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Fraud and Embezzlement within the U.S. Military

Sworn to loyally serve their country and willing to risk their lives in the name of liberty, yet even military personnel can become involved in stealing tax payer’s money for their own selfish gain. In recent years a number of high profile cases have come to light and the evidence could possibly suggest that the problem is widespread. In this article I will cover a number of these cases and then close with a discussion on the poor accountancy practices which have been uncovered at the Pentagon.


At present some 1,200 U.S. military personnel including two generals and dozens of colonels, are under investigation for their part in a nationwide recruitment fraud (BBC News - US Army rocked by Itaq war recruitment fraud scheme). The fraudulent activity is thought to have cost the U.S. 

tax payer at least $29 million but this figure could increase to as much as $100 million as the full scope of the problem is uncovered. The fraud involved the illegal collection of referral fees worth thousands of dollars for each new recruit whose name was put forward. Existing servicemen put the names of family members and friends forward for enlistment. The referral system is both lucrative and costly and during the Iraq war it cost the U.S. government some $300 million for 130,000 new recruits. However the system is also open to exploitation as referral fees were collected for recruits who had already made their minds up they were going to join the military anyway. In some cases military personal failed to inform the civilian recruitment officers of the referral fee scheme and substituted their own bank account details in favour of that of the civilians. 

US armed forces recruitment

U.S. armed forces recruitment station at Times Square, New York. 

In 2011 and 2013 a total of three U.S. soldiers who were based in Afghanistan were charged for their part in an embezzlement that was worth $1.3 million ( News - Third Soldier Charged in $1M Embezzlement Scheme). The soldiers had worked in a military finance office and had tricked an Afghan based company into transferring the money to their bank account after falsely claiming the company had been overpaid for the military equipment they had supplied. The soldiers had teamed up with an Afghan interpreter who later withdrew some $400,000 of the embezzled money in person which he carried off in a backpack to share out among his colleagues.


In 2013 three former U.S. soldiers with the Special Forces pled guilty to the charge that they had used inside information to profit from military contracts in Afghanistan (The Big Story - 3 former soldiers plead guilty in Army fraud case). It was admitted by a former Army Reserve Lieutenant Colonel that he had supplied information on government pricing and on competitors’ bids on contracts totalling $54 million. In the fraud the defendants always bid more, rather than less, than the competitor knowing in advance that the government would refuse the company as unfit to complete the contract. Being absolutely certain of winning the final contract they always bid well above the government estimated price and so had unfairly made money at the expense of the U.S. tax payer. One of the defendants had millions in cash and assets seized by the government which included houses he had purchased in other people’s names in Florida and New Hampshire. Two of the defendants had shared $17 million in proceeds from the contracts between themselves.

The Pentagon, Virginia

The Pentagon, the headquaters of the U.S. Department of Defense, Arlington County, Virginia.

As a result of substandard bookkeeping at the Pentagon it is possible that billions of dollars has been defrauded from its budget over the years. It is publically acknowledged that for a 15 year period until 2013 the Pentagon had kept unauditable books and had not complied with federal law in their bookkeeping activities and that the accounts they did keep were largely based upon fictitious numbers (Reuters - Behind the Pentagon's doctored ledgers, a running tally of epic waste). The end result of this is that the $8.5 trillion spent by the U.S. military since 1996 has never actually been properly accounted for. The Pentagon has also admitted that a significant proportion of this money could have gone to waste or was misspent fraudulently. However bad bookkeeping practices at the Pentagon didn’t just apply to the accounts, it equally applied to its actual stores of weaponry, ammunition and essential supplies. For example between 2003 and 2011 it had mislaid some $5.8 billion of military supplies as a result of redistributions which occurred between the regular and reserve units.


An attempt to properly address the issue of poor bookkeeping at the Pentagon was made as far back as 2001 (CBS News - The War on Waste). The then Secretary of Defense Donald Rumsfeld raised the issue at an ironically poor moment in time as it happened to be 10th September 2001, the day before the attacks on the World Trade Center and the Pentagon itself. What had been a critically important issue as far as U.S. government spending was concerned was largely forgotten in the rush to hunt down the terrorists. On the day of the 10th of September 2001, Rumsfeld publically admitted that, “According to some estimates we cannot track £2.3 trillion in transactions”. Even the Pentagon accountants themselves admitted that 25% of what they had spent couldn’t properly be accounted for. 

Donald Rumsfeld after 9-11

Donald Rumsfeld and team address members of the press after the 11th September, 2001 attack on the Pentagon.

An employee of the Defense Finance and Accounting Service which supplies accounting services to the military spoke out on the issue of missing millions in military budgets (CBS News - The War on Waste). The employee, Jim Minnery, produced an example of $300 million that couldn’t properly be accounted for at one defence agency. He carefully followed the paper trail as it made its way across the country but still couldn’t properly determine what had become of the money. Minnery’s supervisor at the DFAS had apparently become perplexed at why his subordinate should be so concerned about such an issue when Minnery’s answer was that he was only doing his job. Eventually Minnery was reassigned and he claimed his bosses had then attempted to cover the problem up.


However the problem of poor accountancy practice at the Pentagon was not new even in 2001. Some twenty years prior to this a Department of Defense Analyst, Franklin C. Spinney, publically highlighted the issue and claimed the problem only worsened as time went by (CBS News - The War on Waste). Speaking of the military bookkeeping practices of the time he is quoted as saying, “Those numbers are pie in the sky. The books are cooked routinely year after year.” 


The arms and military supply industries are such lucrative concerns that fraud and embezzlement are a constant problem and without the proper bookkeeping practices it is absolutely impossible to detect. Ultimately it is always the ordinary tax payer who pays the price for the billions in fraud and wasted expenditure. Over the years it would seem that the Pentagon has shown a complete disregard for keeping an appropriate record of how it spends government money. Only this year has the Pentagon finally stated that it is now ready to receive government auditors after a deadline originally set in 2011 and some 18 years after it was first made federal law for all government departments to be audited annually (Stars and Stripes - Pentagon say it's ready for 1st audit after years of delays). But why did it take the Pentagon so long before anything was properly done and how many billions in tax payer’s money were unnecessarily wasted or lost completely over the years? According to a report by Reuters in 2013 the fraudulent figures at the Pentagon can exceed a trillion dollars within a single year which is far in excess of the entire U.S. defence budget (Reuters - Special Report: The Pentagon's doctored ledgers conceal epic waste). Considering that the U.S. national debt currently stands at almost $18 trillion or $56,000 for each and every U.S. citizen, this is money the government simply can’t afford to squander.        

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