individuals, the type of irregularities and violations involved. I ask this because we have been speaking in very general terms about irregularities.

Mr. GOODE. Yes. General Cheney will answer that.

General CHENEY. You have involved in some cases larceny which might fall under the more specific heading of embezzlement. This is the general run of things that you have in the open mess irregularities.

You have the question of acceptance of gratuities from vendors to the nonappropriated fund managers and people working for them. Senator INOUYE. What sort of gratuities, sir?

General CHENEY. Well, I think in some situations we have had provision of entertainment, provision of trips and things of this sort, providing of minor gifts. This sort of thing is what it generally runs into.

Then you have kickbacks where the vendor to the club enters into a contract with the manager and he receives the manager receives a kickback from the vendor.

Senator INOUYE. Is this any significant amount?

General CHENEY. I am not aware of any that I would consider a great amount in any particular case. I think it probably depends on what you consider to be a great amount, but I think to my knowledge, the cases that I have looked at, the sums are relatively small, depending upon the size of the contracts, maybe a hundred dollars, in some cases, maybe a thousand dollars. You don't get up into vast sums of money, mostly on the petty scale.

We have involved the violation of regulations. Actually the acceptance of gratuities is generally charged as a violation of regulations because it does constitute a violation of our Air Force regulation 30-30.

We do have allegations of bribery, that is, an occasional one. And we have had and we do have the allegation of extortion in one case I know of.

Senator INOUYE. What sort of extortion?

General CHENEY. I cannot give you the specific details on it, but where the manager attempted to threaten the vendor if he didn't provide a kickback, something of this sort, again on a more or less minor scale.

You have other various things that we have charged-I am getting into the legal effect of how the charge is wrongful appropriation which is just a question of larceny with a lesser intent than larceny.

You have had soliciting of gratuities and bribes as well as the actual acceptance of gratuities and bribes, and we have had the failure in one case I know of, of a custodian to report shortages which is a dereliction of duty.

I think that by and large covers the general run of the type of offenses that we have found.

Senator INOUYE. Have you found any carrying on of illicit or illegal activities such as prostitution?

General CHENEY. I don't recall any specific case of prostitution. I know that we have not made it the subject of any charges. You may have found it in the general investigation. I don't know that we have found any of that. I know it has never been the subject of charges to my knowledge.

Senator INOUYE. What sort of activities are involved in relation to slot machines.

General CHENEY. In relation to slot machines? Several types of things. You have on the one hand people who through some device or mechanical means or otherwise attempt to get the machines to pay off when they are not supposed to pay off. This is, of course, not in the operation of the thing. This is just someone who comes into the club and uses it.

Then you have the manager who has false jackpots in collusion with someone who uses the machine and the person on duty in the club, they will enter into collusion to report jackpots that were actually not paid and will pay off jackpots.

Then, of course, at the supervisory level we have had people supervising the clubs who have failed to report the income from the machines and divert it, something of this sort. This is generally the nature of things that you get into with slot machines.

Senator INOUYE. In the area of kickbacks, in terms of monetary amounts, what percent of the gross sales did it involve; 5 percent, 10 percent?

General CHENEY. Mr. Chairman, again as General Cappucci stated, I don't really know, but I am sure it certainly falls into less than 5 percent, far less than 5 percent of the gross revenue.

Most of the cases, as I say, that we have had involve relatively small amounts of money. I know of one case which was an old, old case, and we did prosecute it and this was some 7 or 8 years ago in which there was allegedly some $100,000 involved, but that was a long time ago. I know of no present case with any sums of money like that involved.

Senator INOUYE. What would be the largest amount involved in any individual case?

General CHENEY. Can you answer that, General Cappucci, as a result of your investigations?

General CAPPUCCI. Well, one subject of our investigation, when we apprehended him, had $6,500 on his person which he could not account for and refused to make a statement about it. That is the largest sum we have come across in our investigations.

I might add, Mr. Chairman, that in several of these cases we are still trying to locate bank accounts and we still have some leads out on those, and we may come up with even more money. But in some cases they put small sums of money in banks where they have never been before, in areas where they have never lived, but they may have friends or relatives that bank the money for them. We still have several of these leads out.

Senator INOUYE. I appreciate this background information, sir. General Dupont, I would like to ask a few questions. On the first page of your statement, you have indicated that General Russell, the Deputy Chief of Staff of Personnel, has the responsibility of policy guidance. Does this mean that your office rather than the Secretary's office is responsible for making policy?

General DUPONT. For Headquarters, USAF, as far as the Air Staff is concerned, yes. The Deputy Chief of Staff, Personnel, through my particular staff, does write the policy and coordinate it.

Senator INOUYE. Then the statement by Secretary Goode which I quote "At the secretarial level, we provide broad policy guidance to the Air Staff," is not quite correct.

General DUPONT. I say we write it for the Air Staff itself. Quite obviously, we follow the directions and the policy of the Secretary of the Air Force.

Senator INOUYE. In your statement, you have indicated that your office conducts periodic staff visits to the major commands to coordinate your efforts. How often do you make these visits?

General DUPONT. They are rather infrequent, Mr. Chairman. We are not staffed to conduct frequent visits. We do have communications, of course, other than personal visits. We are in communication with the people who administer the programs down at the major command levels. But to answer your question specifically, I would say our staff visits are rather infrequent to any one major command.

Senator INOUYE. Are these no-notice visits?

General DUPONT. No, sir; I would like to make it clear that whereas we write the policy guidance and the operational manual at the Air Staff, we have delegated primary authority to the major commanders for the administration of their messes, and as such, we look to them and their staffs who are devoted to the task of administering the open mess and nonappropriated fund activities.

Senator INOUYE. In your visits, have you noticed some disparity or is the same level of control being exerted by all of the commands? General DUPONT. I would say in the last year, sir, that all the commands have made a concerted effort. As I tried to outline in general terms, there has been tremendous emphasis placed on the overall open mess and nonappropriated fund activities and closer controls over their operation. As such, we have received feedback from all the major commands which indicates they are not only doing what they have been asked to do by the Vice Chief of Staff and others, but they have also instituted additional efforts on their own which do differ between major commands.

Senator INOUYE. You mention seminars in your statement. Are these seminars compulsory for managers?

General DUPONT. All the managers are invited, yes.

Senator INOUYE. They are invited, or are they compelled to attend! General DUPONT. Well, when they are invited, they do attend. These are infrequent at Air Staff level. I would also say that at major command level they do the same thing. Headquarters, Pacific Air Force is having one in the very near future where all their primary people will attend.

Senator INOUYE. On the second page of your statement, you state, "We establish policy and guidelines for the administration of military and civilian employees of open messes." Does this include hiring or is it restricted to their conduct during the course of the employment? General DUPONT. It includes all the administration of military and civilian personnel. I don't know of any restrictions on this. DOD, of course, does play a part in the administration of nonappropriated fund personnel. It is my understanding that they now have a rather comprehensive study underway which is meant to produce improved guidelines for the services to work with. But in the meantime, as far as headquarters USAF is concerned, yes, the guidelines do come out for

the hiring, for the payment, for the firing. All those things that pertain do come out of the Air Staff.

Senator INOUYE. Would you be able at this time, or later on, to give us a breakdown on the amounts involved in different categories? I notice the full amount is $282 million, net income $14.5 million. Would you tell us how much is derived from slot machines, how much from the bar, and from food, and so forth?

General DUPONT. Yes, sir. I believe we have that, and we will be glad to submit it.

Senator INOUYE. Thank you, sir. Do you conduct security investigations on the background of persons who apply for employment? General DUPONT. Yes, sir.

Senator INOUYE. I am referring to investigations for possible criminal background.

General DUPONT. You are talking about both military and civilians, I am sure.

Senator INOUYE. Yes.

General DUPONT. On the military personnel, of course, we do review all their personnel records. It is required that all their service be evaluated in terms of whether they are potentially qualified and whether they have any background which would indicate they should not be placed in this type of duty. We have underway in our revised manual a mandatory requirement that every individual who is selected must have a national agency check. If there is indication of any conviction, any lack of integrity, that man will not be selected to go into that field where moneys are involved.

Senator INOUYE. Do you require your club managers, whether they be civilian or NCO's, to file with your office copies of income tax returns?

General DUPONT. No, sir.

Senator INOUYE. Do you think this would be advisable?

General DUPONT. I would have to get some counsel on that question. I am not sure whether this would be in the best interests of the Air Force or not. I know what you are getting at, and on the surface my answer should be yes, but I would prefer to defer that until I get some advice on it.

Senator INOUYE. If you could furnish us with a statement for the record, as to the advisability of such a policy, I would appreciate it. General DUPONT. Yes, sir, I will.

(Information referred to follows:)

We question the propriety of requiring club managers to file a copy of their individual Federal income tax returns as a condition to employment. It may be reasonably argued that such a condition of employment is a violation of constitutional rights, an unreasonable invasion of their private affairs, etc. Regardless

of the questionable legality, it is our view that it is unlikely that those who profit illegally would include the ill-gotten gains as reportable income. For example, a review of past cases reveals that none of those investigated or convicted for accepting bribes, grafts or gratuities did, in fact, report such on their Federal income tax returns. Therefore, we conclude that it would be of doubtful value to the Air Force to impose such a requirement as a condition of employment.

Senator INOUYE. I asked a question of General Cappucci earlier as to the coincidence in timing and scheduling of the September survey. Now, I would also like to ask you whether the survey conducted as a result of Senator Ribicoff's investigation?

General DUPONT. It was conducted as a result of a letter that the Secretary of Defense wrote to the Chief of Staff of the Air Force, and I am sure to the other services on August 12, 1969, in which he asked us to review all the controls, all the procedures that apply to our open messes to insure that we have adequate controls and that they are being run properly.

As a result, we did have a very massive review of all the activities associated with our open messes.

Senator INOUYE. You speak of your office receiving feedback from various sources that policy guidance was being ignored at the local level.

Are you suggesting that prior to this year, you did not receive this kind of feedback in spite of the 123 investigations conducted in fiscal

1968 and 1969 ?

General DUPONT. We have always received feedback from the audit reports, reports of irregularities, and, any of the monthly analyses of the clubs that would indicate any trend which was not the norm. These have always been reviewed by our office.

Senator INOUYE. But you did not consider this feedback as out of the ordinary?

General DUPONT. No. In any large business like this, there will be irregularities. I don't think any of us will deny that. But they were not of the magnitude that we are reviewing right now where we have had the numbers of no-notice inspections, the auditor review, and so forth, which has surfaced rather a profound number of irregularities. But I wouldn't want you to misunderstand me. We have had feedback. We have acted on that feedback. We have corrected manuals. We have taken action against the individuals concerned. All these things have been going on over the years.

Senator INOUYE. I have noticed that in many programs carried on by the Defense Department, the Department has found it necessary to retain the services of consulting companies. Has your office sought the advice of consultants on the management of open mess systems?

General DUPONT. We do have our own consultants within the Air Force, and I look upon, for example, the Comptroller as one of our very closest consultants. He is an expert in the field. He writes the accounting manual for the open messes. He reviews our operational procedures. There is very close coordination between all the agencies concerned, and I would say that we do have our experts and do coordinate and we de make use of them.

Senator INOUYE. I commend you for the command emphasis on controlling open mess operations. Do you believe that this new emphasis will lead to more effective policing of the system?