The military buys billions of dollars in equipment every year -- everything from planes and tanks to bicycles and bandages, and the government loses track of a whole lot of this stuff. It winds up being sold on the Internet. You can buy it. Heck, you've already bought it.

Greg Kutz, Government Accountability Office (GAO): "Okay, the first item we have here is gauze."

Greg Kutz sounds like he's starting his own shopping channel as he shows us some of the military gear he bought online.

Greg Kutz, GAO: "This is a power supply unit for the sea wolf nuclear submarine."

Kutz bought all kinds of stuff as a government auditor checking on billions spent by the Pentagon. He bought cold weather boots, circuit boards, uniforms, medical cabinets, tires and even equipment that could be used to produce and disseminate anthrax. Much of it brand new and unwrapped.

Greg Kutz, GAO: "Well it was a breakdown in their system to reutilize property."

As Kutz explains, there are systems at the Pentagon to keep new equipment from being thrown away or sold off cheap, but those systems don't work.

Out of $2.5 billion dollars worth, the Pentagon used only 12 percent. Another 10 percent was transferred to other government agencies. A full quarter of it was thrown away, brand new stuff into the landfills. And the rest was sold to the public, $1.3 billion dollars worth of new gear sold for what the report terms pennies on the dollar, at the same time the military was paying top dollar purchasing the same or similar items new.

Greg Kutz, GAO: "We identified at least $400 million dollars of items that they were giving away selling for pennies on the dollar or destroying at the same time they were in demand by the military forces."

So, the government is buying boots for $134 dollars a pair and at the same time it's selling identical boots for $12 dollars, or whatever you want to bid.

Phil Montalbano of Daly City is scanning govliquidation.com, a Web site where in one case GAO investigators paid $1,471 dollars to buy new equipment which originally cost $68,000. Do you know who gets stuck with the $66,000 dollar loss?

Phil Montalbano, Daly City: "Us right, taxpayers."

That's right. Greg Kutz says he documented $400 million dollars over two years, but that's only a fraction and it's been going on for more than a decade.

Rep. Ellen Tauscher, (D) Walnut Creek: "Anything the Pentagon wants they get."

Walnut Creek representative Ellen Tauscher sits on the Armed Services Committee.

Rep. Ellen Tauscher, (D) Walnut Creek: "This is the far right hand not knowing what the right hand is doing."

Tauscher blames Republicans.

Christopher Shays is the Republican whose committee is conducting the investigation.

Rep. Christopher Shays, (R) Connecticut: "It's very disconcerting because it's been around for a while and we've had hearings and we've wanted to see changes."

But the changes aren't coming nearly fast enough says Congressman Shays. And the people who are getting stuck with the bill expect it.

Click here to visit www.govliquidation.com.