Defense Secretary Ash Carter announced Wednesday that the Pentagon was suspending its efforts to force soldiers to return enlistment bonuses improperly awarded a decade ago to 9,700 members of the California National Guard for re-enlisting during wars in Iraq and Afghanistan.
Carter's order came after members of Congress from both parties, including House Majority Leader Kevin McCarthy, R-Bakersfield, and Minority Leader Nancy Pelosi, D-San Francisco, condemned the Pentagon's efforts to recoup the money and promised a legislative fix when they returned to a lame-duck session after the Nov. 8 election.
The defense secretary did not address a demand by both Republicans and Democrats in California's congressional delegation that soldiers who innocently accepted their bonuses be reimbursed for any money they've already paid back to the government.
California Sens. Dianne Feinstein and Barbara Boxer, both Democrats, said they would craft legislation to resolve that issue "to hold the Pentagon to its commitments.''
"The small number of service members who knew they weren't supposed to receive bonuses will be exempt from the bill,'' they said in a joint statement.
In his statement, Carter said he was "ordering a series of steps to ensure fair treatment for thousands of California National Guard soldiers who may have received incentive bonuses and tuition assistance improperly as a result of errors and in some cases criminal behavior by members of the California National Guard.''
"There is no more important responsibility for the Department of Defense than keeping faith with our people,'' he said. "That means treating them fairly and equitably, honoring their service and sacrifice, and keeping our word.''
During the height of the wars in Iraq and Afghanistan a decade ago, state National Guard recruiters, under pressure to meet recruitment goals, fraudulently or mistakenly doled out more than $15 million in bonuses to entice soldiers to re-enlist for another tour of duty. Thousands accepted the offer, receiving $15,000 or more apiece. Many had already served tours of duty in Iraq and Afghanistan.
Carter said many recipients did not know the payments were erroneous and should not have to pay them back after the fact. He promised that the Pentagon would speed up the process for sorting through the mess.
But he said about 2,000 who received the bonuses "knew or should have known they were ineligible for benefits they were claiming.'' He said those recipients have been asked to repay the money.
McCarthy praised Carter's action and promised to work on "a long-term legislative solution so that this never happens again.'' McCarthy set up a conference call for Wednesday evening to allow the California congressional delegation to discuss the issue with Deputy Defense Secretary Bob Work.
Meanwhile, Rep. Ken Calvert, R-Corona (Riverside County), called on Congress to "fully investigate how this happened and what steps we must take to protect our soldiers - including reimbursing those who have inappropriately been forced to repay money.''
Army Master Sgt. Toni Jaffe, the California National Guard's former incentive manager, pleaded guilty in 2011 to filing $15.2 million in fraudulent claims and was sentenced to more than two years in prison. Three other officers who pleaded guilty to fraud were put on probation.
The fake claims included cash bonuses for re-enlistment and repayment of student loans. A 2010 Sacramento Bee investigation found that a Santa Cruz chiropractor received $83,000 over seven weeks in 2008. The money included $63,000 for student loans that were not qualified under the program and vastly exceeded the program's $10,000 limit, as well as another $20,000 bonus for which he did not meet the required job skills.
The Bee article found that a Los Angeles cosmetologist received $81,800 improperly, including $51,800 in unqualified student loan repayments and a $30,000 bonus for job skills she didn't have. The Bee in 2013 published a list of 150 cases of known fraud or improper actions.
But other soldiers said they innocently accepted bonuses that they had no idea were improperly awarded, fought in combat zones, and then felt profoundly betrayed when the Pentagon demanded soldiers return the money or else face tax liens. In a few instances, former Guard members were forced to mortgage homes and take other extreme measures to pay it back.
Carter said Pentagon efforts to recoup the money from service members would be immediately suspended and ordered the Pentagon's senior personnel official, Peter Levine, to establish a streamlined process to resolve the cases no later than Jan. 1.
"The objective will be to complete the decision-making process on all cases as soon as possible, and no later than July 1, 2017,'' Carter said.
He promised "a process that puts as little burden as possible on any soldier who received an improper payment through no fault of his or her own,'' while recouping fraudulently paid money for taxpayers.