Rank and name Maj Roland R. Fox.. Maj. Jackie A. Nickerson...... Charge CHARGES IN THAILAND CASES 2 specifications of accepting gratuities from persons engaged in doing 1 specification of asking for a bribe from an entertainment booking agent.. C.M. Sgt. Robert D. Beaudean... 5 specifications of accepting gratuities from persons engaged in doing business with the Nakhon Phanom NCOOM. 1 specification of receiving bribes by accepting monetary sums from an Article 92 134 134 92 134 C.M. Sgt. Bobby L. Estes.. 4 specifications of accepting gratuities from firms or persons engaged in 92 134 1 specification of asking for a bribe, agreeing to accept a bribe, and re- C.M. Sgt. Robert B. Morris..... 3 specifications of accepting gratuities from person or firms engaged in S.M. Sgt. James C. Bolin.. M. Sgt. James C. Burgess..... M. Sgt. George J. Dowdy........ doing business with the Takhli NCOOM. 1 specification of agreeing to accept bribes, accepting bribes, and soliciting Accepting a gratuity ($1,200) from Chester Marriott.... Accepting graft ($1,200) from Chester Marriott for services rendered. 3 specifications of accepting gratuities from persons or firms engaged in 1 specification each of asking for a bribe and receiving bribes for services rendered to an entertainment booking agent doing business with the Accepting a gratuity ($3,500) from Chester Marriott. Accepting graft ($3,500) from Chester Marriott for services rendered. 2 specifications of asking for bribe and 2 specifications of receiving bribes 1 specification of accepting gratuities from a firm engaged in doing busi- 1 specification of asking for a bribe and receiving bribes for services ren- M. Sgt. Wallace J. Dubois.. 4 specifications of accepting gratuities from persons or firm engaged in 134 134 2 specifications of asking for bribes from Edward C. Harold. M. Sgt. James F. McLelland. M. Sgt. Tillman T. Teague...... 2 specifications each of agreeing to accept bribes and receiving bribes for 3 specifications of accepting gratuities from persons or firms engaged in 1 specification of larceny of $200 from the Korat airmen's open mess. 1 specification of accepting gratuities from a person engaged in doing 1 specification of larceny of $1,900 from the NCOOM. 1 specification of extortion from an entertainment booking agent. 1 specification each of asking for bribes, receiving bribes from an enter- M. Sgt. Rommie C. Walker, Jr..... 3 specifications of accepting gratuities from persons or firms engaged in S. Sgt. Francis Shaw.. S. Sgt. Albert Sears, Jr.. C.M. Sgt. James E. Poplin...... doing business with the Takhli NCOOM. 1 specification each of agreeing to accept bribes and receiving bribes for 4 specifications of accepting gratuities from persons or firms engaged in 1 specification of agreeing to accept bribes and receiving bribes for serv- 4 specifications of accepting gratuities from persons and firms engaged in 1 specification of receiving bribes for services rendered to an entertain- 1 specification of accepting bribes and 3 specifications of accepting 5 specifications of accepting gratuities from various vendors and booking 1 specification of bribery by agreeing to accept 10 percent rebates from a 1 specification of accepting graft ($315) from a booking agent.. Senator INOUYE. So your studies indicated that there wasn't a single 100-percent clean one. Every club manager was involved in some sort of irregularities. General CAPPUCCI. Not necessarily the manager, Mr. Chairman, but we can always find something. I guess like the auditors, much of it was minor. Senator INOUYE. Your investigations were usually initiated upon the receipt of allegations. Have you found that these allegations were well founded? General CAPPUCCI. Not in all cases, no sir. Some were rather vague, but we still have to explore them, and if there are indications that there is some substance to them, we then go to the commander and say, here is what we have, do you want an investigation? Usually he will say yes. If he says no, that report comes back to me from wherever it is in the world. It still comes back to my office, and if I consider that an investigation should have been conducted, then I will take it up to the Inspector General and higher, and an investigation will be directed if they believe one should be done. Senator INOUYE. I asked this question during this morning's session and I would like to have the answer in order to give this committee some indication as to the magnitude of the problem. In fact, we were discussing this among the staff people earlier, that if out of a total operation of $282 million, if the criminal activities were less than a million dollars, it is small and I would hate to drag the whole Air Force through an extensive hearing on something which could be proportionately very small. Therefore, once again I would like to ask you to give us an estimate of the total amount involved in goods and services, entertainment, kickbacks, bribes, et cetera. General CAPPUCCI. Mr. Chairman, we discussed this problem during the lunch break and we are preparing something for you to the best of our ability. Senator INOUYE. I realize you can't come out with something very accurate because I don't know how much the services of a woman are, but I suppose there is a going rate even in Thailand. General CAPPUCCI. But we plan to submit something to the committee in the very near future. (Information requested follows:) ESTIMATED DOLLAR VALUE-142 OPEN MESS INVESTIGATIONS A review of the 142 Open Mess investigations revealed that allegations were made concerning kickbacks, gratuities, and embezzlement having an estimated dollar value of approximately $354,400. The basis of the above approximation is set forth as follows: a. A number of entertainment agents in Thialand furnished testimony to the effect that 10% to 20% kickbacks were paid to club custodians on all entertainment contracts at NCO Open Messes in Thailand. Entertainment expenditures at all NCO Open Messes in Thailand for a 12 month period totalled $1,588,000. Using 10% as the multiplier, the alleged annual kickbacks would total $158,880. Investigation, however, was not able to positively confirm that this sum was received by the custodians. b. The remaining amount, $195,520, concerned investigations of Open Messes worldwide, exclusive of the kickbacks on entertainment contracts in Thailand. This total was derived by extracting specific dollar values from investigative reports whenever they were established, by estimating the normal market value of items and services when the dollar value was not reported, and by projecting the dollar value of kickbacks when individuals reported that they had paid a specific percentage. It is again emphasized that the above total represents, in large measure, projections and estimates of dollar values involved, and does not reflect the absolute value of loss or graft occurring in the open mess system. The investigative surveys of 100 open messes developed a total of 3150 administrative irregularities and 81 allegations of specific criminal conduct; i.e. 3150: 1 or an allegation of criminal irregulatory rate of 2.6% Senator INOUYE. In your investigation did you find that most of these irregularities were of a criminal nature? In other words, with knowledge, premeditation? Or were they just a matter of negligence or laxity? General CAPPUCCI. Well, the matters that our investigations developed, of course, would be of a criminal nature. Kickbacks, gratuities, this type of thing, although we did surface, as you know, irregularities in management. The fact I think that 15 are presently facing charges in Thailand, and there will be 11 more to go. Senator INOUYE. In your testimony you indicated that all of the vendors who were involved in these investigations were given the opportunity to testify and that if they refused to testify they were debarred. Has this debarring procedure been effectively carried out? General CAPPUCCI. Yes, sir; it has. This was done by the command upon the advice of the staff judge advocates who reviewed the whole thing. There was no-speaking of Thailand, no Thai laws were violated by the vendors. To give gratuities or kickbacks, anything they want Senator INOUYE. Is it permitted in Thailand? General CAPPUCCI. Yes, sir. As long as the vendor pays his taxes in Thailand, there is really no problem, unless he is stealing the stuff that he is selling. But let us say it is legitimate merchandise. He can make any deal he wants to with the buyer. It is perfectly all right. There are no Thai laws involved here. So what we are involved with, then, do we want to continue to do business with vendors who pay kickbacks and offer gratuities and then refuse to cooperate when we investigate these matters, because it is against our laws and principles. Senator INOUYE. Are you suggesting that all of these vendors were Thai citizens? General CAPPUCCI. No, sir; a number of them were Americans. General CAPPUCCI. Well, one is back, but these Americans worked for Thais, for Thailanders. The Americans returned to Thailand and went to work-for example, one of the vendors worked for a Thailand entertainment agent. The one that gave us Senator INOUYE. He would be placed on a blacklist as an individual. General CAPPUCCI. Yes, and this is a loss of business to these people and the thing was coordinated by the command so that the Army, Navy, and Air Force, all the U.S. facilities, in Thailand put them on the debarred list so they cannot do business with any U.S. facility. This hurts. Now, what they will attempt to do, I am sure, some of these vendors will change their names and get their friends to front for them, I suppose, but this is being watched, too. A number of them did cooperate, did open their books, and we were able to get good evidence. Some will testify. These people will continue to do business with the U.S.. facilities in Thailand. Senator INOUYE. Can you tell this committee for the record how the kickback operates for, say, a food vendor or beverage vendor? General CAPPUCCI. Yes. I will take the beverage first. I think you stated this morning there were a number of liquor representatives running around looking for business, and as you know, it is purchased—– the class III, the locker deal. All the custodians have to do is to indicate what kind of liquor he wants to buy. So the vendor has to get the custodian to select his brand of liquor. For example, J. & B. scotch. This is what you ought to buy and this is the price I will give you. But you could keep part of it. In other words, let us say it is $20 a case, but I will give you back $5 for each case. I will give you two cases free or three cases free for your own use. You don't have to report it. Senator INOUYE. Whom do these vendors represent? General CAPPUCCI. They represent liquor dealers here in the States. Senator INOUYE. The distilleries? General CAPPUCCI. Distilleries, through distributing companies. Senator INOUYE. Have you found any evidence that these mother companies or distillers were aware of the kickback operation? General CAPPUCCI. No, sir; as a matter of fact, I recall one who is very cooperative and I think they fired their man anyway. Senator INOUYE. I presume these mainland companies must have been pressing the vendors to aggressively seek business. General CAPPUCCI. Yes; it is a commission business, I am sure. He only gets paid when he sells liquor. So there is I am sure quite a lot of pressure. Senator INOUYE. And they were not aware that this sort of temptation might be available? General CAPPUCCI. We have no evidence that they were, Mr. Chairman. Senator INOUYE. So you are satisfied that at least the home companies here were not involved. General CAPPUCCI. Yes, sir. Senator INOUYE. Were the home companies advised of the irregularities of their agents or vendors? General CAPPUCCI. I don't know for certain. I will have to get that information. I will provide that information for you, sir. (Information requested follows:) In explanation, several distillery firms are usually represented by a distributor. Salesmen are employed by that distributing company to promote and sell the brands of liquor handled by their employer. The distributors, where applicable, have been apprised of the information that their salesmen were alleged to have given kickbacks and gratuities to custodians. The distillery firms, however, have not been informed of this information by the Air Force. Senator INOUYE. But once they have been involved, I am talking about the vendor, once they have been found to be involved in these irregularities, they are blacklisted? General CAPPUCCI. Yes, sir. Senator INOUYE. So you will not be doing business with them any longer? General CAPPUCCI. No U.S. facility will. Senator INOUYE. Are the vendors also under investigation for possible prosecution? By that I mean are you submitting their names to the Justice Department? General CAPPUCCI. We had their names but actually they haven't performed any criminal act. Senator INOUYE. Not under Thai law. General CAPPUCCI. Not under Thai law. Senator INOUYE. Have you found this type of activity in the United States? General CAPPUCCI. I think the thing that would come closest in the United States would be giving bonus liquor and the custodian keeping the bonus liquor for his own use. Senator INOUYE. What about in Europe? General CAPPUCCI. I don't think we have found that, no, sir. We haven't found that. Senator INOUYE. So your studies indicate that most of the irregularities were found in Southeast Asia. General CAPPUCCI. Yes, sir. Senator INOUYE. And your explanation is that because of law and custom General CAPPUCCI. Yes, indeed. We have cases, you know, in Europe, 38 of them, but there are other irregularities. Embezzlement, theft, and so on. But regarding the deals with vendors, this doesn't seem to apply so much in Europe. We haven't found any. Senator INOUYE. Are you satisfied that the commanders were unaware of these irregularities? General CAPPUCCI. Yes, sir; I am. Now whether they had suspicions or not I don't know. I do know they were not aware of what was going on. If it had been called to their attention sooner, I am sure they would have taken positive action. Senator ÎNOUYE. Do you think that your office will be conducting these surveys on a regular basis from now on? General CAPPUCCI. Yes, Mr. Chairman. I already have requests for 100 surveys a year from General Dupont's activity and I plan to continue them just as long as possible with the personnel that is available to me. Now, there are some more personnel reductions that are going to come in the near future, but I have already prepared paper work which hopefully will exempt ÓSI from a big reduction. Senator INOUYE. From your studies were you able to determine what proportion of the irregularities were actually violations or just poor management? General CAPPUCCI. No, sir. I don't think I could give you a specific on that. Senator INOUYE. You spoke of conflict of interest. Will you give us an example? General CAPPUCCI. Yes. I am trying to think which one it was. Mr. O'DONNELL. We have cases where a custodian will be employed by the club and run as a separate business a selling operation to the same club for which he works. In the case in mind, it is a foreign national who had a foreign national contact and he was in a sense selling to himself. Senator INOUYE. How many instances did you have of this type of conflict? Mr. O'DONNELL. I can't give you a specific figure but I would say in the neighborhood of five to six at the most. |