DOD Using Government Credit Cards in Casinos, Strip Clubs

What Kind of Official Government Business Happens at Larry Flynt's Hustler Club?

Strip Clubs
IG Finds DOD Employees Use Government Credit Cards at Casinos, Strip Clubs. Ron Koeberer/Getty Images

From July 1, 2013, through June 30, 2014, Department of Defense (DOD) employees improperly rang up over $1 million in government credit card purchases at casinos and strip clubs, according to an audit report from the DOD’s Inspector General (IG).

During that 12-month period, DOD employees used their DOD-issued travel credit cards to make 4,437 transactions totaling $952,258 at casinos and 900 transactions worth $96,576 at adult entertainment establishments, like Larry Flynt’s Hustler Club, according to the report.

Among the military branches, Air Force personnel led the way, charging $404,675 at casinos and $ 37,491 at adult entertainment establishments. The Army was a close second, swiping government travel cards for $348,538 at casinos and $34,837 at adult entertainment establishments, according to the report.

Taxpayers Not on the Hook, But…

Before we go any further, you need to know these charges – just like all charges on federal government-issued travel cards – are billed to and paid for by the employees who made them, not taxpayers.

However, as the IG noted, government-wide rules require that credit cards be used only when traveling on “official government travel,” and then only for “official travel-related” expenses, very few of either, we hope, involve visits to places that specialize in selling lap dances.

“Official Government travel is defined as travel under official orders while performing duties pertaining to official Government assignments such as temporary duty and permanent change of station.

In most instances, duties pertaining to official Government assignments would occur in the official travel location,” stated the IG’s report.

In some cases examined by the IG, the “official travel location” involved was a hotel associated with a casino, like the MGM Grand Hotel/Casino in Las Vegas. In those cases, credit card purchases made in the hotel, like room service, may have been “official travel-related” expenses, while charging a losing night of blackjack in the casino, not so much.

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The problem, as identified by the IG, is that current government travel credit card compliance programs fail to collect sufficient details on transactions that occurred at casinos, hotels or adult entertainment establishments to determine if the card was improperly used.

In other words, DOD managers never find out whether the credit cards were used for shaving cream, poker chips or lap dances.

In addition, noted the IG, the DOD does not require its component agencies or military branches to identify “high-risk merchants,” like casinos or adult entertainment establishments where misuse of credit cards is more likely to occur.

How Should the DOD Fix This?

In its investigation, the IG’s office used the Visa IntelliLink Compliance Management system, which aids businesses in detecting improper credit card charges by reporting more specific transaction details.

As you might expect, the IG recommended that the DOD require all of its components to begin using the same Visa compliance reporting system.

In addition, the IG recommended that the DOD develop ways for its financial compliance officers to detect travel credit card transactions that:

  • Are not related directly to official travel status or official travel locations.
     
  • Are cash withdrawals made at ATM machines that exceed the overall meal and incidental expense amounts incurred while the cardholder is on travel status.
     
  • Are made at specific known casinos, casino-processing centers, and adult entertainment establishments.

While the Defense Travel Management Office offered to consider improved methods of detecting improper use of government credit cards, it also criticized the IG’s report for failing to mention the overall “strengths” of the DOD’s Government Charge Card program.

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