WASHINGTON — Federal judges have overturned decisions by the Department of Veterans Affairs to demote two senior officials accused of manipulating the agency's hiring system for their own gain.

The VA demoted Kimberly Graves and Diana Rubens last month. The VA's acting inspector general said the pair forced lower-ranking managers to accept job transfers and then stepped into the vacant positions themselves, keeping their senior-level pay while reducing their responsibilities.

Rubens earns $181,497 as director of the Philadelphia regional office for the Veterans Benefits Administration, while Graves receives $173,949 as head of the St. Paul, Minnesota, benefits office.

An administrative judge reversed Graves' demotion Friday, saying higher-ranking officials knew about her plans and did nothing to stop them. A different judge reversed Rubens' demotion Monday on similar grounds.

"There is a significant problem created by the inconsistent treatment of a comparable employee," Judge William Boulden wrote, referring to Beth McCoy, a VBA official who also pressured a regional manager to leave his position. McCoy was never disciplined and was later promoted, Boulden noted.

Rubens told the judge at a hearing that she "did not hide any of her actions" and that at least three higher-ranking VA officials — including Allison Hickey, the VA's undersecretary for benefits — were aware of the scheme.

Hickey resigned in October amid criticism of a chronic backlog in disability claims and questions about her role in the transfers obtained by Rubens and Graves. The report by the inspector general's office said Hickey and other top VA officials likely encouraged the scheme.

Veterans Affairs Department St. Paul Regional Office Director Kimberly Graves listens during a Nov. 2, 2015, hearing on Capitol Hill in Washington.

Photo Credit: Molly Riley/AP

In a separate ruling last week, Judge Michele Szary Schroeder said penalizing Graves was inconsistent with the VA's failure to discipline the higher-ranking officials, particularly Danny Pummill, a top VBA official in Washington who was aware of the actions by both Graves and Rubens.

"If no one in her chain (of command) said, 'Wait, this will not look right' when they approved her reassignment, how can a penalty be imposed against Ms. Graves for not saying that?" Schroeder wrote in a 41-page opinion on behalf of the Merit Systems Protection Board, a quasi-judicial agency that reviews personnel actions in the executive branch.

Rep. Jeff Miller, R-Fla., chairman of the House Veterans Affairs Committee, called Schroeder's ruling "a twist of tragic comedy."

The VA's attempt to discipline Graves "was undone by its refusal to discipline other employees involved in this scandal," Miller said. "By now there should be no doubt whatsoever that our federal civil service system is in need of drastic reform."

The VA declined to comment on Rubens and Graves, but said in a statement that where evidence warrants disciplinary action, the agency will take action.

"In all accountability actions our decisions must be based on the evidence, not on hearsay," said Deputy VA Secretary Sloan Gibson.

Before taking their current jobs, Rubens was a deputy undersecretary at the VA's Washington headquarters, while Graves was director of VBA's 14-state North Atlantic Region.

In addition to their job assignments, Graves and Rubens have been under investigation for obtaining more than $400,000 combined in questionable moving expenses under a VA relocation program that has since been suspended.

Rep. Tim Walz, D-Minn., a member of the House veterans panel, called the ruling in favor of Graves "ridiculous" and said lawmakers "cannot let up in pushing for fundamental change that puts service to veterans above all else."

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