A funny thing happened after federal authorities arrested several military veterans last year and accused them of lying about how far they drove to get to medical appointments at the Veterans

Affairs Medical Center in Seattle.

A bunch of others, who didn’t get busted, stopped filing for so much money in mileage reimbursements, and the VA hospital began saving tens of thousands of dollars a month, officials say.

“We are taking this benefit-travel fraud seriously because of the amount of money that’s going out the door,” says James O’Neill, the VA’s assistant inspector general for investigations. “When we can publicize the ramifications of committing this fraud and being prosecuted, we can really reduce it.”

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Ten people, including two VA clerks who admitted taking kickbacks, were charged in federal court in Seattle, and several are to be sentenced this week. Others already have been given prison terms of up to two years.

They acknowledged abusing a national program that allows veterans to be reimbursed for travel expenses if they meet certain income- and disability-related criteria.

Some reported driving across the state to appointments even if they lived nearby, and some reported traveling when they didn’t have appointments at all.

Their haul: more than $180,000 from late 2010 to mid-2012.

The number of investigations into such activity has soared nationally since 2008, when the VA’s rate for mileage reimbursement jumped from 11 cents, where it had been set for 30 years, to 41.5 cents, O’Neill says.

There was one investigation in 2006, one in 2007, and one in 2008.

In the past 18 months, the VA’s Office of the Inspector General has opened 225 investigations of benefit travel fraud and made 125 arrests.

Among the recent cases:

• 16 people were indicted in Cleveland last year and charged with stealing a combined $250,000 in fraudulent mileage reimbursements.

• A veteran in Maine pleaded guilty last September to charges of falsely claiming more than $17,000 in travel reimbursements.

• Last April, a veteran in Oklahoma City was sentenced to probation and ordered to return more than $36,000 in false mileage claims.

The investigation into the Seattle case, which began in early 2012, determined that two of the four VA clerks who then processed travel-benefit claims, Nick Hall and Keishjuan Daniels, had been recruiting veterans to submit false mileage forms.

The veterans would frequently claim they had traveled to their appointments from addresses in Eastern Washington, hundreds of miles away.

The veterans then would take vouchers from Hall and Daniels, go to another window and walk away with cash. They’d meet up with Hall or Daniels nearby — in the restroom, or a stairwell, or the VA canteen — and fork over half the money.

“It was policy that nobody on the clerk’s side would check,” said Hall’s lawyer, Stephan Illa. “If you went and said you were driving in from Wenatchee, the clerks would just pay it.”

The VA’s inspector general released a review of the travel-benefit program early this year that criticized a lack of controls to prevent fraud and said the VA has been taking steps to improve the program. O’Neill cited additional training, more certification forms and new posters that warn about fraud.

Prosecutors are seeking sentences of 3½
years for Hall and Daniels, both of whom had lengthy noncombat military careers and no prior criminal record.

“Through Hall and Daniels’ crimes, the veterans they recruited were exposed to criminal convictions, often the loss of their VA supported housing, and in some instances imprisonment,” Assistant U.S. Attorney Kate Vaughan wrote in a sentencing memo.

“Hall and Daniels’ crimes also impacted other veterans who receive much needed VA services. Hall and Daniels stole over $180,000 from VA funds, which are used to pay physician and nurse salaries, for mental health counseling, and other services for needy veterans.”

Since the Seattle arrests, the number of veterans claiming reimbursements of more than $500 per month has dropped by about one-third — even though those arrested represent just 6 percent of that population, O’Neill said. The amount of money the Seattle VA pays for claims made by veterans in that group has dropped from $104,000 per month to $51,000.

O’Neill said his agency doesn’t have enough staff to handle all benefit-travel fraud cases and other cases, such as drug and fraud cases.

Other travel-benefit fraud investigations remain open in the Seattle area, said Dave Martin, resident agent in charge of the VA inspector general’s criminal investigations division in Seattle.