July 30,2001

Grassley Seeks to Stop Abuse of Pentagon-Issued Credit Cards

WASHINGTON – Sen. Chuck Grassley, a long-time advocate of ending wasteful defense
spending, today urged Pentagon leaders to exert greater controls over the 1.8 million credit cards
issued to Department of Defense employees.

“Issuing credit cards to Pentagon employees without proper checks and balances is like
giving people keys to the federal treasury,” Grassley said. “In the past, Pentagon employees needed
a phony invoice to trigger a fraudulent government check, but that obstacle is gone. Credit cards
provide a shortcut to the cash pile.”

Grassley testified about the problem during a House subcommittee hearing chaired by Rep.
Steve Horn of California. A review by Grassley, Horn and the General Accounting Office found that
Pentagon employees spent $9 billion last year with their 1.8 million credit cards. Some of the
spending clearly appeared personal and inappropriate; records show spending at Wal-Mart, The
Home Depot, the Hooters and Bottoms Up nightclubs, and the purchase of items such as DVD
players, computers and pet supplies.

No one knows exactly how much money employees spent fraudulently, but one bank
company has been forced to write off $59 million in fraudulent debts from military cards. The cards
were meant to help Pentagon employees pay for official purchases and travel without bureaucratic

Grassley urged Pentagon leaders to exert greater controls on the cards it issues for official
purchases or travel and respond more quickly in the face of fraud. Many of the credit cards have
large limits – $20,000 to $100,000 – and are issued without credit checks on the employees, Grassley
said. No one checks the purchases for legitimacy. “There are no controls, no responsibilities, and
no accountability,” Grassley said

Grassley said he is hopeful that the new secretary of defense, Donald Rumsfeld, will exert
swift control over a problem that preceded his tenure.

“Every dollar that goes to fraud is a dollar that doesn’t preserve our national security,”
Grassley said. “We have a lot better uses for the defense budget than furnishing employees with
luxury items on the taxpayers’ dime.”