'Nightline' Investigation: Wounded Soldiers Told They Owe Money to Army

An update on Staff Sgt. Eugene Simpson follows at the bottom of this story .

It was one of the thousands of roadside bombs in Iraq that paralyzed Staff Sgt. Eugene Simpson.

"My first instinct was to jump farther back into the Humvee, you know, for protection," Simpson said. "But in doing that, I opened my back up to all the scrap metal and debris, which hit my spine and severed my spine, paralyzing me."

He was soon on a plane home.

Fast-working, skilled Army doctors saved his life, as they have so many.

Slow, bumbling Army bureaucrats would make his life miserable, as they have so many.

"And the military basically is, like, they turn their back on you, you kind of feel that you've just been used," Simpson said.

No Pay for Four Months

It started with a phone call from his wife, home with their four children. She didn't have enough money to pay the bills.

"And she was like, well, we haven't been paid," Simpson said. "And you know, instantly I was like, I don't know what to do. You know, I'm still in the hospital. I can't actually get up and go around and talk to these different people."

And until "Nightline" inquired at the Pentagon, Simpson said he could not find out what happened.

"Every day is something different," he said. "Well, this person isn't in. I'll have them call you back, give it a couple days. Couple days go by, I call back, well I got somebody else for you to talk to. And days lead to weeks, and weeks lead to months."

It turns out the Army had mistakenly continued to pay Simpson a combat duty bonus while he was in the hospital.

He had been overpaid thousands of dollars, and the Army wanted the money back.

"By law, he's not entitled to the money," said Col. Richard Shrank, "so he must pay it back."

Shrank said although that is the law, soldiers can apply for debt forgiveness if they believe the debt is a mistake. So far, more than 800 soldiers have done so. More than 600 of those requests have been granted, amounting to more than $600,000.

So, the Army said it withheld the paralyzed soldier's pay until it got back the amount he owed -- with no advance notice, Simpson said.

"Four months," he said. "I didn't get paid for four months."

An Ongoing Problem

Simpson is not the only one. A study commissioned by the First Infantry Division estimated that eight out of 10 of its wounded soldiers from Iraq have gone through the same or a similar ordeal.

Capt. Michael Hurst, now out of the Army, conducted the study.

"You have to understand that these soldiers are suffering from incredible injuries, some of them have lost limbs, some of them may never walk again," Hurst said. "And in the midst of that struggle, to then get a paycheck for nothing really hurts morale."

And the Army can play tough to get its money back.

In the case of Sgt. Ryan Kelly, who lost his leg in Iraq, he had just finished going through rehabilitation when the Army sent a letter threatening to ruin his credit and call in debt collectors.

He had been overpaid by $2,200 while in the hospital, but, like most, never realized it.

It took Kelly almost a year to cut through the red tape and get the debt forgiven.

"Soldiers receive a paycheck and reasonably think that this is their accurate pay for the month," Hurst said. "And being in the situation they're in, having just been injured and in some cases spouses have to quit jobs in order to spend time at Walter Reed, many of these families are really hurting for funds. So a lot of that money gets spent right away."

'Failed Test'

The Government Accountability Office described the Army as having failed the test of taking care of its wounded from Iraq.

The report concluded that the soldiers fighting to defend the nation have paid the price for that failure.

Shrank disagreed, however. "No, I would not agree that we have failed the test, because we are making the fixes to bring it up to standard," he told "Nightline."

Shrank took over as commander of the United States Army Finance Command last summer to help fix the problem, a problem the GAO said had been ignored until the soldiers went public.

"Nightline" asked when the problem was first realized and why it took so long to realize it.

"We first realized it was a problem when it came into our view through many different channels," Shrank said. "You see it on [television], read about it in the papers. A soldier without a paycheck is a situation that nobody wants to see."

Shrank was asked if it had happened thousands of times. "I, no, I do not think thousands of times," he said. "It happened, one time is too many."

Shrank could not name an exact number, but the Army told "Nightline" that 5,549 soldiers, or about one out of five soldiers who were removed from battle for medical reasons later had payroll problems.

'Nobody Planned for This to Happen'

"You know, as a West Pointer and as a leader in the Army that one of the main things that we're taught is when you have soldiers that you are responsible, you have to take care of them, you have to take care of their family," Hurst said.

"And that's kind of the exchange that takes place between leaders and soldiers. And for a lot of these soldiers this is just a betrayal really. They feel abandoned, when they're in such a vulnerable position and their leaders aren't taking care of them."

Shrank said the process failed the soldiers, "but the leaders didn't fail the soldiers because we are making the changes to improve the processes to take care of our soldiers and their pay."

Shrank said he is not aware of anyone losing their command over the thousands of incidents. When asked if the problem could not have been anticipated, he said, "As we experienced taking care of pay for our wounded soldiers, we saw that the, what we had in place did not work. As I told you."

"Well," he added, "nobody planned for this to happen."

Shrank said, "It was planning that did not meet the standard and the execution that we wanted to achieve."

Fixing the Problem

Shrank said he's moving fast to fix the problem.

There's still no integrated payroll computer system, but now wounded soldiers are assigned a finance officer once they arrive at the Landstuhl Army Hospital in Germany to help keep track of payroll changes and problems.

And the colonel says wounded soldiers like Kelly will no longer be reported to credit agencies or have debt collectors go after them.

"The soldiers have a right to feel that the system let 'em down," he said. 'And it did let them down. This, we know this. We see this. This is why we fixed the system."

Meanwhile, Simpson gave up trying to rectify the situation. "I mean, I've had people on the phone just flat out tell me, I can't help you, no need for you to call here anymore," he said.

Shrank said for those like Simpson, "I would tell those soldiers that I care about them," he said, adding, "And I want to see that they received their proper pay."

In fact, he told "Nightline," he wants soldiers in this situation to call him. "Yes," Shrank said. "If that's what it takes, yes."

Update: Feb. 3, 2006 -- After this story aired on "Nightline," the Army immediately gave Eugene Simpson his long-awaited back pay. It will go a long way towards paying his bills.