About 100 California National Guard members have been accused by the Guard's internal auditor of collecting fraudulent or improper pay totaling more than $500,000 from 2006 through early last year by violating dual compensation and travel expense rules.
In preliminary reports issued in March and April, obtained by The Bee, auditor Debbie Richardson reported that 95 Guard members received more than $286,000 in improper compensation for wildfire-response duties in 2008. The problems largely involved a fire-duty premium that full-time Guard members received above their normal state pay.
Other audits found that three service members got more than $65,000 in inappropriate commute expenses, and one filed fraudulent time sheets for 12 months to receive more than $163,000 while living and working in Texas for that state's Guard.
"If individuals owe money, it will be collected," the Guard said in a written statement to The Bee. A spokesman declined to comment on specific audit findings because the reports are preliminary and officials wanted to avoid compromising future investigations.
The highest-ranking officer cited as collecting pay in acts the auditor called "suspected fraud or irregular acts" was Col. Robert A. Spano, currently the Guard's chief of staff and third-ranking officer. Spano's payments, ostensibly for fire-related work in 2008, included periods during which he was on federal military duty out of state.
The Bee reported Tuesday that the Guard's top officer, Adjutant General David S. Baldwin, recently ordered an audit of Spano's pay, as well as his own and that of Col. Matthew P. Beevers, assistant adjutant general – as a matter of due diligence, rather than from evidence of a problem. Baldwin also ordered a compensation review for all generals who served the Guard full time in recent years.
Spano, the Guard's comptroller in 2008, received $1,000 in fire pay that year, according to payroll data obtained by The Bee from the state Department of Forestry and Fire Protection under the California Public Records Act. He said that he might have received a small amount of that total improperly, and, if so, would repay it. Spano disputed the characterization of possible fraud by himself or others accused of taking improper fire-duty pay.
In his case, Spano said, some problems occurred because another officer signed his time sheet for him. Spano said he also signed another time sheet in advance, and workdays later were entered incorrectly by a colleague. The actions were improper, he said, but were done to meet payroll deadlines with no fraudulent intent.
"It was a total failure of internal controls," Spano acknowledged, calling the payroll reporting system the Guard used at that time "archaic."
Is special pay legal?
The most egregious case involved an officer who fraudulently obtained $163,074 from the California Guard while in Texas, according to a Guard audit. The payments included tax-free housing subsidies for a Texas residence. Spano identified him as Maj. Thomas Venable, a homeland security specialist.
Venable, who also was cited as having received improper fire pay in 2008, could not be reached for comment.
Another high-ranking officer cited as collecting such improper dual pay was retired Lt. Col. Irma L. Goodwater, a comptroller, who received at least $3,092 in fire pay, according to payroll records. The improper amount was not specified by the auditor, who indicated that Goodwater collected fire pay while on sick leave.
Goodwater could not be reached for comment. A person at her residence referred calls for comment to Guard headquarters.
Lt. Johan Lai, who lists himself on his LinkedIn.com page as the manager of the emergency fire duty pay system, was noted as receiving at least $6,272 in improper fire pay. He got more than $9,500 overall, according to payroll records.
Lai was among three employees whom the auditor said were paid large sums in improper commuting costs – in Lai's case, nearly $42,000 for food, lodging and travel between his San Diego County home and Guard headquarters in Sacramento. Some of the reimbursements were made for days Lai was not present at his job.
Via email, Lai said he had not been notified by the Guard about any pay problems, and referred questions to Guard headquarters.
"We refuted (the auditor's) findings for those three individuals," said Spano, referring to Lai and the two others cited for commute expenses. They were temporary employees who were permitted to work at home part of the time and commute costs were allowed, he said. The cases have yet to be resolved.
Richardson's audit suggested that the amount of improper pay for fire duty to hundreds of guard members might rise after a more complete review. The Guard's contract with Cal Fire permits premium pay for fire duties. But the auditor contended that the entire practice of differential pay for full-time Guard members contradicts state law.
That legal question was hotly debated among Guard leaders in 2008, according to Richardson and Spano, who said he was involved in the discussions. Some leaders would not personally accept fire pay, but did not otherwise intervene.
On Tuesday at a joint hearing of the state Senate and Assembly Veterans Affairs Committees, legislators asked Baldwin whether special fire pay was justified for full-time Guard members. He said that practice, though considered valid by Guard policies, had been suspended pending a review.
"What we're questioning," Baldwin said, "is whether it is the right thing to do."
Fraud allegations mount
In a separate report, the Guard auditor addressed long-standing concerns that the department relies too heavily on "state active duty" employees who are the subject of the recent fire pay concerns. Those employees are also Guard members and get higher salaries and better benefits than civil servants doing the same work.
For example, the auditor said six full-time Guard members working in purchasing and contracting earned nearly $500,000 collectively, while comparable civilians who worked alongside them made $275,000.
"Throughout the organization, (state active duty) members receive two to three times more in compensation than their State Civil Service co-workers performing similar or more duties," the auditor wrote.
In 2005, Guard officials vowed to reduce costs by converting full-time jobs for Guard members to civil service when possible – but as of last December, the auditor found, no job had been converted.
The findings follow a recent series of Bee investigations that revealed up to $100 million in improper or illegal recruitment and retention payments to service members, and dual-pay violations by Guard pilots. Those cases are the subject of ongoing criminal investigations by federal law enforcement agencies.
The Bee series also described how the former top commander of the Guard, Major Gen. William H. Wade II, received about $155,000 in apparently improper dual compensation from the state and federal governments during his term, which ended early last year. On Baldwin's request, the state Department of Personnel Administration is reviewing Wade's records for possible recoupment of funds.
"Integrity is the cornerstone of their profession, yet you have massive breakdowns all over the Guard," said state Sen. Ted Lieu, D-Torrance, a reserve Air Force officer and member of the Veterans Affairs Committee. "It's very concerning."
Tuesday's legislative hearing – one in a series called to address issues uncovered by The Bee – examined Guard pay and employment issues.
"If confidence has been lost (in the Guard) how can we restore it?" asked Senate committee chairman Lou Correa, D-Santa Ana.
Baldwin replied that he has ordered more than two dozen reviews and investigations on possible fraud or other improper activities since he was appointed in April, and has suspended from command duties 20 leaders who were implicated in apparently improper or illegal acts.
Baldwin blamed "loopholes" in the Guard's internal regulations for contributing to a history of opportunism and said he ordered a comprehensive review to correct the rules. He said he would enforce stronger leadership throughout the Guard to reform the organization's "ethical culture."
"The root cause of the problem," he said, "is that the organization lost its way, ethically and morally."