She was known as "the M&M lady," for decorating her office cubicle with keepsakes of the confection's advertising characters.
But the treats she dispensed were sweeter than candy and are now the subject of a criminal investigation.
From 1986 until her retirement last year, Master Sgt. Toni Jaffe's job with the California Army National Guard was to give away money the federally subsidized student-loan repayments and cash bonuses the Guard is supposed to use to tempt new recruits and entice Guard members to sign on for another stint.
Instead, according to a Guard auditor turned federal whistle-blower, as much as $100 million has gone to soldiers who didn't qualify for the incentives, including some who got tens of thousands of dollars more than the program allows.
For years, the auditor and other Guard officials allege in interviews or internal documents obtained by The Bee, California's incentives program was operated as a slush fund, doled out improperly to hundreds of soldiers with fabricated paperwork, scant supervision and little regard for the law.
Guard documents describe a high-speed assembly line for bonuses and loan repayments, in which Jaffe single-handedly processed some 8,600 payments over a 16-month period in 2007 and 2008 about 25 per workday.
Most student loan repayments, those documents show, were drawn from money designated for combat vets. Yet a large portion of those funds went to Guard members who hadn't served a day at war. Captains and majors were among those who auditors believe improperly benefited.
A Bee investigation including a review of thousands of Guard documents gathered or prepared by auditors and other officials, and sworn statements from managers who replaced Jaffe found evidence that from 2001 until last year Jaffe often provided improper or illegal bonuses and loan payments.
Documents show that her efforts were overlooked or ignored by recruiters and officers up the chain of command. Some recruiters appear to have benefited personally. The documents show that state Guard officials failed to fix the incentives program despite warning signs going back years.
In comments to The Bee laced with profanity and evident bitterness toward former superior officers, Jaffe denied wrongdoing, insisting that she had followed regulations "by the book."
"They are still trying to blame me for s--- I didn't do," she said in an interview by phone from her Citrus Heights home. "I wish I never joined the Guard. I regret it, and I hate the Guard."
At 8 a.m. on July 8 in a Rancho Cordova office building, Capt. Ronald S. Clark, a federal auditor who oversees funds spent by the California Guard, was briefed about the alleged lapses by the managers who replaced Jaffe. A former police investigator, FBI agent and U.S. Secret Service officer, Clark has fought white-collar crime for years.
Still, he said, the scale and audacity of corruption he encountered in reviewing the California program shocked him: Excluding $43 million in payments recently halted by Jaffe's replacements as improper, Clark estimated $100 million was misspent. He called it "war profiteering."
Early in the audit, Clark said, he became concerned that officers implicated as recipients or enablers of improper payments might attempt to interfere with his work. So for the first time in his career, Clark said, he became a whistle-blower. He secretly contacted the Internal Revenue Service and FBI.
"I don't like grifters," Clark said. "And I'm disgusted at times, ashamed to wear the same uniform as those who steal taxpayer funds or protect thieves."
In late August, after Clark came forward, the U.S. Department of Justice, FBI, IRS and federal Army Criminal Investigation Division launched a criminal probe into the California program, in the process taking over Clark's audit, which was never completed. In a letter obtained by The Bee, the U.S. attorney in Los Angeles informed Brig. Gen. Mary J. Kight, top officer of the California National Guard.
Maj. Thomas Keegan, spokesman for the California National Guard, told The Bee that Kight helped initiate the investigation after learning of "significant irregularities" in the incentives program.
But he said neither Kight nor other state Guard officials would answer questions about the investigation or the incentives program, to avoid prejudicing the ongoing investigation. A spokesman for the Department of Justice, lead agency on the investigation, said the department would not comment.
The Bee examined payment documents on hundreds of soldiers, personnel files, e-mails to and from Jaffe and other officials, program audits and Guard spreadsheets that detail violations of bonus and loan rules. They were obtained from several confidential sources, including state and federal employees. The documents describe falsified and shredded records, and five-figure favors that Clark called "corruption on an astonishing scale."
According to a review of Guard documents, among the officers who benefited from the highest payments that auditors concluded were improper:
Capt. Bruce Corum, a Santa Cruz-area chiropractor who joined the Guard in 2002, received $83,000 over one seven-week period in 2008. That included $63,000 well over the $10,000 limit for the Guard program for student loans taken out too long ago to qualify for repayment. And as an officer commissioned before Oct. 28, 2004, by law Corum was ineligible for the program. Jaffe added a $20,000 bonus for which Corum also was unqualified due to his lack of required job skills. Corum told The Bee he could not recall how he obtained the benefits.
Capt. Teressa Vaughn, a licensed cosmetologist and resident of Los Angeles County, received student loan repayments of $51,800 plagued by similar problems overpayments, loans too old to qualify and officer commission date. She also got a $30,000 bonus for which she was ineligible for lack of proper job experience. Vaughn, a chaplain candidate, has worked as a recruiter meaning she was obliged to have a basic understanding of the incentives program rules that Guard documents show were violated in her case. Vaughn said she was not authorized to comment.
The Guard repaid $51,000 in student loans for another recruiter, Capt. Robert Couture of Hermosa Beach, who holds top-secret clearance. The contract required under military regulations to certify eligibility was not on file, Couture received more than the maximum benefit allowed, and he didn't qualify for the windfall due to his rank. Keegan, the Guard spokesman, said Couture could not comment.
The Guard documents did not answer the question of whether beneficiaries of the incentives understood that the payments might have been improper.
A spot check prepared by Clark's office for Kight examined 62 individuals who received $1.2 million in loan repayments and bonuses over the last several years. Auditors found that at least 52 appeared to have benefited improperly. The recipients, about half of them commissioned officers ranking as high as major, got the funds despite falsified documents, ineligibility, payments beyond program limits and other improprieties.
When he began to grasp the magnitude of the problems, Sgt. Cody Lathrop, one of two managers who replaced Jaffe after she retired a year ago, prepared a sworn statement for the record included in the documents The Bee obtained. That statement, provided to federal auditors, cited "serious illegal activity" and "systematic and historic abuse and mismanagement of fiscal law, guidance and policy."
The concerns were echoed in a sworn statement by Sgt. Ray E. Douke III, the other new manager. Lathrop and Douke declined to comment to The Bee.
In his statement, Lathrop voiced concern "for my family's safety," fearing physical violence in retaliation for disclosures that could spark prosecutions and recoupment of funds from soldiers.
He called the extent of the apparent fraud "spine chilling."
Program rules ignored
Jaffe, 51, worked from Mather Air Force Base near Rancho Cordova as the Guard's incentives program manager beginning in 1986.
Her interests, according to her Facebook page, included the popular online game "Farmville," criminal justice television dramas and an abiding fascination with her favorite candy. Her page featured a trip to a New York M&M's convention. Recently parked in front of her modest suburban home, Jaffe's Ford Mustang, with vanity plates expressing love for her husband, was the color of blue M&M's.
She served the 17,000-member Army section of the state Guard. The overall California National Guard, with an annual budget last year of $1 billion, has more than 21,000 service members, including its Air section.
Each state controls its own Guard troops, with the top commander the adjutant general appointed by the governor. But most of the Guard's funding, including loan repayments and bonuses, comes from federal taxpayers.
The Guard responds to state emergencies, such as floods and fires, and maintains order during civil unrest. Most members are "citizen soldiers" drilling one weekend a month, plus two weeks every year, and holding down regular civilian jobs. Since the Iraq and Afghanistan wars began, many have been called up for active duty, adding urgency to recruit new soldiers and retain officers.
One key to recruiting during wartime has been student loan repayments and cash bonuses. Bonuses alone for the Army section of the Guard in 2010 were budgeted at $549 million nationwide. Some individuals have received tens of thousands of dollars.
In managing the programs, Jaffe was supposed to begin with a review of applications forwarded by soldiers, their superior officers or recruiters. She was obligated to verify that applicant claims of eligibility were valid.
That process can be cumbersome, because each of the nearly 60 bonus and loan-repayment programs she administered for the Guard follows unique rules. Some provide enticements for soldiers with critically needed skills. Others go to rank-and-file members. In all cases, Jaffe was supposed to enter data in a tracking database and order payments for the lender or soldier.
Instead, contracts that certify eligibility, required by Defense Department regulations, were often absent as were tracking data in systems designed to catch errors. Processing forms show that payments sometimes were boosted in sloppy handwritten notes.
"It seemed very unsophisticated," Clark said. "But no one was supervising her work."
In the course of his audit, Clark frequently communicated with Douke to compare notes, in part because Douke worked alongside Jaffe for several months before he replaced her and was able to observe her methods. Douke told Clark in an e-mail, obtained by The Bee, that Jaffe maintained her torrid pace by approving most funds "under the table" and ignoring program rules.
It takes little time to "blindly process payments for everyone," qualified or not, Douke wrote. Clark said in an interview that six people now share the work Jaffe normally did alone.
According to auditor documents, an apparent example of Jaffe's streamlined practices involved Lt. Yasser Brenes, a Guard recruiter. In 2007 and 2008, Jaffe approved loan repayments of $27,000 for Brenes without the required contract on file and in excess of program limits.
Of that $27,000, USAA Federal Savings Bank got $18,500, ostensibly in repayment of a student loan. But USAA, a private lender, has never offered federally guaranteed student loans the only type that qualify under the Guard program. Military regulations are clear on unqualified loans: The payment should never have been made.
Guard documents also showed that Brenes was ineligible because he received a college scholarship from the Reserve Officers' Training Corps. In essence, he was reimbursed twice for his education costs strictly prohibited by military rules.
On top of loan repayments, Brenes got a $10,000 bonus; the required contract certifying his eligibility was not on file. Loan repayments, ROTC scholarships and such bonuses are mutually exclusive, and as a full-time Guard employee, he was in any case ineligible.
Based at Mather Air Force Base, Brenes recently was promoted to captain. He said his superiors told him not to comment.
Maj. Douglas Williams, among the highest-ranking officers to benefit from the alleged fraud, received loan repayments of $33,800, documents show. Guard documents show they were improper for many of the same reasons as Brenes: He was ineligible due to his rank, payments exceeded program limits, and no contract was on file.
But Williams' bonanza was also unique. He was a high-level staff officer in the recruiting command Jaffe worked for. Guard spokesman Keegan said Williams would have no comment.
A 'soft touch'
As loans and bonuses flowed to recruiters, company commanders and their staff, it became common knowledge at state Guard headquarters that Jaffe "definitely blurred the lines of law," Douke wrote to Clark, in response to a query about how apparent fraud became so common.
Jaffe earned a reputation, Clark said, of being "a soft touch."
In one instance, on June 18, 2008, the wife of Guard captain and chiropractor Corum sent Jaffe an e-mail seeking help for Corum's student loans. Jaffe authorized $63,000 that very day, no contract required, Guard documents show.
Jaffe routinely would backdate payment records, assigning payments to long-passed loan due dates, Clark said, "to make it appear as if the service member was owed the funds and that she was merely catching up on her work."
In most years, $1,500 to $3,000 was the maximum payment that would have been allowed on qualified loans. In Corum's case, on a single day Jaffe created 21 payment requests for $3,000. Each was identical except for the annual payment due dates, running from 1987 to 2008.
Corum's loans could not be validly repaid by the Guard for several reasons, according to audit documents. But even without those impediments, federal law prohibits payments for debts incurred more than six years earlier without a waiver from the secretary of defense.
Another beneficiary of backdated records, Capt. Eric Goldie, is an attorney currently deployed to Iraq. Goldie gained $40,500 in loan repayments in 2008. His required contract was not on file, according to Guard documents, and he was ineligible due to rank.
"I have done nothing wrong," he said in an e-mail, referring specific questions to California Guard headquarters, where Keegan declined to comment.
In an interview, Jaffe acknowledged processing payments to officers without required contracts. But if mistakes were made, she said, they were caused by recruiters who "falsify paperwork and lie to the soldiers" about what benefits they qualify for.
Given an immense workload, "I could only go on what they say," she said. "There's 300 recruiters. I didn't have the time to research every one."
Jaffe leveled harsh criticism up the recruiting chain of command.
"They would always tell me that I was doing a good job, then stab me in the back," she said, declining to provide details. "They are there just to protect themselves."
Pressure to recruit
Clark said, based on his knowledge of how the Guard operates, it was implausible to him that a sergeant could authorize what he estimated were thousands of fraudulent payments without detection by any superiors.
He blamed, in part, relentless pressure for new soldiers. In a May 2007 memo, Brig. Gen. Louis J. Antonetti, new commander of the army section of the state Guard, stated his top priority: recruitment and retention.
A little more than a year later, Antonetti launched "operation overdrive" to re-energize enlistment. "I cannot overemphasize the importance of this effort," he wrote. "I am counting on leaders at every level to commit themselves fully."
Antonetti's 2008 operation came as federal Guard authorities were projecting substantial increases in efforts to pull in new soldiers and commit others to years of future service. This included a more than 13 percent boost in incentives program funding by 2010.
In response to a written inquiry from Clark about factors that contributed to Jaffe's actions, Douke cited the importance of payments to "overdrive."
"There were leaders officers willing to look the other way," he wrote, "as long as it supported the strength objective."
In fact, Guard documents show that for years, Jaffe's supervisors had reason to know about problems with her work and failed to intervene.
In 2005, an incentives expert dispatched to California by the National Guard Bureau discovered $2.5 million in overpayments from Jaffe's programs, according to a briefing prepared by Douke and Lathrop for Kight, the adjutant general. Those findings were reported to state leaders, a chronology by Lathrop noted.
Yet the following year, Jaffe was promoted to master sergeant and her position moved from the personnel division into the recruiting command.
In April 2008, personnel records show, Jaffe was served with an "adverse action" notice an allegation of wrongdoing that could result in reprimand, censure, demotion or court-martial. The cause for the "flag," in military parlance, was not noted. Col. Diana L. Bodner, who took over the recruiting command in 2007, signed the order.
The flag normally would have sparked an investigation. It's not clear whether one took place; no such record could be found in Jaffe's file, according to a Guard headquarters source who spoke anonymously for fear of reprisal.
The vast majority of questionable payments occurred from 2007 through 2009 after she was moved to the recruiting command, Clark said. In the 18 months after the flag was created until Jaffe retired, she processed some $63 million just in bonuses.
In 2009, Clark's office began to examine one small bonus program among the many that Jaffe administered. Clark did not participate in that audit. The report, issued last August, found a 20 percent error rate. Numerous lapses were cited, including the shredding of key documents.
As bad as that sounded, Douke told Clark in an e-mail that the audit looked to him more like damage control, understating the problems. Neither he, Lathrop nor any other experts had been consulted.
The auditors noted that their work was requested to support an earlier, state Guard criminal investigation of "improperly approved and paid enlistment and re-enlistment bonuses." The results of that probe have not been made public.
The Bee obtained personnel evaluations of Jaffe for the period between April 2007 and August 2008, the most recent in her file. Neither the flag nor the criminal probe of programs Jaffe administered was mentioned. Instead, she was praised for "100% accountability" in processing more than $86 million in loan repayments and bonuses and for "superior knowledge of bonus and incentive matters."
Paradoxically, the evaluators also said Jaffe "becomes confused and puzzled when asked direct questions on bonus procedures." They gave her "marginal" overall ratings.
Bodner and another rater signed the evaluations in October and November 2009, more than a year after the period of evaluation and after Jaffe had retired.
An active flag would have blocked that retirement. But records show that in July 2009, Bodner's successor as recruitment commander, Lt. Col. Jodee Rowe, removed Jaffe's flag for unspecified reasons, permitting Jaffe to retire honorably. Jaffe said she was forced out, but refused to say why.
'No more lumpy rugs'
Jaffe's missteps were so obvious that within weeks of taking over from her last fall, Douke sent word up the chain of command that they had a serious problem, according to a timeline he authored.
Clark's decision to contact outside authorities, he said, was based partly on the response of California leadership to Douke and Lathrop's concerns.
The two sergeants had been "screaming like crazy about this to any leader who would listen," Douke wrote to Clark in an e-mail, but were "disregarded as overreacting" until Clark's federal office stepped in.
Douke added his concern that beneficiaries of improper payments could "pollute the integrity of entire command structures."
Clark said he also believed his office was ill-prepared for a problem of this magnitude. It employs four auditors to oversee $1 billion in annual spending by the California Guard understaffed for tackling what he estimated could be $100 million in ill-gotten taxpayer funds.
His concern was heightened, Clark said, when he heard about California National Guard Maj. Jeffrey Nichols. Guard documents show that Nichols received $45,000 in loan repayments in 2008 without the required contract on file. The amounts exceeded program limits, the loan was obtained too far back to qualify, and Nichols' officer commission date made him ineligible.
Around the time his student loans were repaid, Nichols was picked to head the national incentives program at the National Guard Bureau in Washington, D.C. Nichols, who now works to reduce National Guard attrition, declined to comment.
Clark said he began to worry that the National Guard Bureau might exercise its legal right to forgive improper payments, to avoid embarrassment and possible impact on recruiting. At that point, he said, he contacted federal agents.
"I came to realize that this criminal matter would be multi-jurisdictional, and would require vast resources to investigate," Clark said. "Soon National Guard officials will know this is for real and that there are no more lumpy rugs to hide stuff under."