Pentagon Engaged in Unfathomable Financial Mismanagement
Around the same time that auditors declared that the Department of Defense’s finances are unauditable, The Nation published an extensive exposé of just how deliberately falsified and mismanaged the Pentagon’s accounts are. We speak to the report’s author, investigative journalist David Lindorff
GREG WILPERT: It’s The Real News Network, and I’m Greg Wilpert.
About three weeks ago, the auditors who were conducting the first-ever comprehensive audit of the Defense Department announced that the audit could not be completed because too much money was simply unaccounted for. Deputy Defense Secretary Patrick Shanahan told reporters afterwards, “We failed the audit, but we never expected to pass it. It was an audit on a $2.7 organization, so the fact that we did the audit is substantial.”
The Pentagon’s annual budget is now over $700 billion and climbing. However, investigators who have looked into the Pentagon’s finances, such as Mark Skidmore, a professor of economics specializing in government policy at Michigan State University, found that at least $21 trillion of Pentagon financial transactions between 1998 and 2015 could not be accounted for.
Joining me now to make sense of what is going on at the Defense Department is David Lindorff. David is a contributor to the Nation, where he recently published an article with the title Exclusive: The Pentagon’s Massive Accounting Fraud Exposed. He also writes for Salon, London Review of Books, and Tarbell.org. Thanks for joining us today, David.
DAVID LINDORFF: Thanks for having me.
GREG WILPERT: So what is going on with the Pentagon’s accounts? Why did it fail the audit, and what exactly does failure mean?
DAVID LINDORFF: Well, it failed the audit because the numbers are so screwy that the 1200 auditors from the outside firms that were looking at it just threw up their hands and said we can’t do it. I had been warned by several people, including the head of the National Security Unit of the GAO that there would not be an audit because of this problem, and that it’ll be years before they can actually do an audit because the numbers are so bad that they’re dealing with. But the reason behind it is that the Pentagon has been deliberately falsifying numbers in its annual reports every year so that for years those numbers are, described by one former OIG supervising auditor, as garbage.
GREG WILPERT: So you requested, yourself, documents from the Defense Department’s Inspector General’s Office, and they sent you an annual report that was heavily redacted, with even the report’s title blacked out. And the slogan at the bottom of the report, though, which was not redacted but perhaps should have been, said “Integrity, efficiency, accountability, excellence.” Tell us about your efforts to get information for the Defense Department, what that was like, and what they said in response to your requests.
DAVID LINDORFF: Well, that document was actually posted on their website as though it was supposed to be public information. But it’s futile, because everything has been blacked out. And that’s a first. The same guy who said that the budgets are garbage said it shocked him as a former supervisory audit director at the OIG to see them censoring the documents, because before this all the documents they would post were were public record.
But you know, Mark Skidmore, Professor Skidmore at Michigan State University, who looked at all those documents between ’98 and 2015 did see all the documents. And the OIG, to its credit, was calling out these fake numbers. They would say, you know, these numbers, which sometimes totaled in the trillions of dollars, in Pentagon budgets were unsupported by any kind of ledger entries to back them up. And they would criticize the Pentagon accounting units and say, you know, you gotta do this right. This isn’t right. But nobody would ever get fired. The OIG would never recommend prosecution to the Justice Department. No supervisory people ever got called to the carpet for this kind of stuff.
So one has to assume that this was deliberate. And in fact, people that I talked to on the record off said that that is exactly what is happening, that it’s a deliberate effort to make the Pentagon budgets impenetrable and inauditable.
GREG WILPERT: Now, it seems like we’re talking about hundreds of billions of dollars per year that is really unaccountable. So if much money is unaccountable, doesn’t this open the door, open wide for fraud, corruption, and maybe even embezzlement? I mean, who’s to say that that’s not what’s happening?
DAVID LINDORFF: Well, actually, it is happening. And what the on-the-record interview I had with Asif Khan, who is the head of the GAO’s National Security Asset Management Unit that monitors the budgets of the Pentagon and the CIA, and various other– the Atomic Energy Commission, or NRC, rather. You know, the various entities that have national security aspects to them. Said that the Pentagon has been for years on his and the GAO’s list of high-risk agencies for fraud, waste, and abuse.
And that, you know, think of this. The Pentagon accounts for 54 percent of every tax dollar that taxpayers and corporations pay in taxes to the government. And it is on the high risk list for fraud, waste, and abuse. This is incredible, and nobody’s–I never even knew that. I don’t think it’s ever been reported that they’re on that list. It’s an absolute outrage, and the American people should be clamoring for action on this. But you hear nothing about it from Congress.
GREG WILPERT: Indeed, it seems to be truly amazing that the story itself has hardly been covered in the media. And if you consider that first of all not only is all this fraud possible, maybe even corruption and embezzlement, but they’re also not returning the money back to Congress as they’re supposed to be at the end of the year if they didn’t spend it. I mean, there’s so much illegality going on, it seems. Why isn’t Congress looking into this more seriously? Why isn’t the Pentagon being held accountable? What do you think?
DAVID LINDORFF: Well, it’s interesting. I mean, in the 1980s there were huge hearings into scandals that were raised by whistleblowers like Chuck Spinney, Ed Fitzgerald. You know, people that had, you know, real credibility and used their names, not just whistleblowers in, you know, behind the scenes. Called out massive fraud by the Pentagon, and the Congress responded by, you know, hearings and putting top people under oath, and uncovered a lot of fraud. And you know, heads rolled and everything. Spinney actually was put on the cover of Time magazine for his efforts.
Nothing like that goes on now. And I run it back to 2001 and the war on terror, which has had the effect of making people and the media, you know, worshipful of the military. They’re supposed to be the highest regarded part of the American government, and yet, you know, they’re they’re basically fraudsters. And they’re doing what bureaucracies always do. They’re enlarging their budgets and enlarging their power, and there is nothing particularly admirable about them.
GREG WILPERT: OK. Well, unfortunately, we’re out of time. We’re going to leave it there for now. I was speaking to Nation contributor David Lindorff, author of the article The Pentagon’s Massive accounting Fraud Exposed. Thanks again, David, for having joined us today.
DAVID LINDORFF: Thanks for having me on.
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