Millions Embezzled from DOE Agency Spent on Pimped-Out Trucks and High-End Knives

By Michael Bastasch Published on August 2, 2016

Internal audits of a utility run by the U.S. Department of Energy revealed about $6.8 million in potentially fraudulent purchases on government credit cards, in part, by employees who went out during work hours to buy things like high-end knives, ammunition, and pimping out their trucks.

“They were just charging stuff back to customers,” a source familiar with the internal audits told The Daily Caller News Foundation. “The receipts would say things like ‘linemen tools.’ Nobody was looking at it and nobody cared.”

“Gun cases, scopes. These guys had no business buying any of that stuff,” the source said.

Internal audits obtained by TheDCNF found the Western Area Power Administration (WAPA) employees spent $6.8 million on government credit cards without “documented evidence that the priority of sources requirements was met or considered.”

Auditors found “personnel were unable to locate or could not provide satisfactory evidence to support transactions for approximately 270 cardholders.” Some of these purchases, auditors noted, “could have been for personal use at each of Western’s five locations, which are considered potentially fraudulent.”

But that’s only the beginning of WAPA’s problems. Sources familiar with the issues plaguing the government-run utility said its managers may have even played a major role in allowing fraudulent purchases to go undetected.

“Their managers even knew they were shopping, they just told them not to get caught,” said another source who’s familiar with possible fraud at WAPA.

Sources said Energy Department investigators have been looking into potential fraud at WAPA for over a year, but a spokeswoman at the DOE inspector general’s office would not confirm or deny the existence of such an investigation.

Money Isn’t Going To The Grid

WAPA is a power marketing agency within the Energy Department that’s responsible for transmitting electricity across 15 states. The utility operates 17,000 miles of transmission lines that carry power from 56 government-owned hydroelectric dams and a coal plant in the Navajo Nation. The utility is headquartered in Loveland, Colorado.

WAPA came under fire recently from federal regulators for not doing enough to protect its transmission lines and substations from physical attacks. Keith Cloud, WAPA’s head of security, recently told The Wall Street Journal he’d only gotten $300,000 to pay for security upgrades at substations.

Cloud said he needed $90 million to protect just 40 WAPA substations from physical attacks — that’s only a fraction of the 328 substations the utility operates.

But internal WAPA audits obtained by TheDNCF show its potentially fraudulent credit card purchases amounted to 23 times more than what Cloud got to protect 40 substations.

Sources noted the lack of controls on credit card purchases meant WAPA’s customers and taxpayers are paying more. They also say it’s diverted money away from protecting the grid.

“Every region was audited and every region demonstrated similar findings in terms of lack of internal controls and oversight,” a source said.

WAPA President Mark Gabriel told WSJ the utility spends about $200 million every year on capital improvements, but it’s not clear how much of that actually went to securing the grid from attack.

One source told TheDCNF WAPA didn’t focus on security at all until after the second time intruders broke into one of its substations.

“They didn’t do anything for security before that,” the source said, noting how other utilities “have lasers and the cops come” when intruders come near substations.

The source said there were over a million trees so tall they covered the power lines, which increases the risks of fires starting. The source even noted how the tops of some trees were burnt from electricity jumping off high voltage power lines.

A WAPA spokeswoman, however, denied the millions of dollars in potential credit card fraud had any effect on grid security.

“There is no connection between our enhanced internal controls process and our physical security efforts,” Teresa Plant, WAPA’s chief public affairs officer, told TheDCNF.

Overtime at Cabela’s

“Of the transactions reviewed, we identified more than 11,600 transactions totaling approximately $6.8 million that required further review by regional and headquarters’ officials,” reads a February 2016 audit of government purchase cards, or GPCs, used by WAPA employees from December 2014 to October 2015.

The February audit found WAPA employees had made $1.8 million worth of credit card purchases “to merchants such as, Amazon, Cabela’s, Walgreens, Bass Pro Shops, Target, and others” for things like high-end camping knives, ammunition, weapons gear and even refrigerators for their government cars.

“They were buying stuff and filling up the back end of Ford Expeditions with items,” a source who witnessed WAPA employees flaunting their purchases told TheDCNF. “Instead of having a cooler in their truck, they had these $800 refrigerators.”

WAPA employees “thought they were saving money by not buying ice,” the source said, barely able to contain his laughter.

“They were buying lift kits for their own personal vehicles and going to this specific shop,” the source added. “All of it was on work time.”

WAPA employees had also spent nearly $350,000 upgrading their government and personal trucks with “lift kits, off road shocks, custom wheels and tires, custom bumpers, cargo glides, winches, step bars, new radios, GPS units, and tool boxes,” according to the February report.

The February report, however, was only the “capping” report that summarized an internal investigation by WAPA’s compliance office that wasn’t released to the public. It largely builds off a previous audits into WAPA regional office in Phoenix, Arizona, called the Desert Southwest (DSW) Region.

A December 2014 audit of DSW’s credit cards found more than $220,000 spent on upgrades to General Services Administration vehicles without permission. Upgrades also included: “lift kits, off road shocks, custom wheels and tires, custom bumpers, fog lights, winches, new radios, GPS units, and tool boxes.”

“Basically DSW spent upwards of $400K just altering these trucks. Some of these trucks had XM satellite radio,” a source noted. “Some even had refrigerators in them.”

The DSW audit also found tens of thousands of more dollars were spent on gear they couldn’t justify. Sources said workers even went out shopping while working.

“Majority of these people doing it were still getting overtime,” a source told TheDCNF. “You’re shopping at Cabela’s and still getting overtime?”

One source said he witnessed workers coming back from a Cabela’s shopping spree with a car full of goods they bought using government credit cards, but he was reluctant to report them over fears of union reprisal.

“These guys were union linemen and in my business you leave those guys alone or they’ll pack your lunch. My job would be in jeopardy,” the source said, noting linemen belonged to the International Brotherhood of Electrical Workers, or IBEW.

It Goes Right To The Top

Potential fraud is only a symptom of a larger problem at WAPA. The internal audits revealed that management was not keeping records of purchases being made on credit cards.

“There’s no controls in place,” a source said. “That just goes right to the top.”

While sources suggested some managers may have condoned fraud across WAPA, the audit found there was a complete breakdown in company oversight.

“We identified minimal monitoring or oversight activity directed at assessing program results, evaluating internal control, or identifying the extent of potentially fraudulent, improper, and abusive or questionable purchases,” the December 2014 audit of DSW found.

“We found overall control environment weaknesses at DSW that contributed to breakdowns in key control activities and potentially fraudulent and improper purchase card transactions,” the audit found.

At the time, DSW had 216 employees with 65 government purchase cards. In total, WAPA has more than 1,400 employees with 476 government credit cards.

“Of the 12,000 transactions reviewed, we could not find documented evidence that the priority of sources requirements was met or considered,” reads the February 2016 internal audit.

“Specifically, we identified ineffective monitoring or oversight activities for assessing program results, evaluating internal controls, and identifying the extent of potentially fraudulent, improper, and abusive or questionable purchases,” the February audit found.

“It permeates every level of the organization,” another source familiar with WAPA’s inner workings told TheDCNF, referring to the lax oversight at the utility.

WAPA senior officials’ failure to properly document what their employees were spending on their credit cards highlights a bigger problem than just fraud. They can’t even be sure what they’re buying and how much they’re spending.

One source said he believed most people at WAPA were trying to use the correct processes to purchase what they needed to get the job done, but law management means their purchases are now being flagged for potential fraud.

“I think a lot of people went through and tried to go through the process, but that was after people had already modified their vehicles,” the source said.

But other sources noted the internal audits are only a snapshot of the improper spending at WAPA. Both the 2014 and 2016 audits are only samplings of the credit card purchases made at DSW.

“It doesn’t even show up that people bought weapons, gear and ammunition,” a source said. “There were people who bought high-end knives. Some of these guys had like five credit cards.”

“If somebody did a 100 percent audit, it would be a complete mess,” the source said.

Sources also noted workers were using DOE credit cards as well as GSA credit cards to make purchases. The internal audits also note how WAPA employees were using convenience checks to buy things as well. The February audit found employees used convenience checks for more than $2.3 million in purchases and racked up more than $35,000 in fees.

WAPA Responds

Plant told TheDCNF WAPA has been working to crack down on misuse of government credit cards ever since the December 2014 audit. She said “WAPA initiated a proactive self-check process to validate our compliance with Government Purchase Card procedures and to identify where we needed to improve our business practices.”

“The internal audit uncovered some procedural non-compliance in the WAPA-wide GPC program and also a few isolated incidents of misuse in prior year,” Plant said. “These incidents were investigated by WAPA’s management and those that warranted more attention were reported to the Department of Energy’s Office of Inspector General.”

She also said WAPA had put into place “corrective actions, added additional purchase card training for cardholders, approving officials and management, and created policies to hold people accountable for adhering to the GPC program.”

“Today, we are engaged in regular follow-up audit activities to verify the success of the corrective actions we have implemented and that compliance with our GPC policies, procedures and internal controls are indeed working,” she said.

Click here to read the December 2014 internal audit of DSW

Click here to read the February 2016 internal audit of WAPA


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