Navy Sailors Used Gov't Credit Cards to Hire Prostitutes

Published October 08, 2002

| Associated Press

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

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

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

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

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

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

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

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

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

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

The brothel payments were disguised as restaurant and dining bar charges.

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

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

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

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

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

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

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

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

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