

and if there’s been sufficient outreach to know that there is help, 

there is support there, and we hope that they get it. Thank you. 

General KADAVY. I will leave the majority of that comment to the 

next panel. I will just say from my perspective, we have had overwhelming support, partnership, from the Office of the Secretary of 

Defense, DOD, Army. Everybody wants to get this right for the soldiers. 

Mrs. DAVIS. Thank you. 

Dr. HECK. Mr. Cook. 

Mr. COOK. Thank you, Mr. Chairman. 

I want to thank the generals who are testifying today. 

And, you know, this goes back a long ways. I was the chair of 

the Veterans Committee, and Senator Denham, at the time, had 

the Senate Committee, and it brings back the memories, and I 

think part of it when we did this was just the shock of what was 

happening. 

And, of course, General Baldwin, I am very, very happy with 

what you have done since you have taken over. So this is not an 

inquisition against you or anything else. And we have had a conversation, and where I am coming from is going to be the same 

thing over and over again. And I am not so worried about the officers so much as the troops. 

We have—everybody that’s been in the military knows that we 

have—everybody always says, ‘‘recruiters.’’ And because you put 

your life in the—the hands of the recruiters. You trust them. You 

trust the Army. You trust the National Guard. You trust whatever 

service. And people, once they do that, it is like you are giving 

them your entire life. 

So my problems, which I would like you to talk about, are on 

some of these cases where there have been troops that, through no 

fault of their own, are suffering the consequences. And maybe I am 

wrong, but it sounds like we are nitpicking, particularly where 

some of these people don’t have the economic means to repay these 

things or what. We have got it—you know, it is our fault. Now, I 

use that word collectively on behalf of all officers that are in positions of authority, we betrayed the trust of the troops, and there 

is no excuse for that. 

And, so, obviously, I am hearing how we are going to change this, 

and I still don’t have a warm and fuzzy feeling about that is being 

done. I don’t want it to be too bureaucratic. And after saying that, 

I do want to comment, once again, our Guard is so, so important 

not just to California, but to all the operations that we are doing. 

And everybody on this committee knows the exercises in Europe 

and the commitments and the op plans and everything else. We 

have got to get this right. 

So, once again, I am going to ask a very broad question, and— 

well, in fact, I am going to skip, because I have been ranting and 

raving, and I do want to yield my time to Congressman Denham 

before it runs out. But, eventually, if you could comment on the 

trust issue over and over again. 

Jeff, sorry I talked so long. 

Mr. DENHAM. Thank you, Colonel Cook. And he and I, while we 

served in the State legislature together, chair of the Senate Vet-
11 

erans Committee, Assembly Veterans Committee on his behalf, we 

did work on this issue. I would say that the difference that he and 

I may have is the difference in how we both—how we first got into 

the military. 

I was 17. I signed a contract that was put in front of me. In fact, 

at 17, you have to take it home to your mom to have her sign it 

as well. So for the military to take the position that the soldier is 

guilty and must prove, a decade later, that there was some fault 

of their own—I mean, we still continue to have conversations that 

you have got to still carry your yellow shot records around from 

decades before because it is not an automated system. 

So to presume that the soldier is guilty and, therefore, responsible for a decade-old contract that they signed in good faith and 

put their life on the line, to me, is—to me, it is a big black mark 

on our Department of Defense’s record. 

And I only have a short amount of time, but I would ask you to 

just respond to both of our statements. 

General BALDWIN. Congressman, first, I want to thank both you 

and Congressman Cook for your leadership role in addressing this, 

and being very aggressive about it. And we really appreciate the 

support. And our soldiers, airmen, and families appreciate both of 

you very, very much. 

I would agree wholeheartedly, Congressman Cook, that we do 

have a problem that we are going to have to re-establish trust with 

our soldiers, with their families, and with potential recruits. I am 

very encouraged by—as I mentioned before, by the actions that the 

Congress have taken. I think that they go a long way to address 

some of the issues that you just brought up, Congressman Denham, 

and the steps, again, that OSD are taking in order to be able to 

show that soldiers—we are going to trust the soldiers up front. And 

if we have a problem with it, the burden is on us to prove that the 

soldier did something wrong, rather than the soldier having to 

prove from their innocence that they are innocent. 

Dr. HECK. Thank you. The gentleman’s time has expired. 

Mr. Walz. 

Mr. WALZ. Thank you, Mr. Chairman. And I would like to take 

a moment, too, to thank you. General Heck’s service and integrity 

and effectiveness to this—not just to this committee, but to our veterans and our citizens. It is something I am proud to have stood 

beside you as you did it. Oftentimes around here, we talk about my 

good friend. I certainly mean it this time. And it is—you have set 

an example of how we understand that our services here are for 

those that—that we are charged to look out for and our veterans. 

So I want to thank you, sir, for that. 

Thank you both for being here. And I was just discussing with 

the gentlelady from California. General Baldwin, you made a case 

of this, and I think we are trying to get at it. And I think the two 

gentlemen here obviously know this issue very well. But having 

been involved with this, both receiving bonuses and being part of 

a group that gives them—also being there when pay errors are 

made, when I would have to tell my soldiers, you knew you were 

divorced; you weren’t to get that BAQ [Basic Allowance for Quarters], and kept it anyway, so you are going to have to pay it back, 

because that is the way things work. 
12 

I know this is a touchy subject, because when somebody gets 

paid, all the issues that the ranking member put out is, this has 

huge impacts on families. It has huge impacts as it goes down the 

line. Just a couple of questions. 

General Baldwin, you talked about this, where people got bonuses. Did I hear you right, even before they went to basic training, they got paid? 

General BALDWIN. Yes, Congressman. 

Mr. WALZ. How did that happen? Because I am thinking back to me. $1,500 bonus, I completed basic and AIT [Advanced Individual 

Training], I got $750; 2 years later, I got $375. On the fourth year, 

I got $375. That kept me in. When did that change, or how does 

that authority differ? 

General BALDWIN. I don’t know when it changed, because when 

I joined, it was the same as you. You had to serve before you got 

all or some of your bonus. 

Mr. WALZ. Correct. 

General BALDWIN. Somewhere around 2006, the National Guard 

Bureau changed its policy in order to provide a bigger incentive to 

get massive amounts of troops in, and they would pay the bonuses 

up front. And that was a very poor business rule that doesn’t exist 

anymore. 

Mr. WALZ. Okay. So that—so a lot of these—I shouldn’t say a lot. 

I am trying to get the numbers on this. Many of them fell in that 

category? 

General BALDWIN. That is correct. 

Mr. WALZ. But there was a section of these, as you said, that 

where someone knew they were getting a bad bonus, they colluded 

with a recruiter, and there was a kickback, basically, to take this 

bad bonus? 

General BALDWIN. That is correct. 

Mr. WALZ. Now, could I ask—could you give me these numbers 

again, the error rate when you went back through and did your 

audit, the error rate in contracts in general? 

General BALDWIN. So there were two—there was an audit done 

by the Army Audit Agency, and then an inquiry, which was a precursor, as you know, to an investigation that was initiated by my 

predecessor. First, with the Army Audit Agency that I didn’t mention before, they found a 55 percent error rate in the sample that 

they looked at. I don’t know how large that sample was. 

In the inquiry that was occurring in the month before I took command, they reviewed, I want to say it was 153 records, and in the 

case of those records, they found a 91 percent error rate. And that 

was enough that I felt compelled that we had to continue to look 

at every single record. 

Mr. WALZ. What accounted for that? You know, and having done 

these before and the detail that went into them—I am still from 

the old age of carbon paper, and everything had to be exact or it 

was no good, and they threw them back out. How could you have 

a 91 percent—I mean, were these small errors, large errors, misinterpretations of the regulations? 

General BALDWIN. It was all of that. But the root cause problem 

was lack of oversight of control, and lack of resources. So they had 

one person doing incentive managements. And the number of in-
13 

centives had grown very rapidly from just a handful of incentives 

they would offer for critical MOSs, or bonuses, to a very, very broad 

pallet of incentives that ranged everything from medical professionals to people that are going to join the band and everything in between. 

And at the time, they had one person managing these incentives. 

She was overwhelmed. She was under tremendous pressure to help 

meet—get the numbers to disburse the money, and she had no 

good oversight. Only people pressing on her to get money out, no 

one checking to see if she needed help, no one checking to see if 

she was doing things correctly. 

Mr. WALZ. Which is a recipe for disaster. 

General Kadavy, if I could move to you on this. When you did 

a systemwide NGB audit of this, if I am reading this correctly, you 

only found irregular bonus activity to a total of about $58,000. Is 

that correct? Am I reading this right? 

General KADAVY. Congressman, so when we did the 53 other 

States, territories, and District of Columbia, we did a sampling of 

about 9,600 records. We found 689 that had errors across the other 

54 for a percent of about 14, and that was actually 2.4 million. 

Where, you know, General Baldwin mentioned the Army Auditing 

Agency, they did a sampling of 159 in California. They discovered 

97 errors. 

Mr. WALZ. See, this one—and if my time is going to come up, but 

somewhere I would like to come back to this. Most often, when you 

have an issue like this, I find it systemwide, whether it is the VA 

[Department of Veterans Affairs] or DOD. This is very odd. 

Does that strike—we will come back to it. I know the fraud may 

be a piece of that, but that is a very interesting statistic. So I will 

get more when we come back on my time, but thank you. 

Dr. HECK. Mr. Knight. 

Mr. KNIGHT. Thank you, Mr. Chair. And I have just a brief question, and I am going to yield some time. 

I, too, would like to thank Congressman Heck for his leadership. 

He has been invaluable. 

My only question is on the GIMS system, because we are talking 

about trust. And when I went down and signed when I was 18 

years old—I don’t know that I was a whole lot smarter than Congressman Denham when he was 17, probably a lot smarter, but, 

you know, it is kind of a contract that you are going down there 

and you are trusting and believing what the recruiter is saying is 

the truth. So I think it is a trust issue that we are trying to build 

back. 

But, General Kadavy, you talked about the GIMS system a little 

bit. And I am going to give you a little bit of time and tell us how 

that is going to build back some of the trust that we can have, and 

how the recruiting process is going to go, and how we can be assured that some of—all of these problems if not—are going to be 

caught before they become a problem? 

General KADAVY. So, Congressman, I think GIMS puts trust back 

into the system. I think what we are really talking about is trust 

between leadership and soldiers. And in that—that is earned, and 

the system isn’t going to fix that. And so we do a tremendous 

amount of training out in our professional education center for all 
14 

recruiters. We are not getting our recruiters there in a timely fashion. We are working on that. We provided additional guidance to 

ensure they are getting the training, and then we have also implemented a program called POSTA [Positions of Significant Trust 

and Authority]. And I will have to get you the exact name of it. 

So the adjutant general has reviewed each and every recruiter to 

make sure they are ethically, morally, the right folks to be talking 

to young men and women that potentially could join our Army National Guard. And when there’s issues, that they think the soldier’s 

still good, it comes up to me. And I read each and every one of the 

POSTA requests for any waivers. And I think the time I have been 

the director, I have approved one. Because you are absolutely right, 

our very best, most trusted professionals must be the ones that are 

recruiting our young Americans. 

Mr. KNIGHT. Very good. 

And Mr. Chair, I am going to yield the balance of my time to 

Congressman Denham. 

Dr. HECK. If the gentleman will suspend. I was informed by staff 

that subcommittee members cannot give their time to a non-subcommittee member. They have to wait until after all subcommittee 

members had an opportunity to ask their questions. 

Mr. KNIGHT. I am going to keep my time. 

So, General Kadavy, on the same kind of vein, I know that Congresswoman Davis was talking us down this road of when the folks 

of—have been given a bonus, and then they have had to repay the 

bonus, but under the appeal, they were awarded the bonus. They 

should have gotten the bonus. They should have kept the bonus. 

But some of these folks have now paid back a bonus, and maybe 

their credit approval has been hurt. Some of the things that, because of paying back that bonus, it put them in some hardship. I 

mean, that is going to be part of the trust issue, too, how we can 

make those soldiers whole moving forward. 

Is that—obviously, that is going to be a big part of what you do. 

But is that also part of how we can help in this issue? 

General KADAVY. Congressman, I can tell you that it is very important to the cross-functional team that Mr. Levine is leading. It 

is one of the key issues we are looking at. At this point in time, 

what I am hearing is we think we have all the authorities and the 

abilities to make a soldier whole, particularly in the instances that 

you were talking about. But I would say the subject-matter experts 

on this particular question are probably on panel 2. 

Mr. KNIGHT. Okay. 

And very good. Mr. Chair, I am going to yield back. 

Dr. HECK. Ms. Speier. 

All right, then we will go to Mr. Coffman. 

Mr. COFFMAN. Thank you, Mr. Chairman. 

First—so, let me understand this right. So you have got a recruit 

coming in, and it takes a certain MOS for a certain length of time 

under the bonus, under—to—in order to get a bonus. That individual is placed, for whatever reason, in a different MOS. Is that— 

or occupies a different position in a unit that is different from that 

MOS. Is that individual required to pay back the bonus? 

General KADAVY. It depends. So we give bonuses for three reasons; for a skill, a grade, or a unit. It—if that is a critical MOS, 
15 

and the soldier elects to change on their own, in general, yes, that 

is a recoupment. If we direct the change, or, for instance, we just 

had a number of units that changed their structure from military 

police to others. That was directed by us. There is no recoupment. 

And then a soldier, of course, can always provide an exception to 

policy request, and many have, that indicates if there were some 

issues—I can’t go that far to drill; it is too far of a drive; we take 

all those considerations, and then a decision is made. But it doesn’t 

necessarily mean that. 

But in the GIMS system, there is a flag that goes up, which 

means it needs to be adjudicated one way or another with exception to policy, or a termination of a contract. 

Mr. COFFMAN. Okay. What is the status of these recruiting bonuses to pay others—other soldiers? That practice has stopped, 

right? 

General KADAVY. Yes. That’s been stopped for quite some years 

by my predecessor. 

Mr. COFFMAN. What is the status of the bonus structure now for 

recruiting people, say, first-term enlistees? 

General KADAVY. I guess I don’t understand the question. 

Mr. COFFMAN. What is it—so I assume there is still a bonus 

structure for first-term enlistees? 

General KADAVY. Right. There are enlistment bonuses for certain 

units, certain skill sets, and then retentions bonuses for certain 

grades where we don’t have enough, for instance, maybe staff sergeants and et cetera. 

Mr. COFFMAN. And how dynamic is that process? Because I think 

it is—it seems like—I know in 2005, it was very tough to fill the 

ranks of the military across the board, and then, obviously, it is 

much easier today than it was back then. 

General KADAVY. Right. So, Congressman, it is very dynamic 

today. We are taking a look at it. I think it is almost too dynamic 

that it gets to be a bit confusing. 

You know, I just talked to a few of the adjutant generals that 

are on the general officer advisory committee. And we are likely 

going to go to talk to the States, and they provide us where their 

holes are at the beginning of the year and midyear. We will adjust 

it if need be, so that it stabilizes and doesn’t change the skill sets 

and the grades in the units on a continual basis that maybe is confusing and causes some of these issues. So we are going to try 

to—— 

Mr. COFFMAN. Right. But those enlisted soldiers that sign up for 

an MOS specialty, and they get moved, are—or they—how is that— 

I guess they elect to move. Are they—I just want to make sure that 

they are fully cognizant of—— 

General KADAVY. No. What I am talking about is initial enlistment—— 

Mr. COFFMAN. Right. 

General KADAVY [continuing]. That you sign. We are going to 

limit how often we change which skill sets. So we might have a different one every month. And sometimes it gets confusing to recruiters, or a recruit walks in thinking they are going to get a bonus, 

but they wait to make a decision a couple of months later, and that 

skill is no longer there as far as a recruiting. 
16 

What you talk about is once a soldier signs a contract, GIMS 

verifies that. And, you know, as long as they live up to that contract, there are no issues. If something changes, GIMS flags it, and 

we adjudicate it either through an exception to policy, ABCMR, or 

if the soldier, for instance, doesn’t complete a set of training and 

decides to no longer serve out their enlistment period in the Army 

National Guard, then, by statute and policy, we must recoup for 

any unexecuted portion of that contract. 

Mr. COFFMAN. Right. When you said if an enlisted soldier 

elects—first-term enlistment elects to change an MOS, then they 

would be responsible for recouping, and if it was a critical MOS, 

how would the command structure allow them to change—to elect 

to change their MOS? 

General KADAVY. Well, you know, I can’t speak to every case. 

But, in general, you know what you signed up for. So in most 

cases, in my observation, is it is more related to changes in force 

structure, and force design updates that the Army provides. So you 

are in an MOS, in a unit, in a location today, and that changes. 

We do not collect from that particular soldier. 

And I don’t see that as an issue that is related as much as it was 

in the past. 

Mr. COFFMAN. Sure. 

Chairman, I yield back. 

Dr. HECK. Thank you. 

Mr. Garamendi. 

Mr. GARAMENDI. Mr. Chairman, thank you for the privilege of 

sitting with your committee and now asking a question. I appreciate the information that has been elicited thus far in the testimony. 

We now have an NDAA that has a new law—a new section that 

will eventually become law, and it may affect—is certainly meant 

to affect those men and women that took a bonus in good faith, carried out their responsibilities, even though it may not have been 

to the strict MOS or other criteria, and have faced a clawback of 

their bonus. 

I agree with, I think, every member of this panel that that is 

unconscionable that that could happen, or did happen. But my real 

question is going forward. 

General Baldwin, you gave a bunch of statistics and numbers at 

the outset. I would like you to quickly review those in the context 

of how does the new, hopefully soon-to-be new law, in the NDAA, 

affect those men and women that are under review as a result of 

the bonus question that has arisen in California? If you could run 

through that quickly. 

And I also understand there is certain criteria that are in the 

soon-to-be law as well as criteria that you—excuse me—that the 

Army may use to eliminate from the clawback, or potential clawback. Could we go through that, please? 

General BALDWIN. Sure. So for, I think, the important step that 

is in the law is it—as OSD is putting together their team, and they 

will discuss it in the next panel that is going to be able to more 

rapidly adjudicate the cases and review soldiers to find the ones 

that the many, many, thousands, perhaps, the ones that deserve to 

keep their money. One of the main things that it does is that it re-
17 

lieves the notion that for that targeted group of individuals, that 

we have to have a presumption of guilt in order to review their 

case. They are going to review every case that they take before 

them. So that is very, very encouraging. 

The other thing the law does that I think is very, very helpful 

is that—and as I understand it, this would impact not only the soldiers that are in this population that we are addressing here, but 

National Guardsmen ostensibly both in the Army and the Air National Guard, from time forward, that if you—if DFAS establishes 

a debt for a National Guard soldier or airman, prior to this current 

NDAA, the National Guardsman could not go to DFAS to ask for 

a sum total financial relief for financial hardship. They could do it 

in the case if they had loss or damage coming from property, but 

in the case when they had been overpaid or paid bonus that they 

weren’t due, they couldn’t get relief if they were suffering from financial hardship. Title 10 Active Duty personnel could. Title 32 

couldn’t. The current NDAA corrects that, and we are very, very 

happy to see that in there. 

Mr. GARAMENDI. I understand that there were other criteria that 

would eliminate from the clawback, certain men, guardsmen, 

Guards people, could you—is that the case? Are there—is it only 

this issue of financial hardship or does it have to do with rank, position? 

General KADAVY. If I could take this one, Dave? 

General BALDWIN. Oh, sure. 

General KADAVY. Congressman, as a member of the cross-functional team being led by OSD, we are still reviewing, and the next 

panel, Mr. Levine can tell you exactly where we are on this. But 

we are building criteria, and I think, based on the Secretary of Defense’s guidance and what is in the NDAA, the intent is to only 

find those that were ineligible for a bonus and should have, or did 

know they were ineligible. The intent is not to recoup from soldiers 

that did not understand what was going on. It was only—it is only 

to get after those that were ineligible and accepted the bonus 

knowing they were ineligible. 

Mr. GARAMENDI. Will that criteria significantly reduce the number of Guards people that are affected? 

General KADAVY. So I have been asked if you could refer that 

question to the next panel. 

Mr. GARAMENDI. I will do so. 

Mr. Chairman, I want to thank you, and I want to thank this 

panel for writing into the NDAA the language that will significantly solve most of the problem, perhaps not all of it. And I would 

ask that in the future, this panel continue to observe and watch 

as this plays out. Thank you very much. 

Dr. HECK. Ms. Speier. 

Ms. SPEIER. Thank you, Mr. Chairman. Let me add my words of 

praise to you for your service to our country and to this Congress, 

and thank you as well for bringing this issue to the forefront today. 

Let me start with you, General Baldwin. You met with me yesterday, and I appreciated that. You took over in 2011, correct? 

General BALDWIN. Yes, ma’am. April of 2011. 
18 

Ms. SPEIER. And you took over, in part, because the Governor 

saw this as a problem, and wanted to relieve the general before you 

and put you in that position, correct? 

General BALDWIN. That is correct. 

Ms. SPEIER. All right. 

So from 2011 until 2016, the only time this was ranked as an 

issue, and it was ranked number six, was in 2014 to the foreign— 

to the Armed Services Committee. And there was no impetus to 

take this seriously enough to fast-track it. And it was only until the 

Los Angeles Times did a story that this issue got some traction. 

So my question to you is, while you are not responsible for what 

happened before your watch, you are responsible for what happened after you took over. And why didn’t you elevate this to a 

high enough level in 2012, in 2013, in 2015, and again in this year? 

General BALDWIN. So for the first 2 years you mentioned, 2012 

and 2013, we weren’t aware of the amount of time it was going to 

take to get through the adjudication process. We first started pushing cases forward after doing a review in late 2012. And since it 

was taking 2 years for cases to run their course, it wasn’t until the 

end of 2013 to 2014 that we realized the scope of the problem we 

had based on the amount of time it was taking to get relief for soldiers. That is why in 2014, we first brought—— 

Ms. SPEIER. Okay. I am going to shortcut this a little bit, because 

I have a limited amount of time. I just want to make the point that 

while your—you have made it a priority on a list, you didn’t make 

it a priority to the committee so it wasn’t dealt with as it should 

have been. 

Now, you had mentioned to me that some of the largest bonuses went to physicians, the 40-, the 50-, the $60,000 bonuses. And in 

those cases, they have not—they committed to 6 years, served, in 

some cases, less than 2 years, got the bonus up front. 

Now, that decision to offer that bonus up front before you had 

committed the 6 years seems like a no-brainer. Why would anyone 

do that in an administrative role when the likelihood of someone 

skipping is pretty high? 

General BALDWIN. Yes. So that was—that is a great example, because those cases, because the dollar amount were amongst the 

most egregious. The way that the program for benefits—for incentives for medical professionals worked at the time is they could actually get up to an $80,000 bonus, and it was paid out in tranches, 

so every couple of years as they served more time, they would get 

paid part of the bonus. And that was in accordance with the regulation. 

What happened is the incentive manager, though, would just 

push the button to pay the whole lump sum in 1 year, or maybe 

after 2 years. So if they had made a 6-year commitment, that medical professional served 2 years, got their 60-, $80,000, whatever it 

was, and then—— 

Ms. SPEIER. Okay. So I want to go on record that those medical 

professionals that got those bonuses with a commitment to serve 

6 years and only served 2, that we should claw back every single 

dime. 

Now, for those—you also told me that you were under the impression that for noncommissioned personnel, that are list—who 
19 

were—who were enlisted, that, for the most part, especially if they 

were over 10 years in length, that that is going to be waived, and 

that requirement for enlisted will not be clawed back? Is that true? 

General BALDWIN. So that—I think that is one of the business 

rules that they are going to discuss in the next panel, that for certain ranks and for certain time in service, for more junior people, 

they are going to apply some rules that are more forgiving for people that may have been more senior, or perhaps worked in recruiting that should have known the rules. 

Ms. SPEIER. Okay. I have always had a problem with this ‘‘should 

have known,’’ because if you received it, you didn’t know that you 

weren’t supposed to receive it, but you should have known, and it 

is 10 years past. That is, I think, an expectation that we should 

not require those individuals to pay it back, particularly if they 

committed to a contract and served for the requisite period of time. 

And with that, I yield back. 

Dr. HECK. Mr. Aguilar. 

Mr. AGUILAR. Thank you, Mr. Chairman. I don’t serve on this 

panel. Thank you for allowing me the opportunity to ask a few 

questions, and thank you for—it’s been a pleasure to serve with 

you on the full committee as well. 

General Baldwin, can you explain—again, maybe this is getting 

into the should-have and did-know that you mentioned. Can you 

explain the process that was gone through to determine whether 

the incentive pay or the student loan needed to be recouped, and 

then immediately thereafter, once that decision was made and the 

notification was given, what were the next few steps along the 

process? 

General BALDWIN. Sure. So I will address those cases where we 

did not find fraud or suspect fraud. So for the preponderance of the 

soldiers, what we would do is overlay the paperwork that they had 

that showed, here is their contract, here is what the regulation 

says in order for them to receive that certain benefit, in order for 

them to establish an eligibility, what other documents are required, 

and whether they—or not they had all that paperwork. 

By the rules that were in place on time—at that time, if someone 

was missing one of those elements, it voided the contract, and that 

forced us to then send them to the National Guard Bureau for an 

exception to policy, which we, again, sent with the ones that we did 

send where we are working with the soldiers we sent with endorsements recommending approval. 

If they did not get approved—if their exception to policy got approved by the National Guard Bureau, that was then within General Kadavy’s predecessor to allow them to keep the money, and 

then we were done. 

If the National Guard Bureau did not or could not approve the 

exception to policy, it did give us the ability to help the soldier go 

to the Army Board of Corrections of Military Records, where the 

case would then go and get reviewed by an administrative law 

judge that would then make a determination of whether or not 

they would approve it. We have about a 50 percent success rate. 

I will give you one concrete example of a fairly common problem 

that we found was for soldiers that were first-term enlistees, as 

with the case of Congressman Denham, where you can join the Na-
20 

tional Guard or the military when you are only 17 years old, a lot 

of these soldiers hadn’t graduated from high school when they enlisted. For the National Guard, you could do that. You could join 

the National Guard before you graduate from high school. However, in order to be eligible for the bonus, you have to produce a 

high school diploma. 

And in many cases, the soldier served and served well, but we 

just didn’t have a high school diploma in their records, and in that 

case, we were—we had to take action. And those are cases that 

were fairly easy for us to go back to either exception to policy, or 

up to the ABCMR to get relief. 

Mr. AGUILAR. What kind of time period were they given in order 

to correct the document side, the deficiency that you saw, whether 

it was a high school diploma or whether it was any other document? 

General BALDWIN. So the only soldiers that we sent to recoupment were the soldiers that did not contact us. So the soldier contacted us, we worked with them and have continued to work with 

them, and to my knowledge, have not sent any soldier to recoupment for any benefit that we could assist them on. 

Mr. AGUILAR. General Kadavy, do you want to talk a little bit 

about that from a process perspective, those that came through, 

you know, within that flowchart, those that came through that 

your office and your predecessor reviewed, you know, what did— 

what did that look like from the documentation standpoint? That 

is what I am concerned about are those folks that were dinged because of the lack of documentation but met the criteria for the 

bonus. 

General KADAVY. Yes. So I believe, I can’t really speak for my 

predecessor, but our guidance, our intent is to work as hard as we 

can for an exception to policy for each and every soldier, and quite 

honestly, if they had served the term and met the agreements, an 

exception to policy was almost always provided. 

Mr. AGUILAR. Okay. I appreciate it. I will yield back, Mr. Chairman. 

Dr. HECK. Ms. Graham. 

Ms. GRAHAM. Thank you, Mr. Chairman. 

I think you touched on this. I will direct my question to General 

Kadavy. Did I pronounce your name correctly? 

General KADAVY. Kadavy. 

Ms. GRAHAM. Kadavy, okay. It was one way or the other. I picked 

the wrong way. But you discussed in your initial—in your opening 

comments that you have not seen wide—this concern widespread 

across the country. It is limited to California. 

I am from Florida, and reached out to our National Guard as 

soon as I heard of this to just see where they thought that they 

were with any challenges with bonus recoupment with our National Guard, and we have about 12,000 in Florida. I just want to 

confirm that you don’t see any—any of these concerns in Florida 

that have come to the attention of those here regarding California? 

General KADAVY. Well, specifically related to the fraud, we have 

given no guidance to any other State, district or the territory, or 

District of Columbia or any of the territories to do any audits or 

any inspections. As I said, through GIMS, we always have ongoing 
21 

recoupments for generally those that don’t meet the term of their 

enlistment. 

So specifically, I can’t talk specifically to Florida and what is 

going on in Florida, but we have not directed any type of work, and 

we have not discovered any type of systemic problem related to 

fraud that we are aware of. 

Ms. GRAHAM. Well, that answer kind of concerns me because I 

thought in the beginning that you stated that there weren’t concerns across the country, that this was limited to California. Could 

this be something that the wonderful men and women that serve 

in our National Guard in Florida have to be worried about, because 

I certainly, as I think the only representative from Florida here, 

want to give them some assurances that that will not be the case. 

General KADAVY. Well, I—— 

Mr. LEVINE. Congresswoman, we have conducted audits for 

the—— 

Dr. HECK. State your name. 

Mr. LEVINE. I perform the duties of Under Secretary of Defense 

for Personnel and Readiness, Peter Levine, and I apologize. I am 

on the next panel. 

Ms. GRAHAM. No, thank you for stepping in. 

Mr. LEVINE. I apologize for jumping on this, but because we have 

done some reviews and we have identified zero cases in Florida, I 

thought it would be helpful for me just to mention that. 

General KADAVY. Right. 

Ms. GRAHAM. Zero cases is very good. Thank you. Thank you 

very much. So I will take, from your testimony, that the men and 

women that serve on our National Guard in Florida do not have 

to be worried about this same concern. 

Thank you. I appreciate that, and I yield back, Mr. Chairman. 

Thank you. 

Dr. HECK. Mr. Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman, and thank you, gentlemen, for being here today. I am troubled. Between 2006 and 2008, 

National Guard senior noncommissioned officers improperly provided student loan repayments and bonuses to numerous California 

National Guard members, and one person, sergeant, master sergeant—female, Toni—I can’t come up—— 

General KADAVY. Toni Jaffe. 

Mr. JOHNSON. Toni Jaffe was the only person to be criminally 

sanctioned. But dozens of personnel, including senior leaders and 

general officers were punished by the California National Guard for 

this illegal activity. Is that correct? 

General BALDWIN. That is correct, Congressman, but an additional 43 soldiers were charged and prosecuted by the—either the 

Federal Government or district attorneys for fraud also. Master 

Sergeant Jaffe is not the only person that served jail time. She 

served far more time in prison than anyone else that did jail time, 

but there were other officers and some noncommissioned officers 

that were given sentences that included some jail time. 

Mr. JOHNSON. All right. Thank you. What was the highest ranking official to be found to have engaged in this misconduct? 

General BALDWIN. So on the receiving side or the people that we 

actually had evidence that committed fraud or colluded to commit 
22 

fraud, I believe it was a captain was the highest ranking individual 

that received money. Higher ranking officers weren’t eligible for 

the bonuses. 

Mr. JOHNSON. Yeah. Actually, I am getting at those who were responsible for initiating the payments, not those who received them. 

General BALDWIN. So the only person held responsible for initiating the payments was Master Sergeant Jaffe. I held many, many 

people responsible, though, for their failure to provide proper oversight or leadership. That included three two-star generals, one twostar general, and one colonel that was in the California National 

Guard, and then the National Guard Bureau fired a colonel that 

was working for the National Guard Bureau. 

Mr. JOHNSON. Why were not the others charged criminally? It 

appears that the master sergeant may have been made the fall guy 

from a criminal standpoint. 

General BALDWIN. You would have to ask the U.S. attorney that 

question, Congressman, because they did those prosecutions, and 

they actually had seized all of the evidence related to that case. So 

if there was any evidence that senior leaders had actually colluded, 

I haven’t seen that evidence. If I was presented with evidence like 

that, I would take the appropriate action. 

Mr. JOHNSON. What was it about the sergeant major’s case that 

made it actionable from a criminal standpoint whereas others were 

not? 

General BALDWIN. I don’t know the details of the case. As I understand it, they had physical evidence, whether it was copies of 

contracts or it was emails where—or some forms of conversations 

which they can prove that she had actually colluded with officers 

and enlisted people to do this. 

Mr. JOHNSON. All right. The criminal cases now, is criminal prosecution—has the criminal investigation ended, or is it still ongoing? 

General BALDWIN. I don’t know. Again, you would have to ask 

the U.S. attorney that question. 

Mr. JOHNSON. Did you—did your office make any recommendations as to who or who would not be prosecuted? Who should or 

should not be prosecuted? 

General BALDWIN. They did not have that conversation with us. 

And again, they seized all the evidence, so any recommendation 

that we did have would have to be based on the evidence. They 

seized all that evidence before I came back from Afghanistan. 

Mr. JOHNSON. Major General Baldwin, in your testimony, you 

stated that the—that service members—you stated service members that should be required to repay their bonuses should be made 

to do so. 

Can you describe in more detail in what cases would service 

members actually have to repay the bonuses that they have received, especially since in most cases it seems they got the bonuses 

through no fault of their own? 

General BALDWIN. It would be in those cases where the service 

member egregiously violated the contract for which they said that 

they would serve. For example, they signed up and they never went 

to basic training, or they signed up for 6 years and only performed 

2 years of Guard duty and then either went AWOL [absent without 

leave] or left the Guard for some reason. 
23 

Mr. JOHNSON. Do you have the numbers? 

Dr. HECK. The gentleman’s time is expired. 

Mr. JOHNSON. Thank you. 

Dr. HECK. Mr. Denham. 

Mr. DENHAM. Thank you, Mr. Chair. General Baldwin, annually, 

you put together a list of priorities through your office; that is 

something you do every year? 

General BALDWIN. That is correct. 

Mr. DENHAM. When do you start working on that? 

General BALDWIN. Generally, we start working in the late fall, 

early spring, in order that we can present those legislative priorities to the Congress around the March timeframe so they are 

ahead of the mark. 

Mr. DENHAM. And I have got here in front of me your list from 

fiscal year 2015, so you would have started this in spring of 2014, 

address Congress later that year? 

General BALDWIN. We would have presented it in the spring of 

2014 and started working on it in the fall of 2013. 

Mr. DENHAM. So you got your fiscal year 2015—I just want to be 

clear. Fiscal year 2015 NDAA priorities, you present that to Congress when? 

General BALDWIN. Around March of—it would have been around 

March of 2014. 

Mr. DENHAM. 2014. So you start working on that in 2013? 

General BALDWIN. That is correct. 

Mr. DENHAM. And this year, in particular, fiscal year 2015, you 

list as priority number 6, your final priority, service member debt 

relief equity, that is the issue that we have now—I introduced legislation on this issue. We have now included it in the NDAA this 

year, but I was surprised to see that in fiscal year 2016, your list 

of priorities, it wasn’t in here. You have got six priorities, and this 

debt repayment was not one of them. Why did it fall off of the list? 

General BALDWIN. So it fell off because in 2014, the item had 

been scored by the CBO [Congressional Budget Office] and we 

weren’t successful in getting it through because of the cost that 

was involved. It was a tough sequestration year. In 2015—— 

Mr. DENHAM. We are still under a tough sequestration year. 

General BALDWIN. I understand that, Congressman. I regret not 

including it in the 2016—in the 2016 year. I am very encouraged 

that the committee, again, with your leadership assisting, is helping to get this legislation passed. 

Mr. DENHAM. Why wasn’t it included in 2017? You would have 

started working on that 2 years ago, correct? 

General BALDWIN. That is correct. Again, we—we felt that we 

had asked. We were not able to take that ball across the goal line, 

so we directed our time and energy towards trying to help the soldiers that we could influence. In retrospect, in hindsight, you are 

right, I should have continued to make this a priority. 

Mr. DENHAM. Is that a—your list of priorities, is that at your sole 

discretion or does the Governor weigh in on that? 

General BALDWIN. Ultimately, it is my list, and I take responsibility for the list. 

Mr. DENHAM. In the language that we have now included in the 

NDAA, we have resolution to this. My concern has been—as a 
24 

Member of Congress, I don’t get a list from the DOD on who has— 

who they are going after for this debt forgiveness. I don’t get a— 

any idea of who is having to repay this, who has been harassed, 

until they call my office. So somebody who has now repaid their 

debt, how do they go about filing to resolve this issue going forward? 

General BALDWIN. So—— 

Mr. DENHAM. What is the process? How does the process work 

to make somebody financially whole that has now taken a second 

out on their house and repaid a debt that they didn’t owe? 

General BALDWIN. I think the second panel will be able to address much of that. We have—still have our financial—our soldier 

assistance team in place. There is a 1–800 number that we have 

posted on our web page that people can call that have been in this 

so that we can get to work, that if they have suffered from this, 

or they are on the list of people that potentially may have or had 

a problem with it, that we can then refer them to the lawyers and 

the people, whether it is in California or at the Army or at OSD 

to get help. 

Mr. DENHAM. And what if there is an individual that is still serving that either in the Guard or Reserves that is being asked to 

repay a debt, but in their chain of command, they are asking them 

not to go to a legislator or a Member of Congress, what would 

you—what your opinion of that be? 

General BALDWIN. That violates—that violates the policies that 

are in place that are both OSD policies and policies that I have 

within the military department. No one can interfere with an individual’s right or ability to make a protected communication between themselves and their elected officials. 

Mr. DENHAM. Thank you. I look forward to following up with you 

on that as we resolve this issue for a constituent. 

One final question, and you and I had a discussion about this 

earlier. I have a big concern with—when somebody takes a government document, a private email, and puts that out for the press to 

see, my concern in this case wasn’t about the legislation itself. My 

concern is with the issue with recruitment and retention that it 

has now had on the Department of Defense, and even the VA in 

this case. I would like to follow up with you on this release of 

emails from your subordinates to get a further clarification on why 

they felt a need to go outside their chain of command on this issue 

as well. 

General BALDWIN. I look forward to that, Congressman, and if 

there is anyone in the California military department that violated 

any laws, rules, policies, or regulations, we will take the appropriate action. 

Mr. DENHAM. Thank you. 

Dr. HECK. I would like to thank both of you for taking the time 

to be here today to review this important issue, and at this time, 

we will switch out the panels, and we will hear from representatives from the Office of Secretary of Defense. 

I would now like to introduce our second panel. We have Mr. 

Peter Levine performing the duties of the Under Secretary of Defense for Personnel and Readiness from the Department of Defense, 

Ms. Alissa Starzak, general counsel for the Department of the 
25 

Army, and Ms. Teresa McKay, director of the Defense Finance and 

Accounting Service. 

Mr. Secretary, you are recognized for 5 minutes. 

STATEMENT OF HON. PETER LEVINE, PERFORMING THE DUTIES OF UNDER SECRETARY OF DEFENSE FOR PERSONNEL 

AND READINESS, ACCOMPANIED BY ALISSA M. STARZAK, 

GENERAL COUNSEL, DEPARTMENT OF THE ARMY, AND TERESA A. McCAY, DIRECTOR, DEFENSE FINANCE AND ACCOUNTING SERVICE 

Mr. LEVINE. Mr. Chairman, Ranking Member Davis, first of all, 

thank you for holding this hearing, and I really appreciate the discussion that I heard with the first panel. It shows some serious engagement on what is really an important issue. 

I would also like to join your colleagues, Mr. Chairman, in thanking you for your service. You have been very good to the Department of Defense. Your focus on these personnel and readiness 

issues has been really important to us and really helpful to us, so 

thank you. 

I can’t also—I would also like to, if I may, thank Chairman 

Thornberry for being here and for continuing to listen, on occasion, 

to my good friend, Mr. Simmons, who I see also on the back row 

there. You have my written statement, and I won’t read any of it, 

but there are a few points that I would like to focus on, some of 

which have already been discussed but I think deserves some attention. 

First of all, recoupment is an ordinary fact of life in the military. 

Our pay systems aren’t as perfect as we would like them to be, and 

we have run into any number of issues, from the person we heard 

about earlier, who might be divorced and still getting a BAH [Basic 

Allowance for Housing] as if they were married, to somebody who 

has got the wrong paycheck or fails to pay a bill, fails to pay a travel bill. We are recouping against as many as a 100,000 soldiers, 

sailors, airmen, and marines at any given time, civilians as well. 

The California Army National Guard cases are a particular—particularly the ones that have been in the press, have been reported 

in the press are particularly egregious set of cases, but I wouldn’t 

want members of the committee to think that this is the nature of 

recoupment and that we always have this problem with recoupment. 

There are a number of reasons why these cases are particular— 

the cases we read about in the press are particularly troublesome. 

One is that many of them are based just on a technical deficiency. 

We have heard about wrong MOS cases where, also where the soldier may have been misled as to whether that wrong MOS 

mattered, whether they needed to have a high school diploma. 

Technical absence of paperwork, which seems like a pretty minor 

reason for recoupment, particularly in the case—in cases like this 

where we have service members who made a commitment on the 

basis of a bonus, and then served out that commitment. So when 

we come in later after somebody has fulfilled their commitment 

and then question on a technical ground why they received a bonus 

in the first place, that is a particular hardship. 
26 

What I hope you will understand is, that that is not all the cases 

that we are dealing with even with the California National Guard. 

We heard about some of the medical professionals who may have 

received bonuses and then not served out their commitment. We 

have a significant number of other cases in this pile of recoupment 

cases where we had service members make a commitment and receive a bonus on the basis of commitment, and then not fulfill that 

commitment. 

So as a matter of basic fairness to those who did serve out their 

commitment, we need to take a very close look at those cases, and 

those would tend to be cases in which we would expect to uphold— 

in most cases, uphold the recoupment if the service member didn’t 

fulfill the terms of the commitment, the terms of the contract. 

The second point I would like to focus on briefly is just how the 

process of recoupment sets up. We read in the press that the Pentagon ordered recoupment; the Pentagon means a lot of different 

things to a lot of people. It could mean the Secretary or OSD, or 

people in Washington, or could mean the entire Department of Defense. 

The way we work on these kinds of issues, and it is not just limited to recoupment issues or pay issues. We have an auditor come 

in and look at an issue, an auditor identifies a problem, and they 

have standards to which they work to identify those problems, but 

auditors do not make decisions for the Department of Defense. 

Auditors do not determine that we are going to recoup or not going 

to recoup. Auditors make recommendations. 

So if you are in a contract matter, an auditor would make a recommendation to a contracting officer and the contracting officer 

would make a decision. 

In this case, the auditor would make a recommendation to the 

property and financial accounting official who is technically an employee of the National Guard Bureau but is appointed by the California National Guard and is—a California National Guard member appointed by the California National Guard, but then serves as 

a Federal role because they are activated when they are appointed 

to that position. 

As we look at the way these cases set up, we had the Army Audit 

Agency do an audit and make a recommendation with regard to a 

limited number of cases and found an error rate, I think we heard, 

of 50-something percent. California National Guard looked at that. 

We have—when we look at these things, we have discretion, we 

have enforcement discretion. We don’t have to say, ‘‘Yes, the auditor said to do this; we are going to do every one of these things.’’ 

Before we get to the point of establishing a debt, we can determine whether it is in our interest to establish a debt or not. So as 

we have looked at other States where we had smaller numbers and 

lower error rates, we see that some of the other States with the 

National Guard where you had 8 cases, only 2 of them were sent 

for recoupment; or 10 cases, only 3 were sent for recoupment; or 

40 cases, only 5 were sent for recoupment. Some States sent all the 

cases for recoupment. They make those judgments. 

What California did, and it was within their discretion, and 

given that they said that they did another review and found a 91 

percent error rate, I can’t say it is wrong for them to do this, but 
27 

they not only referred all the cases that they had for recoupment, 

but they also said, ‘‘We are going to do 100 percent review of everybody else.’’ So we are not only going to refer for recoupment those 

cases that were in our sample, we are going to go to the rest of the 

universe, which brought in about 17,000 more individuals. 

I think that what the California National Guard discovered over 

a period of years after they did that was that they didn’t have the 

bandwidth to deal with those cases. And so they dealt with some 

of those cases and put some of them into recoupment. Some of 

them should have put into—they should have put into recoupment, 

some of them maybe not, but they left thousands of other cases 

hanging out there with the threat of recoupment over them, which 

I think adds to the unfairness of this process. 

Now, I have to say, we have oversight over the California National Guard. Army—Army has audit—has oversight, the National 

Guard Bureau has oversight. We were not aware of this until we 

read it in the newspaper, and that is on us. We missed this. But 

when we became aware of this, the Secretary specifically directed 

me to go in and address this, do this, do this fairly, do this expeditiously, get it done by next summer. 

So we are going through a process where we are going to be looking at—we are going to be looking at these cases to figure out 

which ones should be subject to recoupment, and we are going to 

do it as expeditiously as possible. As your legislation requires, we 

are going to favor the soldier wherever possible, but we are going 

to—we are going to account for the differences in different types of 

cases. 

Now, we have two basic categories of cases that we have to deal 

with. One is those cases that were already determined to have a 

debt and sent to DFAS for recoupment. DFAS is just sort of the 

receiver here. They get the cases. They implement it. Somebody 

else tells them that they are supposed to recoup. So we have about 

1,400 cases in that category. 

Then we have a second category of cases that were essentially 

put under suspicion or threat of recoupment, about 16,000 more 

cases in that category. For those cases that are in recoupment, we 

have the question of, are we going to dismiss the case? Are we 

going to forgive the debt? Are we going to repay the soldier if we 

decide it was improper? 

We are—we are—we put those through a screening process. We 

have already had the Army Audit Agency look at all 1,400 cases 

through a preliminary screen. Through that preliminary screen, we 

think that we can eliminate about a quarter of them, which we will 

be able to recommend for forgiveness without further action. 

We are going to go through a second review, which is going to 

get us into a more detailed review to look at those cases. It is my 

hope that we can pare those cases down to—by about half before 

we put the remainder in front of a further review process, which 

I will describe in a moment. 

So it is my hope we get from 1,400 down to about 1,700 before 

we—just based on our reviewing the paperwork without involving 

the soldier at all and tell half of them you are off the hook. That 

is a goal. I don’t know what exact numbers we get to. 
28 

Turning to the second category, the 15,000, the larger category, 

in that case, we have greater discretion because we haven’t yet established the debt. So we have our enforcement discretion at this 

point, and so we are going to establish a number of rules of thumb, 

which were referred to earlier, and these will be my recommendations. It will be up to the Secretary of the Army to accept those recommendations, but I expect that he is going to have the same objective that I do and the Secretary of Defense does, which is that 

we want to pare these cases down to the most serious ones. 

So we are going to screen out cases that are more than 10 years 

old. That is consistent with your legislation. I expect we are going 

to screen out cases with some exceptions—we are going to have to 

be careful about soldiers who have gone AWOL or have other kinds 

of problems—but we are basically going to try to screen out cases 

with a debt of $10,000 or less. 

We are going to screen out cases with—we are going to try to 

screen out most of the cases with enlisted members and lower 

ranking members, members without prior service on the basis that 

it is unlikely that they would have a basis to know that they were 

going to be—to read and understand their contract. This was an 

issue that came up earlier. 

So as we go through those screens, I think we will get—from that 

second universe of 16,000 or so cases, I expect to reduce that by 

about 90 percent, so we get down to about 10 percent of those. So 

about something between—something on the order of 2,000—1,500 

to 2,000 cases. We will then put that universe through the kinds 

of screens, substantive screens, substantive review of that, and I 

hope to get that down further. 

It is my hope that by the end of the year, we will have—we will 

have something between 1,000 and 2,000 cases total out of the total 

universe of 17,000 that are subject to review. Those are the cases 

that we will then put in front of BCMRs [Boards for the Correction 

of Military Records] and allow soldiers to come in and make their 

case that they shouldn’t be subject to recoupment. 

But the objective is to find the easy ones first, get rid of those, 

tell people we are not pursuing you, so we don’t have to tell you 

you have to come into a BCR [Board for Correction of Records] or 

you can come into a BCMR. We are telling you you are off the 

hook, we are done with you, and do that on the basis of paper so 

that we can focus our resources on those cases that are most significant where we really need to understand the facts better. 

The Army has already staffed up the BCMRs, they have identified the people who will be serving in this role, so we are going to 

add resources. They are in the training process. We expect to be 

up and running by beginning of the year, and that the staffing 

numbers that they have established, we believe, are sufficient so 

that if we have 2,000 cases, we will be able to handle that number 

of cases by the July 1 deadline that was set by the Secretary. 

That concludes my testimony, Mr. Chairman. I would be happy— 

we would all be happy to answer any of your questions. 

[The prepared statement of Mr. Levine can be found in the Appendix on page 51.] 
29 

Dr. HECK. Ms. Starzak, Ms. McKay, do you have any opening 

comments? No. Great. Thank you. And thank you, Mr. Secretary, 

for taking time to be here and running us through the process. 

So one of the questions that I asked General Baldwin, which he 

deferred to the second panel, was of those 400 who they had recommended being relieved but lost, did not get—seek—I guess were 

not granted relief, do they have another appeal avenue, or is that 

it? They are done—— 

Mr. LEVINE. Let me say two things: First, I don’t necessarily 

tracked all of General Baldwin’s numbers. Not that his numbers 

are wrong, but we are trying to develop our own database and go 

through the numbers in our own way, so I can’t identify necessarily 

those 400 cases. 

What I can say is we will provide an avenue for everybody here. 

In the cases of those who have been committed—who have already 

been convicted of fraud, that may be a narrower avenue, but we 

will provide an avenue for everybody. 

Dr. HECK. And then my only other question is for those that are 

in collections, let’s say, and they are having wages or something 

garnished by the IRS [Internal Revenue Service] or who may have 

been turned over to a credit agency, whose—you know, where is 

the rose getting pinned to make sure that the IRS stops taking 

money or that we help get credit ratings restored? 

Mr. LEVINE. This is a DFAS function, and we believe that has 

already been taken care of in terms of stopping action. Ms. McKay 

may want to respond to that in greater detail. 

Ms. MCKAY. That is correct. When the Secretary asked us to stop 

the recoupment, we were able to do that within a week for the 

cases that had been identified to us by the California National 

Guard. 

That included the cases that we had internal to DFAS where we 

were recouping from their military pay as well as any voluntary repayments that were underway, as well as any cases that we had 

turned over to the Treasury for recoupment, and that would include the category of private collection agencies. 

We also took action to rescind any reporting to the credit reporting bureaus, and so those—those—for those cases that were identified by the California National Guard to us, those credit ratings 

have been restored as if these debts never occurred. 

Dr. HECK. Thank you. Thank you very much. 

Mr. LEVINE. The one thing I would like to add, Mr. Chairman, 

is in terms of the 1 week, there are a handful of cases that lagged 

the 1 week, only because we had trouble identifying the individual 

involved. We had erroneous Social Security numbers and things 

like that that we have been trying to clean up as we went along. 

Dr. HECK. All right. Thank you. Mrs. Davis. 

Mrs. DAVIS. Thank you, Mr. Chairman, and thanks for being 

here. Of all the changes that have been suggested, and some are 

in the legislation and that you have been working on, is there an 

area that you have seen, by virtue of correspondence from guardsmen or women or others that is still hanging out there, still an 

issue that you are not sure that you could tell me confidently that 

you have resolved? 
30 

Mr. LEVINE. Congresswoman, I am confident that we have the 

authority that we need to clean up this situation. We need to put 

the resources into it that we are now putting into it, and we will 

address this, I think, in a way that is fair to everybody. 

The—we would, of course, always prefer to see legislation before 

it goes into law because we can help head off unintended side effects, but we believe that we can work with the legislation that you 

have enacted and do what we need to do. 

Mrs. DAVIS. Anybody else have a concern? 

Okay. One of the issues, and we had the opportunity to see a 

number of pieces of correspondence from those who were really affected by this, some from California, not necessarily all, and certainly our offices had had several inquiries and we had casework 

around this, but minimally so that there wasn’t a sense that this 

was anything systemic at that particular time, and I think the 

issue over, you know, whether or not, you know, it was number six 

on a list of issues that the Guards were looking at, but we do have 

a number—you know, quite a bit of correspondence, I think, that 

you all have received over the course of time that suggests to me 

that perhaps it wasn’t followed through on a number of occasions. 

And so, to what extent do you take another look at some of that 

correspondence and see what was happening in the lives of the 

men and women who were writing, why they weren’t getting any 

response whatsoever, whether the hotline or either the—and the 

assistance center wasn’t responding? Why was that? 

Mr. LEVINE. Honestly, I don’t know the answer to that. I have 

been asked by the Secretary to take a forward look and clean this 

thing up going forward. I have not been asked to go back and retrace the history of how we got to where we are today. I agree with 

you that we—and that is why I pointed out that we have an oversight role here. I think that we should have seen this before now, 

and I don’t know why we didn’t. 

Mrs. DAVIS. Thank you. So I guess, going forward, because I am 

for that as well, I think that that is what is really important. We 

don’t want this to happen again. But I am a little concerned that 

we have these cases, and do you—do you receive inquiries on the 

part of the men and women for additional assistance, whether it 

is mental health or financial assistance, whatever that may be? I 

mean, does there seem to be that—a group of individuals who 

clearly, this made a difference in their lives? 

Mr. LEVINE. So we obviously have all sorts of mechanisms 

through the Department of Defense for receiving complaints. There 

were any number of avenues of appeal for these soldiers that are 

established avenues of appeal; appeal to DFAS, appeal to the Secretary of the Army, appeal to BCMR, those are official channels 

they can go through. In addition, we have, obviously, abilities to 

complain to Members of Congress, ability to go to hotlines. We 

have—we have pressure valves for those kinds of things. I can’t tell 

you why those pressure valves didn’t raise this case to a higher 

level before now. I just don’t know. 

Mrs. DAVIS. I think what I am wondering about is going forward, 

and as this law changes, and we can be grateful that at least in 

the numbers that we have seen, we are not going to see this kind 

of occurrence, I hope, again, but we still have all these cases out 
31 

there that, in fact, perhaps people really could have used some assistance and can still use assistance. How do we deal with that? 

Mr. LEVINE. So going forward, I think that the Guard really 

has—the National Guard Bureau really has taken important steps 

in instituting this automated system, which will—which should 

automatically pop up places where we have improper payments 

and instituting a double-check system so you don’t have the one 

person who can sign off on something and get in the kind of problems we had in California there. 

So while I can’t be 100 percent confident that we are going to 

avoid any problems, I think we are much more likely to identify 

these kind of payment errors early, and I think the big problem 

here was not that we had the payment errors. It is that we made 

these errors and then let somebody sit—serve out their service and 

then came back to them after they served out their service and 

said, ‘‘Oh, by the way, we made a mistake, we want our money 

back.’’ 

Mrs. DAVIS. Right. Yeah. 

Mr. LEVINE. If we identify that problem in a timely manner, then 

as a matter of—then at that point, I think it is much more appropriate to recoup than it is when you come back 5 years later and 

say I want my money back. 

Mrs. DAVIS. Right. Because I think as we look at the timeframe, 

and even the timeframe from 2011 until 2016, under the general’s 

command, I think that there are a lot of cases there that people 

were hurting, and I don’t know whether there is also a mechanism 

within the Guard, there should be, to check up on people just the 

same way that we check up on people that are going through transition and have returned and do not request the assistance of a 

mental health provider or any kind of health provider, that there 

is a sense that they have—we have to check up on them. 

Mr. LEVINE. I appreciate that. That is part of a commander’s responsibility. 

Mrs. DAVIS. Okay. Well, let that—and I think, going forward, I 

suspect that the committee is going to want to have another opportunity really to talk about this perhaps in 6 months, and see how 

everybody is doing, okay. Thank you very much. 

Dr. HECK. Mr. Coffman. 

Mr. COFFMAN. Thank you, Mr. Chairman. Mr. Levine, and if anybody else wants to answer this, but I am surprised, from members 

of the National Guard, that we would go for these, and let’s just 

call it deficiencies, or whatever you want to call it, that we were 

going after them civilly and affecting the credit union. Does that 

affect Active Duty people as well when there is a mistake on a 

bonus? 

Mr. LEVINE. So again, this is a fairly unique case because we 

were going after people on technical grounds. Some people, at least 

on technical grounds years after this technical mistake was made 

when they had already served out. We refer cases for recoupment 

all the time. As I indicated, there are probably 100,000 cases under 

recoupment at any given time. We pursue them. 

They are large cases and small cases. I think that the numbers 

show that most of them are relatively small cases. I mean, we 

could have recoupment cases for lost or damaged equipment. We 
32 

could have recoupment cases because you failed to pay for your 

travel. We could have recoupment cases because you were getting— 

you are getting aviation incentive pay when you weren’t a pilot, 

you know, any number of different kinds of reasons we could have 

recoupment cases. 

When the debt is certified, I—in this case, the property and financial officer for the National Guard out in California, when the 

debt is certified, it goes to DFAS, and I believe DFAS would follow 

the same procedures in each case. So I would defer to Ms. McKay 

to speak to that. 

Ms. MCKAY. Yes, sir. You asked specifically about Active Duty. 

So as long as the—when a debt is established on an Active Duty 

member, it is handled within the military pay system. Debts are 

recouped against the payments going to the military members at 

a predetermined statutory rate, and so it would come out of their 

Active Duty pay. 

As long as an account is not delinquent, and in these cases, there 

will be active collections against the debt, they are not considered 

delinquent, there wouldn’t be any credit reporting against them. 

Mr. COFFMAN. Mr. Levine, in your testimony you address the 

comparative recoupment amounts between California and other 

States as $11 million in California alone and a total of only $2 million between all of the States. I understand that a special audit 

team was sent to the State of Colorado, Washington, Texas, and 

the territory of Puerto Rico to check 100 percent of the records in 

each of those States and territories. The records check revealed 

that the automated systems’ internal controls were not working as 

intended, resulting in management of the system being brought to 

the National Guard Bureau level as a short-term solution. 

Would you describe for us how those systems were not working 

as intended, and what the results of that were in each of those 

States, particularly perhaps for the State of Colorado? 

Mr. LEVINE. So I am unable to answer the question as to the specific internal control deficiencies in the State of Colorado. We did 

have the Triple A [Army Audit Agency] and the National Guard 

Bureau conduct reviews across the States. They did determine that 

there were internal weaknesses, lack of oversight, lack of multiple 

signoff, the kinds of weaknesses that we discovered in California. 

What we didn’t discover was the kind of exploitation of the weaknesses or systematic problems of weaknesses, where in California 

they determined that there was fraud involved. 

With regard to Colorado, I am interested by the 100 percent review because, again, as with Florida, I have—I asked the National 

Guard Bureau and the Triple A to look at whatever cases we had 

elsewhere, and I have got a rack-up of those, which is what the $2 

million comes from. I show the same thing for Colorado that I do 

for Florida, which is no cases of recoupment. 

So if you have something different on that on Colorado recoupment, I would be very interested in seeing that. I can’t guarantee 

that I have got 100 percent accurate information, but I would certainly like to know if there is a significant number of recoupment 

cases in Colorado, because I don’t show any based on the information we have been able to gather at this point. 

Mr. COFFMAN. On the recruiting bonus side, we do. 
33 

Mr. LEVINE. Okay. I would be—if you have information on that, 

I—— 

Mr. COFFMAN. Sure. 

Mr. LEVINE [continuing]. Would appreciate it if you share it with 

us so we can go back to the National Guard Bureau and the Triple 

A and see where that fell through the cracks. 

Ms. STARZAK. Actually, I would like to distinguish between the 

two. The recruiting bonuses are a different issue—— 

Mr. COFFMAN. Okay. 

Ms. STARZAK [continuing]. Than this enlistment bonus issue. So 

when Triple A looked at those questions, it did do an audit of several States. I think it was Missouri—— 

Mr. COFFMAN. Okay. 

Ms. STARZAK [continuing]. Indiana, Pennsylvania, and a couple of 

others potentially. They did not find systemic problems. They did 

identify some concerns with internal controls. The National Guard 

Bureau also had sent audit teams out to different States and they 

asked their internal folks to audit. Those came out with some results, but again, there was no—there was no finding of the type of 

systemic problems that they had in California. 

Mr. LEVINE. Having said that, the numbers that I got from Triple 

A and National Guard Bureau are supposed to cover both of those 

reviews, so if you have something else, I would really appreciate 

seeing it. 

Mr. COFFMAN. Absolutely. 

Mr. LEVINE. Thank you, Congressman. 

Mr. COFFMAN. Thank you. Oh, and I just—before I yield back, I 

just want to thank you, Mr. Chairman. Thank you so much for 

your service to this committee. It has been a privilege to work with 

you, despite the fact that you greatly outrank me in terms of being 

in the military. 

Dr. HECK. Ms. Speier. 

Ms. SPEIER. Thank you again. The issue of counseling those who 

now have issues around their credit and the like, is that something 

that is going to be undertaken by the Guard or by a separate office? 

Mr. LEVINE. We do financial counseling for members, for service 

members generally. We provide that as a service. My expectation 

would be it would be done through the National Guard Bureau, but 

we would have to check that for you. 

Ms. SPEIER. All right. Because the National Guard indicated to 

me that they feel that since they are in close proximity to them, 

that they would like to pursue providing that counseling. 

Mr. LEVINE. It would be my expectation that in the normal 

course of events, that it would be the California National Guard 

that would counsel California National Guard soldiers, but again, 

we will have to check that for you. 

[The information referred to can be found in the Appendix on 

page 63.] 

Ms. SPEIER. All right. When the general was kind of running 

through those that were prosecuted and pending cases, most of 

them from the U.S. attorney, when he referenced the courtmartials, seven of them, six officers, one enlisted, I guess, he made 

the statement that both because of lack of evidence and just the 
34 

UCMJ itself, prevented them from pursuing court-martials of those 

individuals. What would have to be changed in the UCMJ in order 

to allow the military justice system to work? 

Mr. LEVINE. The military justice system has the same presumption of innocence that the civilian justice system does, and so we 

have the same issues of proof that we have in the civilian justice 

system, and often, they are cases which we might have a suspicion 

that somebody did something wrong, but when we have prosecutors 

look at the case, they say there is just not enough here to pursue 

it, to pursue it to trial. 

I think that given the way our justice system works, that is to 

be expected, and I don’t think that we are in—that any of us want 

to change the fundamental premises of our justice system. 

Ms. SPEIER. Oh, no, no, but I just wondered based on what you 

said whether there was something within the UCMJ that we needed to look at. 

Mr. LEVINE. I don’t think there is anything unique to the UCMJ 

that I would look to. I would look to the difficulty of prosecuting 

cases where there is tough evidentiary questions, which we run 

into in general. 

Ms. SPEIER. All right. And then, I guess, finally, I am still somewhat confused by the fact that this was a California-only problem, 

and it appears that the National Guard chose to distribute these 

bonuses in a manner that was inconsistent with other National 

Guards in an effort to, I guess, get their numbers up, but to somehow offer a recruitment bonus that is given 100 percent at the beginning of the tour as opposed to in increments seemed quite foolish. Should there be more uniformity among the various National 

Guards? 

Mr. LEVINE. So the way I would describe it is that we had a system at that time that was vulnerable to abuse, and that system 

was vulnerable to abuse not only in California, but in other States, 

too. It was in California that they identified abuse and that they 

went after it, pursued it for that reason. It is not that the other 

States didn’t have the same system, it is that they didn’t find that 

same evidence of abuse that led into this 100 percent audit and review that they did in California. 

Ms. SPEIER. I see. So, but moving forward, that is not going to 

be able—that abuse cannot take place? 

Mr. LEVINE. I can never tell you that we won’t have mistakes or 

problems in the Department of Defense. I think we have addressed 

this one, but where we will make a mistake the next time, I can’t 

tell you. 

Ms. SPEIER. All right. Well, thank you all for your service, and 

I yield back. 

Dr. HECK. Thank you. Thank you, Mr. Levine and Ms. Starzak 

and Ms. McKay for being here. I know it is a very difficult issue 

but one we want to make sure we get our hands around to ensure 

that we take care of the guardsmen and women in California and 

make sure we don’t have any similar issues across the defense enterprise, so we appreciate you being here. 

Before we adjourn, I just want to take a moment of personal 

privilege, as this is my last subcommittee hearing, and one—I 

thank my ranking member, Mrs. Davis, for all of her help over the 
35 

last 2 years. You know, when we set out an agenda for this Congress, what we were going to accomplish in this subcommittee, we 

had quite a few major issues, and people said we were crazy for 

thinking we could get even one of them done. Whether that be 

UCMJ reform, retirement reform, healthcare reform, commissary 

reform, and due to your support, the hard work of all of the committee members, and the incredible staff, we got all four of them 

done, and that would not have happened had it not been for the 

great working relationship that we all have. 

I also, although he is not here, want to thank the Sergeant 

Major, Mr. Walz. We know standing beside every officer is an NCO 

making sure he gets the job done right, and Mr. Walz was that person for me. And I really want to thank the staff, everybody who 

made the last 2 years as successful as it has been. It has been a 

great honor to serve, and it shows this committee’s commitment to 

taking care of our men and women in uniform, their families, our 

retirees, and our survivors. There being no further business, the 

hearing is adjourned. 

[Whereupon, at 4:05 p.m., the subcommittee was adjourned.] 

A P P E N D I X 

DECEMBER 7, 2016 

PREPARED STATEMENTS SUBMITTED FOR THE RECORD 

DECEMBER 7, 2016 

(41) 
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WITNESS RESPONSES TO QUESTIONS ASKED DURING 

THE HEARING 

DECEMBER 7, 2016 

(63) 

RESPONSE TO QUESTION SUBMITTED BY MS. SPEIER 

Mr. LEVINE. Currently, Soldiers are directly contacting the Soldier Incentives Assistance Center (SIAC), which is part of the California National Guard created to 

assist affected soldiers, to access the following four types of trained and certified financial counseling resources listed below. Indeed, it is the primary contact point for 

affected Soldiers to be directed to the most suitable and available of the four types 

of counseling resources. The counselors receive Office of the Secretary of Defense 

(OSD)-approved training and meet fiduciary standards (i.e., best interests of member). 

1. Personal Financial Management (PFM) Services: The Military Services provide 

full-time PFM services at active duty installations to meet the long-term financial 

readiness needs of Service members. National Guard (NG) members and families 

may utilize PFM services. 

2. Personal Financial Counselors (PFCs): OSD provides accredited PFCs by request to meet the financial readiness needs of the active and reserve component. 

‘‘On demand’’ PFCs are available for short-term requirements of 3 days or less. 

‘‘Surge’’ PFCs are available for 30 to 90 days. ‘‘Rotational’’ PFCs are available for 

medium-term requirements of 180 days to 365 days. PFCs provide in-person counseling only. 

3. Military OneSource: Military OneSource (MOS) provides a referral service to 

all Service members and family members (any status) to in-person, telephone, or online (chat) financial counseling. Additionally, MOS maintains a database of all counseling resources nationwide (i.e., PFM and PFC), which users can search by zip code 

to find the nearest counselor. 

4. Community Partners: National Guard State Family Program Directors (SFPDs) 

and Airman and Family Readiness Program Managers (AFRPMs) sustain referral 

networks of financial professionals willing to donate time or reduce fees to counsel 

NG members and families. These community partners comply with DODI 1344.07, 

‘‘Personal Commercial Solicitation on DOD Installations,’’ rules and requirements. 

Additionally, The California Army National Guard (CAARNG) is working directly 

with the California Franchise Tax Board to provide assistance based on pending legislation. 

The Army National Guard (ARNG) is experienced in handling the entire spectrum 

of Soldier financial issues. Typically, the majority of phone calls taken by our Family Assistance Centers (FACs) involve financial issues. The 17 FACs in California 

assist Soldiers in finding local resources for everything from paying the rent and 

buying groceries to long-term debt and credit management. [See page 33.] 

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