Defense Department credit cards were used to charge personal expenses at casinos and “adult entertainment establishments” including a Larry Flynt’s Hustler Club and the Sapphire Gentlemen’s Club in Las Vegas, according to the Pentagon’s inspector general.
An audit found that military and civilian personnel used the cards, intended for authorized government travel, to charge $952,258 at casinos and $96,576 at adult clubs in the year that ended on June 30, 2014.
Taxpayers didn’t have to pay for excursions to strip clubs and casinos because the 1.6 million holders of Pentagon travel cards must pay monthly bills themselves while seeking reimbursement for authorized expenses such as hotels and meals, according to the Defense Department. But the inspector general said the charges underscored a failure to enforce a 2012 law requiring oversight of travel cards to prevent fraud and misuse.
The Pentagon’s Defense Travel Management Office “did not have controls in place to detect these transactions,” such as at casinos that “in most cases were more than an hour away” from an official travel destination or an employee’s home, the watchdog agency found in a draft report obtained in advance of its publication this month.
Among 900 charges on the cards for adult entertainment were $4,686 to the Sapphire Club, $2,100 to the Vegas Showgirls club, $1,614 to Flynt’s Hustler Club and $308 to the Dreams Cabaret, according to the audit. Maryland Live Casino in Hanover and the Pechanga Resort and Casino in Temecula, California, were among the locations for 4,437 transactions at gambling establishments.
Putting such charges on a government credit card could serve the purpose of keeping them off a personal card shared with a spouse.
Pentagon officials described the transactions, while improper, as minuscule, accounting for less than 0.03 percent of $3.4 billion charged travel card transactions during the year examined.
Bridget Serchak, spokeswoman for the inspector general, declined to comment until the final report is released.
Unless the travel management office and service managers “improve oversight actions, improve internal controls” and “provide written prohibition” against charges to high-risk merchants, personnel will continue to improperly use their card at casinos and adult entertainment establishments, the inspector general’s report said.
Senator Charles Grassley, the Iowa Republican who sponsored the 2012 law, said through spokeswoman Jill Gerber that it requires periodic audits, “specifically to keep on top of charge card abuse and hold agencies accountable for implementing the required internal controls.”
Among the weaknesses cited in the report are the Pentagon’s method for blocking the merchant category codes of casinos and strip clubs, which the inspector general found was ineffective, and the Travel Management Office’s automatic tool, which didn’t provide automated, real-time notification of “high-risk, declined transactions” that could have flagged improper use.
One incident cited involved a senior airman from Seymour Johnson Air Force Base in North Carolina who was visiting Nellis Air Force Base outside Las Vegas.
He used his card to make three purchases at the Sapphire Gentleman’s Club totaling $4,686 for VIP Room services for himself and several friends, according to the audit. The credit-card company declined an additional $920 transaction.
Once the charges were flagged by a service administrator, the airman was demoted and issued an administrative punishment.
El Paso Trip
A Petty Officer First Class from a Naval Special Warfare Group used his government travel card “at multiple adult entertainment establishments” while on a 17-day official trip to El Paso, Texas, spending $1,746.63 at clubs such as Dreams Cabaret, Jaguars Gold Club, Tequila Sunrise and the Red Parrot Gentlemen’s Club.
After the Navy was notified by the inspector general’s office, he was subjected to a disciplinary board that recommended “Travel Card 101” training and other counseling.
In an example of card abuse at a casino, the audit cited the case of a Defense Logistics Agency employee not on travel who used his government card 19 times at the Maryland Live casino to take cash advances of $3,366. The agency was unaware of the transactions until notified by inspectors. The employee was suspended without pay for three days.