[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                 EXAMINING FEDERAL EFFORTS TO PREVENT,
                 DETECT, AND PROSECUTE PANDEMIC RELIEF
                    FRAUD TO SAFEGUARD FUNDS FOR ALL
                           ELIGIBLE AMERICANS

=======================================================================

                                HEARING

                               BEFORE THE

             SELECT SUBCOMMITTEE ON THE CORONAVIRUS CRISIS

                                 OF THE

                   COMMITTEE ON OVERSIGHT AND REFORM

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 14, 2022

                               __________

                           Serial No. 117-86

                               __________

      Printed for the use of the Committee on Oversight and Reform
      
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]      


                       Available on: govinfo.gov,
                         oversight.house.gov or
                             docs.house.gov
                             
                             __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
47-805 PDF                 WASHINGTON : 2022                     
          
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                   COMMITTEE ON OVERSIGHT AND REFORM

                CAROLYN B. MALONEY, New York, Chairwoman

Eleanor Holmes Norton, District of   James Comer, Kentucky, Ranking 
    Columbia                             Minority Member
Stephen F. Lynch, Massachusetts      Jim Jordan, Ohio
Jim Cooper, Tennessee                Virginia Foxx, North Carolina
Gerald E. Connolly, Virginia         Jody B. Hice, Georgia
Raja Krishnamoorthi, Illinois        Glenn Grothman, Wisconsin
Jamie Raskin, Maryland               Michael Cloud, Texas
Ro Khanna, California                Bob Gibbs, Ohio
Kweisi Mfume, Maryland               Clay Higgins, Louisiana
Alexandria Ocasio-Cortez, New York   Ralph Norman, South Carolina
Rashida Tlaib, Michigan              Pete Sessions, Texas
Katie Porter, California             Fred Keller, Pennsylvania
Cori Bush, Missouri                  Andy Biggs, Arizona
Shontel M. Brown, Ohio               Andrew Clyde, Georgia
Danny K. Davis, Illinois             Nancy Mace, South Carolina
Debbie Wasserman Schultz, Florida    Scott Franklin, Florida
Peter Welch, Vermont                 Jake LaTurner, Kansas
Henry C. ``Hank'' Johnson, Jr.,      Pat Fallon, Texas
    Georgia                          Yvette Herrell, New Mexico
John P. Sarbanes, Maryland           Byron Donalds, Florida
Jackie Speier, California            Vacancy
Robin L. Kelly, Illinois
Brenda L. Lawrence, Michigan
Mark DeSaulnier, California
Jimmy Gomez, California
Ayanna Pressley, Massachusetts

                    Jennifer Gaspar, Staff Director
                          Derek Collins, Clerk
                      Contact Number: 202-225-5051

                  Mark Marin, Minority Staff Director

             Select Subcommittee On The Coronavirus Crisis

               James E. Clyburn, South Carolina, Chairman
Maxine Waters, California            Steve Scalise, Louisiana, Ranking 
Carolyn B. Maloney, New York             Minority Member
Nydia M. Velazquez, New York         Jim Jordan, Ohio
Bill Foster, Illinois                Mark E. Green, Tennessee
Jamie Raskin, Maryland               Nicole Malliotakis, New York
Raja Krishnamoorthi, Illinois        Mariannette Miller-Meeks, Iowa
                        
                        
                        C  O  N  T  E  N  T  S

                              ----------                              
                                                                   Page
Hearing held on June 14, 2022....................................     1

                               Witnesses


Michael Horowitz, Chair, Pandemic Response Accountability 
  Committee
Oral Statement...................................................     5

Hannibal ``Mike'' Ware, Inspector General, Small Business 
  Administration
Oral Statement...................................................     7

Kevin Chambers, Director for COVID-19 Fraud Enforcement, 
  Department of Justice
Oral Statement...................................................     8

Roy D. Dotson, Jr., Acting Special Agent in Charge, National 
  Pandemic Fraud Recovery Coordinator, United States Secret 
  Service
Oral Statement...................................................    10

  * Written opening statements and the written statements of the 
  witnesses are available on the U.S. House of Representatives 
  Document Repository at: docs.house.gov.

                           Index of Documents

                              ----------                              
  * OIG COVID-19 Fraud Investigations, Indictments, and 
  Convictions; submitted by Chairman James Clyburn.

No additional documents were entered into the record for this 
  hearing.

 
                 EXAMINING FEDERAL EFFORTS TO PREVENT,
                 DETECT, AND PROSECUTE PANDEMIC RELIEF
                    FRAUD TO SAFEGUARD FUNDS FOR ALL
                           ELIGIBLE AMERICANS

                              ----------                              


                         Tuesday, June 14, 2022

                   House of Representatives
                  Committee on Oversight and Reform
              Select Subcommittee on the Coronavirus Crisis
                                                   Washington, D.C.

    The subcommittee met, pursuant to notice, at 10:05 a.m., in 
room 2247, Rayburn House Office Building, and via Zoom; Hon. 
James E. Clyburn (chairman of the subcommittee) presiding.
    Present: Representatives Clyburn, Maloney, Foster, Raskin, 
Krishnamoorthi, Scalise, Green, Malliotakis, and Miller-Meeks.
    Chairman Clyburn. Good morning. The committee will come to 
order. Without objection, the chair is authorized to declare a 
recess of the committee at any time. I now recognize myself for 
an opening statement.
    The coronavirus crisis caused significant economic 
suffering as millions of Americans lost their jobs and 
businesses struggled to keep their doors open. Congress took 
decisive action to ease this pain, appropriating unprecedented 
relief for small businesses and workers who lost their jobs. 
First, through the CARES Act, and later, under President Biden, 
through the American Rescue Plan. These laws funded the Small 
Business Administration's Paycheck Protection Program or PPP, 
and Economic Injury Disaster Loan program or E-I-D-L, we call 
EIDL, as well as expanded unemployment insurance.
    Unfortunately, criminals and criminal organizations took 
advantage of Americans suffering during this crisis and 
committed substantial fraud against these critical pandemic 
relief programs, stealing billions of dollars in aid. These 
acts of fraud are not victimless crimes. This fraud exhausted 
funds badly needed by eligible Americans, particularly funds 
allocated to support small businesses that are crucial to 
making the American economy thrive.
    In some cases, pandemic relief fraud involved a tentative 
theft that prevented innocent people from accessing 
unemployment insurance when they lost their jobs and were in 
desperate need of assistance. In other cases, pandemic fraud 
put identity theft victims' credit at risk as fraudulent relief 
loans were taken out in their names.
    The Trump administration contributed to this problem by 
failing to put basic fraud controls in place to protect these 
vital relief programs and American taxpayers from fraud. Today, 
the select subcommittee released a report showing that under 
the Trump administration, SBA failed to implement basic 
safeguards to prevent fraud against the EIDL program. The Trump 
administration even directed loan officers to approve EIDL loan 
applications when there were clear indications that the 
applicants were engaged in identity theft. This both depleted 
funds from a critical relief program and put Americans at 
increased risk of suffering the consequences of identity theft.
    The SBA Office of Inspector General similarly found that 
during the Trump administration, SBA failed to use sufficient 
controls to prevent PPP fraud--and I'm quoting here, ``lowered 
the guardrails,'' end of quote, in the EIDL program, 
significantly increasing fraud vulnerabilities.
    We look forward to hearing from SBA Inspector General Ware 
today about his office's efforts to address the fraud that 
occurred because of these failures, including his office's work 
to recoup taxpayer dollars lost to fraud. The Biden 
administration has taken action to reverse the damage caused by 
the prior administration and to prevent future fraud. In the 
EIDL program, the Biden administration implemented measures to 
identify potential fraud, directed loan officers to address 
indications of fraud before approving loans, and took 
additional steps to make sure applications were legitimate.
    Further, through the American Rescue Plan, Congress made 
critical investments in fraud prevention and accountability, 
including providing more than $200 million in funding for 
watchdogs to investigate fraud, waste, and abuse, as well as $2 
billion to support states' modernization of unemployment 
insurance systems to reduce fraud vulnerabilities. The Biden 
administration has begun using these funds to support state 
efforts to make unemployment insurance systems both more 
accessible to eligible recipients, and less susceptible to 
fraud.
    This funding is also supporting the work of the Pandemic 
Response Accountability Committee, or PRAC, chaired by 
Inspector General Michael Horowitz. The PRAC has coordinated 
efforts to conduct and investigate fraud across the Federal 
Government. We will hear about those important efforts from 
Inspector General Horowitz today.
    As the Biden administration works to prevent and detect 
fraud, they have also taken action to hold perpetrators of 
fraud accountable. As he continued to do in this year's State 
Of The Union, President Biden directed the Department of 
Defense to appoint a chief prosecutor to lead efforts to 
investigate pandemic relief fraud. Kevin Chambers, who was 
named to this role in March, is here with us today. Data the 
Department provided to the select subcommittee showed that it 
has already charged nearly 1,500 people with alleged fraud 
against pandemic relief programs. We look forward to hearing 
from Mr. Chambers about the Department of Justice's efforts.
    There is more that must be done to bring perpetrators of 
fraud to justice and to protect future emergency programs. We 
should consider whether to extend statutes of limitations to 
allow investigators more time to uncover pandemic relief fraud, 
and we should continue efforts to protect relief funds by 
fulfilling the Biden administration's requests for more funds 
to protect and strengthen state unemployment insurance systems.
    I would like to thank our witnesses for being with us 
today. I look forward to hearing more about the 
administration's efforts to hold perpetrators of fraud 
accountable and what else we can do to protect vital relief 
programs going forward.
    I now recognize the Ranking Member Scalise for his opening 
statement.
    Mr. Scalise. Thank you, Mr. Chairman, and I'd also like to 
welcome the witnesses and thank them for joining us today for 
this important hearing.
    In the initial days and months of the COVID pandemic, 
uncertainty was rampant, and much of the economy was locked 
down. Congress acted multiple times in a bipartisan way to 
deliver much-needed relief as fast as we could to help save as 
many jobs as we could. We knew keeping people employed was the 
best way to keep our economy from crashing. Perhaps the most 
significant program was the Paycheck Protection Program, known 
as PPP. Initially, Congress gave the new program $349 billion 
in March 2020, and mandated that the Small Business 
Administration implement the program within 15 days of enacting 
this new program.
    Over time, the program received more than $800 billion, and 
the SBA estimates that it saved more than 51 million jobs. 
That's right. President Trump worked with Democrats and 
Republicans in Congress to pass a program at the beginning of a 
global pandemic that saved more than 51 million jobs and turned 
it around at rapid pace.
    Using loan data as of August 2020, the SBA office of 
Inspector General has flagged an estimated $4.6 billion, which 
represents roughly one-half of one percent of the total loan 
funding for potential fraud or other improper payments. Fraud 
of any kind is wrong, but given the size of the program and the 
demands placed on the agency by Congress to rush the money out 
of the door to save as many jobs as possible, about one-half of 
one percent is better than most Federal programs that have been 
around for decades. Sadly, despite this fact, Democrats have 
continued their effort to undermine the PPP's success by 
attacking the Trump administration and financial institutions 
involved in the program despite the PPP's well documented 
successes.
    In stark contrast to PPP, is the enhanced unemployment 
insurance program. The Labor Department's Office of Inspector 
General estimates an improper payment rate of 18.7 percent in 
2021. That means about 6--$163 billion--$163 billion of the 
program's $872 billion in Federal, state unemployment benefits 
paid during the pandemic, could have been improperly paid with 
a significant portion attributable to fraud.
    The OIG found that, quote, ``Based on their audit and 
investigative work, the improper payment rate for the pandemic 
UI program is likely higher than 18.71 percent.'' Why aren't we 
having a hearing on that? Great. Let's go after the $4 billion, 
but why aren't we going after the $163 billion that's being 
completely ignored in fraud? There are numerous examples of 
domestic UI fraud.
    One man from New York received $1.5 million over 10 months. 
A California real estate broker got more than $500,000 over six 
months. One person used the same social security numbers to 
file UI claims in 40 different states. We're not having a 
hearing on this. In addition, the program was targeted by 
criminal organizations and enemy nation states. A ProPublica 
investigation found that a substantial amount of UI fraud can 
be attributed to organized crime, both in the United States and 
abroad.
    Estimates by some say at least 70 percent of the money 
stolen ultimately went to foreign nationals in countries like 
China, Russia, and Nigeria. One state received fake 
unemployment claims that came from IP addresses in nearly 170 
different countries. That was just one state's reported fraud. 
So far, just over $4 billion has been recovered of that 160-
plus billion dollars in fraud from the enhanced UI program.
    We should be doing everything we can to aggressively 
identify, investigate, and prosecute the criminal fraud in 
pandemic unemployment programs. That's why I introduced a bill 
last week with many of my fellow Republican colleagues to help 
encourage states to recover fraudulent payments. I hope we'll 
be able to get that bill moved through Congress quickly.
    On top of the egregious and unprecedented fraud, the 
pandemic's enhanced UI program has been cited as a leading 
contributor to the historically high inflation that is crushing 
American families right now. With all the legislative 
extensions, some claimants could receive up to 79 weeks of 
enhanced unemployment, about a year-and-a-half of getting paid 
more money not to work than what they were making at their job. 
And all this while businesses all across the country are still 
looking for workers, you had the government paying hundreds of 
billions of dollars to pay people more money not to work than 
they were working prior to the pandemic.
    Democrats insisted on extending the program for another six 
months and providing an additional $300 a week in their 
partisan $1.9 trillion spending spree that caused the highest 
inflation in 40 years. The latest numbers have inflation 
hitting 8.6 percent last month. This is costing the average 
American household an additional $327 a month. That's right. 
Families across America are paying $300 a month more in higher 
inflation because of all the trillions of dollars in spending 
here in Washington doing things like paying people not to work.
    Washington Democrats shamelessly used the pandemic to 
pursue their socialist dreams of government dependency. They 
paid people not to work, handed out big stimulus checks and 
expanded government welfare programs, all while ignoring the 
warnings about inflation that would be caused. Instead of 
dumping cash into the already recovering economy, we should 
have been focused on reopening schools and getting our 
businesses back open safely and helping those workers get back 
into their jobs.
    While PPP and other pandemic programs have a few 
detractors, they were overwhelmingly bipartisan and largely 
succeeded in delivering much-needed relief, and, again, saving 
51 million jobs for those hard-working families who are luckily 
still in the work force today because of this program.
    I hope that in our oversight of pandemic programs, my 
Democrat colleagues will be able to recognize the difference 
between what was needed to save the economy during 
unprecedented pandemic versus pushing a partisan inflation 
inducing agenda.
    With that, again, I look forward to hearing from our 
witnesses.
    And Mr. Chairman, I yield back the balance of my time.
    Chairman Clyburn. Thank you very much, Mr. Scalise.
    I would now like to introduce our distinguished witnesses. 
The Honorable Michael Horowitz is the Inspector General for the 
Department of Justice, and chairs the Pandemic Response 
Accountability Committee. Inspector General Horowitz testified 
before this committee last March, and we appreciate his return 
to testify today.
    The Honorable Hannibal ``Mike'' Ware is the Inspector 
General for the Small Business Administration. Inspector 
General Ware also testified before this committee last year, 
and we look forward to hearing from him again today.
    Mr. Kevin Chambers is an Associate Deputy Attorney General 
who is serving as Director for COVID 19 fraud enforcement. 
Thank you for being here today.
    Mr. Roy Dotson is the National Pandemic Fraud Recovery 
coordinator for the United States Secret Service. Thank you.
    And I would like for the--all witnesses please stand, raise 
your right hands.
    Do you swear or affirm that the testimony you are about to 
give is the truth, the whole truth, and nothing but the truth, 
so help you God?
    Thank you. You may be seated.
    Let the record show that the witnesses answered in the 
affirmative. Without objection, your written statements will be 
made part of the record.
    Mr. Horowitz, you're now recognized for five minutes for 
your opening statement.

 STATEMENT OF HON. MICHAEL HOROWITZ, CHAIR, PANDEMIC RESPONSE 
                   ACCOUNTABILITY COMMITTEE;

    Mr. Horowitz. Thank you, Mr. Chairman, Ranking Member 
Scalise, members of the subcommittee. Thank you for inviting me 
to testify today about the work of the PRAC, which Congress 
created in March 2020 to oversee what is now over $5 trillion 
in pandemic relief spending across 426 Federal programs at 40 
agencies. Given the magnitude of these responsibilities, we've 
developed a new model of conducting oversight in a crisis that 
involves promoting transparency by providing the public with 
accessible and comprehensive spending data on our website, 
pandemicoversight.gov, collaborating across Inspector General 
community, in the oversight community, to identify cross-
cutting issues and risks, by detecting and preventing fraud, 
waste, abuse, and mismanagement through the use of leading edge 
data insights and analytic tools, and holding wrongdoers 
accountable by marshaling the investigative and analytical 
resources of the oversight community.
    A key to our success has been the transparency we've 
provided to the public about pandemic-related spending. 
Pandemicoversight.gov, our website, empowers Americans to see 
how their money is being spent and enables whistleblowers to 
help us prevent and detect wrongdoing. However, we face several 
challenges in our efforts to advance transparency.
    As we reported in November 2020 and October 2021, 
significant agency data gaps present challenges to our pandemic 
oversight efforts. And data completeness is just one of the 
challenges we've identified as part of our oversight efforts. 
In September 2021, and again last week, we issued reports 
highlighting the important lessons we've learned from reviewing 
some of the largest pandemic relief programs. Among those 
lessons that we've detailed in those reports are that agencies 
should be using the existing data to determine program 
eligibility rather than relying on individual self-
certifications as occurred in many instances here.
    I want to briefly mention the critical role collaboration 
has played in our oversight efforts. From the earliest days of 
the pandemic, we regularly coordinated with GAO leadership, and 
similarly engaged with our state and local oversight partners. 
For example, the PRAC conducts quarterly briefings to share 
fraud indicators with our state and local oversight partners. 
To date, close to 400 state and local officials have 
participated in those briefings.
    We've also had strong working relationship with senior 
executive branch officials. This level of engagement with IGs 
and the PRAC has become a model for how to manage large-scale 
spending programs and to ensure that agencies benefit from the 
knowledge that IGs have developed through our oversight work.
    Let me turn to our accountability efforts. The only way to 
effectively oversee $5 trillion in relief spending is with 
data. At the PRAC, we've use advanced data science to further 
our oversight by creating the Pandemic Analysis Center of 
Excellence, or PACE, to deliver world class analytic, audit, 
and investigative support. Our data analytic center is 
currently providing 37 law enforcement agencies access to more 
than 150 million records from public, nonpublic, and commercial 
data sources. The work of the PRAC and partner IGs have already 
led to more than 1,200 indictments and complaints, about 950 
arrests and over 450 convictions.
    We are committed to using all available tools to hold 
wrongdoers accountable, including criminal, civil and 
administrative actions, such as forfeiture and suspension and 
debarment. This investigative and oversight work has also led 
us to conclude that prevention and detection of identity theft 
should be among the highest priorities of Federal agencies. 
Identity theft has been endemic in the fraud cases we've seen, 
and just yesterday, the PRAC issued a report summarizing our 
key insights on this issue. We've also found that identity 
theft victims have few avenues of assistance available to them. 
That's why the PRAC created the identity fraud Reduction and 
Redress Working Group. Our working group is partnering with IGs 
to identify ways agencies can help close those gaps and to help 
identity theft victims move forward.
    Finally, I want to voice my support for three bipartisan 
bills pending in Congress that would assist our efforts to 
fight fraud and pandemic-related spending. Two of those bills 
passed the House earlier this month, as the chairman mentioned. 
The third is currently pending on the Senate floor that would 
allow us to increase the jurisdictional recoveries for smaller 
false claims. I'm hoping for prompt congressional action on all 
three bills.
    Thank you for your continued strong support for our 
oversight work, and I am pleased to answer any questions the 
committee may have.
    Chairman Clyburn. Thank you very much, Mr. Horowitz.
    The Chair now recognizes for five minutes Mr.--the 
Honorable Hannibal Ware.

 STATEMENT OF HON. HANNIBAL ``MIKE'' WARE, INSPECTOR GENERAL, 
                 SMALL BUSINESS ADMINISTRATION

    Mr. Ware. Chairman Clyburn, Ranking Member Scalise, and the 
distinguished members of the subcommittee. Thank you for 
inviting me to speak with you today and for your continued 
support of my office.
    My office is providing oversight of more than $1 trillion 
in pandemic funds. The unprecedented pandemic response demanded 
an unprecedented oversight approach. Our office has performed 
audits in real time, and we literally rewrote the book on how 
to present findings in a timely and proactive manner. OIG 
reviews typically take 10 to 12 months to conclude, whereas we 
published reports meeting stringent review standards in little 
as two weeks.
    To date, we have issued 22 pandemic-related reports. Our 
recommendations for corrective action to the agency have 
resulted in SBA tightening their internal control systems and 
our work continues to focus on the various phases of the 
program to mitigate fraud and ensure only eligible recipients 
receive funds. The importance of this ongoing oversight to the 
Nation cannot be overstated. It is our goal, a goal I know that 
is shared by the PRAC and the IG community, that the lessons 
learned will prevent future missteps when taxpayer dollars are 
at stake.
    This brings me to the fraud landscape and the urgency by 
which I bring this message to you today. This subcommittee 
knows well the tens of billions of dollars that have been 
identified by my office as potentially fraudulent. The actions 
of these fraudsters will not simply vanish. The evidence trail 
left behind can best be described as footprints in concrete.
    Our oversight accomplishments are significant, literally 
billions of dollars, but we are nowhere near a full 
understanding of the fraud landscape. What we do understand is 
that we are far beyond the notion of potential fraud, and we 
are attacking this fraud head on. Our investigators are 
topnotch and viewed as experts across the law enforcement 
community. They have forged partnerships with counterparts, 
joined task forces, and worked hand in glove with prosecutors 
to bring wrongdoers to justice.
    Our data analytics team is using cutting-edge artificial 
intelligence and machine learning to develop high-impact leads, 
which are aggressively pursued by our investigators. We are 
systematically approaching the use of these resources to 
develop the capability to detect fraud in near real time going 
forward.
    In addition to independently developed leads, we're combing 
through financial suspicious activity reports, allegations of 
fraud directly from financial constitutions, SBA program 
offices, and our hotlines to prioritize our investigative work.
    With under 70 criminal investigators on board, we alone are 
far outmatched with the hundreds of thousands of investigative 
leads. We have 399 open investigations regarding EIDL and PPP 
fraud, which are associated with over $1 billion of estimated 
loss. Our investigators have proven to be tireless and 
collaborative, and represent the best of a whole-of-government 
response to this massive theft of taxpayer funds.
    Now, let me raise awareness of the fraud landscape before 
us, and why it is vital that the statute of limitations is 
extended to close the disparity between the 10-year bank fraud 
statute of limitations, and fraud that is committed against 
non-banking institutions, such as SBA. The House took action 
last week to pass such measures. EIDL loans were provided a 30-
month deferment period for the first payment, with the program 
just closing a couple weeks ago.
    History tells us that the fraud fully reveals itself when 
loans begin to default. Given we already have brought 
wrongdoers to justice associated with hundreds of millions of 
dollars in fraud, and we have identified tens of billions of 
potential fraud as being prioritized, there simply must be more 
time made available in the interest of justice to the taxpayer.
    We similarly are faced with a wave of fraud to be fully 
realized in PPP. Already, over 66,000 loans have defaulted 
where SBA paid the 100 percent guarantee to the lenders in the 
amount of $3.7 billion. An additional 1.2 million PPP borrowers 
have not requested loan forgiveness on a program designed to 
forgive their debt. Needless to say, these are highly 
suspicious loans and will require focus and scrutiny.
    The President has submitted a $10 million increase to my 
office's base operating budget in Fiscal Year 2023. This 
increase will position my office to carry forward approximately 
just half of the staff we on-boarded to provide oversight of 
SBA's pandemic response, the quid suggests 30 positions. It is 
vital that the President's budget is supported and that we 
consider the fraud landscape that I've presented to you today. 
The Nation can depend on us to provide independent, objective, 
and timely oversight of SBA as we have demonstrated.
    Thank you for the opportunity to speak to you today, and 
I'm happy to answer any questions you may have of me.
    Chairman Clyburn. Thank you very much, Mr. Ware.
    The Chair now recognizes Mr. Chambers for five minutes.

   STATEMENT OF KEVIN CHAMBERS, DIRECTOR FOR COVID 19 FRAUD 
               ENFORCEMENT, DEPARTMENT OF JUSTICE

    Mr. Chambers. Mr. Chairman, Ranking Member and members of 
the committee, thank you for the invitation to meet with you 
today.
    The Department fully shares your concern about pandemic-
related fraud and is committed to doing all that it can do to 
vigorously prosecute pandemic fraud, bring to bear all 
appropriate criminal, civil, and administrative tools. This is 
not a new commitment. The Department has been prosecuting 
pandemic-related fraud since COVID-19 arrived on our shores. 
Since then, U.S. attorneys offices have criminally charged 
approximately 1,300 defendants, and the criminal division fraud 
section has criminally charged and prosecuted 220 defendants in 
pandemic-fraud-related matters. These cases, most of which are 
still in progress, have involved over $1.1 billion in lawsuits. 
Many more matters are in the investigative stage.
    As with our criminal matters, our civil attorneys have also 
been hard at work. They've opened 300 civil investigations into 
over 2,300 individuals and entities for alleged misconduct in 
connection with pandemic fraud. Now, all of our attorneys are 
working tirelessly on other not yet public matters not included 
in these totals, but the resolved cases do exemplify the 
Department's efforts.
    In the western district of Washington, just to give one 
example, prosecutors secured a guilty plea for a foreign 
national who used the stolen identities of more than 20,000 
Americans to file for more than $2 million in government 
benefits across multiple states. This is just one example of 
the many cases already resolved by the Department.
    We are proud of the work done so far, but it is no time to 
pat ourselves on the back. As with any government relief 
program, there were those here and abroad who saw pandemic 
relief as an opportunity for personal enrichment. These thieves 
employed a number of schemes to carry out their selfish ends. 
They purchased stolen identities and filed for unemployment 
insurance relief benefits, using bank accounts opened online to 
receive the funds and money mules to help transfer the benefits 
overseas.
    They created fake businesses and received funds in the 
names of those imaginary companies. They used fishing scams to 
trick unsuspecting citizens into downloading malware onto their 
computers and used that malware to steal personal and financial 
information. Criminals have worked together in loose, online 
networks using encrypted messaging applications to coordinate 
schemes to file for SBA loans and unemployment insurance 
benefits. This is not imaginary money.
    Each dollar stolen was a dollar taken from a small 
restaurant owner who wanted nothing more than to keep her staff 
on the payroll, or taken from suddenly unemployed parents who 
needed help feeding their families. Each dollar stolen could 
have been used to obtain protective gear, COVID tests or other 
scarce resources. Instead, the stolen money was diverted into 
the hands of criminals.
    As we approach the next phase of our enforcement work, we 
will focus on data. Indeed, we will start with the data, and 
there is plenty of it. For each fraudulent application, someone 
provided a name, a mailing, email, or IP address, a bank 
account or other data. Through use of advanced analytical 
tools, we will continue to identify patterns and trends that 
will lead us to those who put themselves above the safety and 
security of the American people, and we will be bringing all of 
our tools to this fight.
    We will deploy skilled, dedicated prosecutors across the 
Department to lead the effort to prosecute these cases. And 
dedicated analysts will pour through millions of pieces of data 
to create the leads that will result in investigations and 
ultimately convictions. We are supported by investigators from 
across the Federal Government who have committed resources to 
assist.
    And I would like to thank the other witnesses at the table 
today, all of whom have lent their support and commitment. I 
appreciate their partnership.
    Like the relief and like the fraud, our response must be 
unprecedented. The enormous amount of data and the years of 
work ahead will require significant resources. The President's 
2022 budget sought $41.2 million for COVID fraud enforcement 
efforts. Unfortunately, that amount was not approved by 
Congress. The President's 2023 budget contains the same 
request. These resources will speed our data analysis and our 
identification of fraudulent schemes, and that will increase 
our ability to bring people to justice and recover funds.
    And our experience so far shows a tremendous return on 
investment when it comes to resources committed to COVID-19 
fraud enforcement. So, we ask for your continued support to 
properly staff this effort with the agents, analysts and 
prosecutors needed to bring these criminals to justice, and to 
seize their ill-gotten gains.
    Once again, thank you for attention to this matter and for 
your support. I'm happy to answer any questions you may have. 
Thank you.
    Chairman Clyburn. Thank you very much.
    Mr. Dotson, you're recognized for five minutes.

   STATEMENT OF ROY D. DOTSON, JR., ACTING SPECIAL AGENT IN 
 CHARGE, NATIONAL PANDEMIC FRAUD RECOVERY COORDINATOR, UNITED 
                     STATES SECRET SERVICE

    Mr. Dotson. Good morning, Chairman Clyburn, Ranking Member 
Scalise, and distinguished members of the select subcommittee. 
Thank you for the opportunity to appear before you today to 
discuss the ongoing efforts in the United States Secret Service 
to counter cyber-enabled financial crimes targeting the 
Nation's financial infrastructure, in particular COVID-19 
fraud.
    My name is Roy Dotson, and I'm assigned to the Secret 
Service Office of Investigation as the national pandemic fraud 
recovery coordinator. The operative word regarding the CARES 
Act was speed. U.S. citizens were suffering from the effects of 
COVID-19 and needed assistance. Unfortunately, fast money 
sometimes equals fast crime, and fast crime requires an equally 
fast response by law enforcement.
    The CARES Act was signed into law March 27th, 2020, and by 
the first week of May, the Secret Service was investigating 
cases involving unemployment fraud. It quickly became apparent 
that organized groups, as well as individuals, were targeting 
the system's programs. Within weeks, the Secret Service 
partnered with the Financial Crimes Enforcement Network, or 
FinCEN, to issue two advisories alerting the financial sector 
to potential fraud.
    We also mobilized our more than 160 offices and 44 cyber 
fraud task forces to focus on these investigations. These task 
forces are comprised of partners from the state, local 
partners, many of them received training at our National 
Computer Forensic Institution, or NCFI in Hoover, Alabama. In 
2008, NCFI has trained more than 18,000 state, local, Tribal 
and territorial partners for more than 2,500 agencies 
throughout all 50 states, and five U.S. territories. Those 
receiving NCFI training and Secret Service-issued cyber 
equipment, have become essential in assisting their local 
communities in countering COVID-19 fraud.
    Our success in launching quick and efficient investigations 
is made possible by our partnerships maintained nationwide with 
Federal, state, and local government entities, as well as the 
private sector. In July 2020, the Secret Service partnered with 
the Department of Labor Office of Inspector General to publish 
our first joint advisory on pandemic fraud. This advisory was 
sent to nearly 30,000 financial institutions and outlined fraud 
indicators associated with pandemic-related schemes.
    It requested those in the financial sector to work with the 
Secret Service to identify suspected fraudulently obtained 
unemployment benefits. The Secret Service also collaborated 
with Small Business Administration Office of Inspector General, 
and the Pandemic Response Accountability Committee to send out 
additional advisories when Economic Injury Disaster Loan and 
paycheck protection loan fraud was detected.
    The Secret Service's efforts to recover stolen assets and 
hold criminals accountable will be ongoing for years. 
Countering this fraud and ensuring the integrity of the 
Nation's financial infrastructure remains a core focus of the 
Secret Service's investigative work. Over the past 26 months, 
the Secret Service has observed a clear evolution of the type 
of frauds being perpetrated.
    These fraud schemes are not unfamiliar to the Secret 
Service. Phishing campaigns have given way to nondelivery of 
fraudulent goods and services, and those schemes have evolved 
into more sophisticated cyber crimes, such as ransomware 
attacks and business email compromises. I would like to 
highlight the successful completion of the Secret Service's 
investigation into a Michigan unemployment insurance fraud 
scheme.
    In this case, a contract employee for the state of 
Michigan's unemployment insurance agency conspired with others 
to submit hundreds of false unemployment insurance claims. Over 
the course of the subject's criminal activity in exchange for 
bribes, she released payment on 700 fraudulent claims, 
resulting in the illegal disbursement of more than $3.7 
million. The joint Secret Service investigation with the 
Department of Labor and multiple other Federal and state 
agencies epitomizes the outstanding teamwork across the law 
enforcement community.
    The subject has already been sentenced to 58 months in 
prison and ordered to pay restitution in the amount of nearly 
$3.8 million. While this one case represents a single example 
of the exceptional work being done by the Secret Service and 
our partners to prevent and combat fraud, I'm also able to 
report that we continue to see mission successes emerge from 
hundreds of other investigative efforts. To date, the Secret 
Service has initiated over 1,000 criminal investigations in the 
pandemic relief crimes, seized over $1.26 billion, and 
prevented approximately $2.3 billion in fraud losses.
    Chairman Clyburn, Ranking Member Scalise and distinguished 
members of the select committee, thank you for your time. I am 
honored to represent the dedicated professionals of the Secret 
Service, and I look forward to your questions.
    Chairman Clyburn. Well, thank you very much. Let me thank 
the entire panel, not just for your very substantive 
presentations here today, but also for your very timely 
presentations. I don't know that we've had four members who 
stayed within the time allotted. You're to be congratulated. I 
suspect that comes from experience at this sort of thing. So, 
thank you so much.
    Of course, each member will now have five minutes with 
which to ask any questions that they may have.
    And I'm going to begin with a question for you, Mr. 
Chambers. You mentioned in your opening statement about the 
steps that President Biden has taken in directing your work.
    Can you give us a little thumbnail sketch, a little bit 
like we just heard, of your work?
    Mr. Chambers. Sure. So, Mr. Chairman, I should start by 
saying while I'm new to this role, this role is new. The work 
of the Department has been ongoing for two years, again, right 
from the beginning of the pandemic. The women and men of the 
Department in our U.S. Attorney's Office and Justice 
Departments components were tasked with, on top of their 
already-full-capacity workloads, taking on these new and often 
complex cases.
    My role as Director of COVID-19 fraud enforcement is to 
enhance and supplement the work that they've been doing. I see 
my role as involving three primary pillars. First is to act as 
point of coordination across the Department of Justice with 
respect to the code enforcement work that is going on in all 
our offices and at Main Justice.
    Second is to serve as a line of facilitation and 
communication. Over the course of the past two years, each 
prosecution, each civil case has brought new lessons to be 
learned. And those lessons are ones that in my role I will 
share across the Department to make sure that we are working as 
effectively and as efficiently as we possibly can.
    Third, in my role, we will be focusing on particular types 
of COVID fraud, and we will be focusing specifically on large-
scale COVID-related fraud perpetrated by criminal organizations 
and foreign actors. We've seen some of this already in some of 
the cases that have been resolved, deal with that type of 
fraud. We will be in the not-too-distant future standing up 
strike teams in specifically selected locations that will be 
made up of dedicated prosecutors, dedicated investigative 
agents, and dedicated analysts, who will do nothing but 
prosecute that type of large-scale fraud that allows us to 
develop an expertise and will allow our U.S. Attorney Offices 
and Main Justice components to continue to do the good work 
they've been doing.
    Chairman Clyburn. Well, thank you very much for that. While 
I do not in any way condone the small actors, and I do consider 
the case--the Michigan case that Mr. Dotson just mentioned to 
be big by my estimations, but--by what we know to be taking 
place, it's kind of small. And so, I'm glad to see you are 
going to focus on these organizations that seem to be 
perpetrating tremendous fraud among the American people.
    But the Biden administration has also prioritized other 
forms of fraud, and the Democrats in the Congress assisted in 
that effort. We assisted by appropriating $40 million in 
additional funds to the PRAC as part of the American Rescue 
Plan. Now, if I might--if you can see the graphic on the--on 
yesterday, select subcommittee--I don't--there it is.
    Select subcommittee, 1,200 indictments resulting from OIG 
pandemic-related at the PRAC; 1,150 ongoing investigations in 
COVID-19 EIDL; and PPP and unemployment. I don't know if you 
can see this, but 450 convictions.
    Now, I would like to ask for unanimous consent that we 
enter this into the record.
    Chairman Clyburn. Mr. Horowitz, can you please describe 
specific PRAC activities coordinating and supporting the 
efforts of these Federal agencies, such as the initiative to 
provide detailees and data science fellows to various offices 
of the Inspector Generals?
    Mr. Horowitz. Certainly, Mr. Chairman.
    You know, in the CARES Act, Congress gave us various hiring 
authority, and we've used that successfully to bring on board a 
number of data scientists. This is just one example of the work 
we've done to collaborate across the Inspector General 
community. And we've hired numerous data scientists and 
mathematicians and statisticians from around the country with 
the authority you gave us. And what we've been able to do is 
assign those data scientists and fellows to IG offices 
throughout the community.
    And so, we've already placed about 20 data scientists to 
help IG offices look at data and find anomalies and find 
issues. Because, as you indicated, one of the things we want to 
do at the PRAC, and I know our member IGs want to do, I know 
Mr. Ware is trying to do it as are others, we're looking for 
the entire scope of the wrongdoing. And the way you do that is 
to use data and to use analytics and to see the thousands of 
applicants that use the same social security number to get 
unemployment benefits or PPP benefits or EIDL benefits, the 
same telephone numbers that are used in thousands of 
applications, the same drop boxes in terms of mailing 
addresses, social security numbers.
    We have a project right now, we've identified well over a 
million suspiciously used social security numbers for multiple 
applications, and what we're looking to do is to understand 
from the Social Security Administration whether the Social 
Security numbers and names on the applications match the Social 
Security numbers and names the Social Security Administration 
has for the true owner of those accounts. We're looking at over 
1 million of those instances. So, we're trying to use, on a 
large scale, data analytics to address some of the issues you 
referenced.
    Chairman Clyburn. Thank you very much. I had to be the 
first one to violate the five-minute rule here.
    So, I'm now going to yield five minutes plus to Dr. Green.
    Mr. Green. Mr. Chairman, I don't think I'll need it, but 
thank you. You're kind. Thank you, Chairman Clyburn, and 
Ranking Member Scalise, and I want to thank our witnesses for 
being here today. I really appreciate the work you're doing. 
You know, when people break the law, they should pay the price 
for it, especially considering how hurting everyone was during 
this time.
    On Friday, the Bureau of Labor Statistics released its 
latest update on the inflation crisis, which continues to eat 
away at Americans' wallets. The Consumer Price Index rose to 
8.6 percent in May, the highest it's been in four decades. 
Prices are up on everyday goods and services across the board. 
Rent is up a record 11.3 percent over the last year. The price 
of groceries has increased by nearly 12 percent, the largest 
increase since Jimmy Carter was President.
    Gas prices have more than doubled since President Biden 
took office and launched a crusade against American energy 
production. On Inauguration Day, gas averaged $2.39 a gallon. 
Now, for the first time ever, the average price of a gallon of 
gasoline is over $5. The cause is obvious. It's what happens 
when the President decides to decrease the volume of flow 
through our pipelines, suspend new Federal oil and gas leases, 
and stifle producers with costly regulations.
    Core CPI, which excludes food and energy prices, is at six 
percent, reflecting that inflationary pressures are straining 
all sectors of the economy. Overall, the typical family is 
having to spend around 450 more dollars per month just to buy 
the same things they would have normally bought a year ago.
    Real wages are falling in a way that we haven't seen in 40 
years. This isn't surprising. As much as President Biden tries 
to pin the blame on everything but his own policies, his 
administration has shown more willingness to negotiate with 
Iran and Venezuela than our own domestic oil producers.
    Speaker Pelosi and President's Biden wasteful and 
completely partisan $2 trillion stimulus package supercharged 
inflation, pumping vast sums of Federal spending into the 
economy and requiring more borrowing and money printing. At the 
time, many warned that this sort of stimulus would come with a 
heavy price. Now, even the liberal website, Vox, ran a piece 
last month acknowledging, and I quote, ``The Biden stimulus 
made the U.S. inflation problem even more severe,'' end quote. 
The Biden stimulus was the turning point that marked the 
beginning of the inflation crisis, which is making it much more 
difficult for Americans to save and make ends meet.
    And a key part of that was the reckless extension of 
Federal unemployment benefits where many people got paid more 
to stay at home than to return to work. Now we know that a 
significant amount of the unemployment money was subject to 
massive fraud, with the Department of Labor's Inspector General 
estimating that at minimum, $163 billion worth of unemployment 
spending could be attributed to fraud or improper payments out 
of the estimated $872 billion that was spent out of pandemic 
unemployment programs. We're talking about an improper payment 
rate approaching 20 percent. With hundreds of billions of 
taxpayer dollars flushed down the drain, most of it gone 
forever. Hopefully not.
    Agent Dotson, my first question is to you. In the course of 
your investigations, have you seen that a significant amount of 
fraud, you know, is committed by transnational or criminal 
organizations, and if so, do you mind detailing a little bit 
about that?
    Mr. Dotson. Mr. Congressman, thank you for your question.
    There's no doubt that transnational and domestic organized 
crime groups committed fraud during this pandemic benefit 
programs and across the board. And we look at these 
investigations, you know, not to get back to Michigan, but 
nobody has to--you don't have to be a citizen of Michigan to 
apply for Michigan unemployment assistance. So, anybody 
anywhere can apply, and took that opportunity. We are 
definitely--we have several ongoing investigations that I can't 
speak to today----
    Mr. Green. Sure.
    Mr. Dotson [continuing]. that do involve transnational 
organized groups. I can highlight one case that dealt with a 
west African organized crime group that we have dealt with for 
years basically that commit all types of cyber crime, including 
ransomwares and business email compromise. And of course, this 
was a crime of opportunity, so they took that opportunity. They 
committed pandemic fraud, but they have been arrested, and they 
are currently being prosecuted. That's kind of the black ax 
group out of western Africa.
    Mr. Green. Excellent.
    Mr. Dotson. We've had some success, and we will continue to 
look no matter where they are. We are able to go worldwide, not 
only, you know, here at the Secret Service, but with our 
partners. We will turn over every stone, and we will go after 
if it's an organized group, or if it's somebody that's 
committed substantial fraud.
    Mr. Green. I will take grace you've given me, Mr. Chairman, 
and ask one last question.
    If you had to predict the amount domestic versus, you know, 
transnational, what would be your predictions, any one of you, 
on the fraud? You think it's mostly domestic? Is it mostly 
foreign? Is there an even mix? What's the rough guess?
    Mr. Dotson. Well, Congressman, I can say that at this time, 
we're still--as my distinguished colleagues here said--still 
trying to ascertain the amount of fraud that's occurred, and 
who's committed that. To give those numbers wouldn't be proper 
at this time.
    Mr. Green. Fair enough.
    Mr. Dotson. I would say that it's a combination.
    Mr. Green. Well, again, let me reiterate my thanks to the 
hard work that you're doing trying to dig that out. Thank you.
    Did you want to say something, sir?
    Chairman Clyburn. Are you asking in terms of volume?
    Mr. Green. Yes.
    Chairman Clyburn. Or amount of money?
    Mr. Green. Amount of money, actually. Yes.
    Mr. Ware. We have--my office, as the Office of Inspector 
General, has a report that will be out shortly within probably 
the next 30 days or so that speaks to this. We have a report 
coming out on foreign IP addressees that will tell a good part 
of the story of what happened.
    Mr. Green. Excellent. Thank you. Very good.
    Mr. Horowitz. If I could just add, because it relates to 
legislation the House passed that the Chairman mentioned--that 
the House passed last week, the bipartisan legislation to 
extend statute of limitations. The challenge at this point of 
estimating it is finding domestic fraud is a lot easier early 
on than finding the overseas fraud.
    Mr. Green. Sure.
    Mr. Horowitz. We have to go through not only all of the 
resource issues that come with figuring out what happened from 
overseas, but also from an investigative standpoint, we need 
approval to go get the information from overseas, and it 
highlights the importance of having more than the five years 
the statute of limitations currently is.
    The statute of limitations that the House passed extends 
PPP and EIDL fraud to 10 years, lining it up with bank fraud, 
which Congress passed back when the S&L crisis hit 40 years ago 
or so, for good reason back then. It needs to happen now. 
Hopefully the Senate will pass it. Appreciate the House doing 
so already.
    Mr. Green. Thank you.
    Thank you, Mr. Chairman
    Chairman Clyburn. Thank you.
    Thanks to this immediate past action and the work of Dr. 
Green and Mr. Foster, this subcommittee has operated in a 
bipartisan way to effectuate those kinds of results. So, thank 
you. You thought I wasn't watching, but I've been watching. 
Thank you, guys.
    Now, we're going to go a little bit out of order, because 
of the schedule of one of our members and, with the 
acquiescence of Mrs. Maloney, the chair will now recognize Mr. 
Krishnamoorthi for five minutes.
    Mr. Krishnamoorthi. Thank you so much, Mr. Chair, and thank 
you for accommodating----
    Mrs. Maloney. Thank you, Mr. Chairman. Small business----
    Chairman Clyburn. The chair is now recognizing Mr. 
Krishnamoorthi. And I understood, Mrs. Maloney, that you had 
agreed for me to go out of order.
    Mrs. Maloney. OK. All right. Whatever. Whatever works, Mr. 
Chairman.
    Chairman Clyburn. Thank you. Mr. Krishnamoorthi.
    Mr. Krishnamoorthi. Thank you, Mr. Chair.
    Thank you, Madam Chair Maloney, for accommodating my 
hearing that's happening in another committee simultaneously.
    First of all, the select subcommittee released a new report 
today revealing the Trump administration's shocking failures to 
protect critical pandemic relief funds from fraud.
    The committee's analysis and this document right here, 
which we just released today--I think it's going up--basically 
shows that 98 percent of DOJ's prosecutions of fraud against 
the EIDL program involved fraudulent applications submitted 
during the Trump administration. Here's actually one example 
why, and there's a graphic showing basically some guidance that 
the Trump administration had given to officers at the SBA with 
regard to EIDL loans.
    The select subcommittee found that under the Trump 
administration, loan reviewers at the SBA were directed to 
approve applications for the EIDL program even when they had 
red flags that indicated potential identity theft.
    Inspector General Ware, your office has specifically 
investigated identity theft fraud committed against the EIDL 
program through January 2021. Isn't that right?
    Mr. Ware. That is correct.
    Mr. Krishnamoorthi. Did the choice to approve applications 
for the EIDL program despite red flags indicating potential 
identity theft increase the likelihood of fraud?
    Mr. Ware. Well, thank you for your question. The work that 
we are doing in this regard is ongoing. What we did--so we have 
not fully completed that work within my office.
    Mr. Krishnamoorthi. I understand, but I guess my question 
is this: Would approving EIDL program loans despite red flags 
with regard to identity theft increase the likelihood of fraud?
    Mr. Ware. Yes, it would. I believe that we did have a 
report that asked them to flag items such as that. It gave them 
specifically which ones we asked them to flag, and we also 
asked them to set up a system where you could clear a flag if 
it was, indeed, a reason for something happening.
    Mr. Krishnamoorthi. Right. And prior to the pandemic, SBA 
actually had a, quote, ``rule of two control,'' close quote, 
rule of two, where basically two SBA employees would review and 
approve a loan application, but the SBA OIG reported that this 
control was abandoned for EIDL loans related to the pandemic.
    Mr. Ware, did the choice to abandon the rule of two control 
for the EIDL program increase the likelihood of fraud? I 
presume it did.
    Mr. Ware. Yes, it did.
    Mr. Krishnamoorthi. Whenever you dispense with a 
requirement that two people, you know, basically act as a check 
on fraud, well, you're going to have more fraud, and that was 
predictable.
    Now, let me ask you this: Mr. Horowitz, from your work with 
partners across the government, do you believe that EIDL and 
other vital programs could have delivered quick relief while 
doing a better job of preventing fraud?
    Mr. Horowitz. Congressman, I think that is correct. What--
the challenge here in any program, particularly in a national 
emergency that we're facing, is speed versus proper payments 
and controls. And what we saw here early on for several 
programs, including PPP and EIDL, was that speed overrode any 
controls whatsoever.
    And, so, having simply a situation where you're requiring 
self-certification and nothing more is an invitation to 
fraudsters to come in and try and obtain benefits they 
shouldn't otherwise get.
    As Mr. Ware has reported, I think it was 57,000 
applications in PPP were individual--were for applicants who 
are on the Do Not Pay List involving several billions of 
dollars. Well, that Do Not Pay List is sitting in the Treasury 
Department. It doesn't take a lot of time to compare that data 
with the applications. So----
    Mr. Krishnamoorthi. And can you just tell us, do you know 
what were among the biggest loans among those 57,000?
    Mr. Horowitz. Mr. Ware.
    Mr. Ware. I don't have that--unfortunately, I don't have 
that report in front of me currently, so I can't speak 
specifically to what the biggest loans were, but any of them 
would have been an issue.
    Mr. Krishnamoorthi. And how much fraud are we talking about 
just in those loans?
    Mr. Ware. $3.6 billion.
    Mr. Krishnamoorthi. Yes, that's a lot of money. Thank you 
so much for your time.
    Chairman Clyburn. Thank you very much.
    The chair now recognizes Dr. Miller-Meeks for five minutes.
    Mrs. Miller-Meeks. Thank you, Mr. Chair.
    And I'd like to thank all of our witnesses for taking time 
to come and testify before the committee today. And I want to 
say for the companies, the businesses, the employers in my 
district in Iowa, the Second District of Iowa, they were 
tremendously appreciative when the government closed down their 
businesses, and their business had the potential to fail and 
never come back, not from their own poor planning or poor 
execution or poor savings, but because the government shut them 
down, they were tremendously appreciative of the PPP program, 
how it was administered, that it was administered through their 
local banks. And it was what helped to save them through the 
pandemic and to come back and to be part of the strong economy 
in Iowa today.
    So, I'd like to take a brief moment to discuss the actual 
rates of fraud in the programs we're discussing today.
    So, Mr. Ware, what was the fraud rate in the PPP program?
    Mr. Ware. Thank you for your question. The fraud rate in 
the PPP program is not something that we have calculated yet. 
What you saw at the onset was a report that raised immediate 
awareness that we had an issue, and that was where the 4.6-, 
$4.7 billion came from in PPP.
    Once we identified that we had issues, we pivoted into 
making SBA raise the controls in order to prevent more up 
front, because we realized the pay and chase model that would 
be necessary afterward would not be effective. So, we spun into 
identifying real fraud, in terms of our casework and everything 
else.
    I said earlier that we're nowhere near understanding what 
the full amount is.
    Mrs. Miller-Meeks. I thought the fraud rate was 0.6 
percent. That was my understanding. So, I could see that you 
put in roadblocks and guardrails.
    Are you aware of the improper payment estimates for the 
pandemic unemployment insurance program?
    Mr. Ware. Yes, I do. Yes, I am.
    Mrs. Miller-Meeks. And what's the rate there?
    Mr. Ware. The rate there is like 18-point-something 
percent, but----
    Mrs. Miller-Meeks. 18.71 percent. So, 0.6 percent versus 
18.71 percent. According to the Department of Labor Inspector 
General, this means that if you use the estimated $872.5 
billion in pandemic unemployment insurance payments, at least 
$163 billion in pandemic UI payment benefits could have been 
paid improperly, with a significant portion attributable to 
fraud.
    Some of the states have reported on unemployment fraud, and 
it's jarring the amounts we're talking about. For example, one 
man filed for unemployment in 40 states and received more than 
$222,000.
    Even more jarring are the investigations that have found a 
substantial amount of this fraud can be attributed to organized 
crime, including reports of up to 70 percent of the fraudulent 
money ended up in the hands of Russian, Chinese, and Nigerian 
nationals.
    So, what we've seen perpetrated on the Federal level is now 
the same criminal organizations targeting state governments and 
state benefit programs.
    Mr. Dotson, I'd like to ask you to discuss, from your 
perspective, what has been done and what can be done to combat 
this transnational criminal fraud now and in the future, 
knowing that it's targeted these Federal programs and is 
looking at state programs, where they may not have substantial 
guardrails?
    Mr. Dotson. Yes, Congresswoman. Thank you for your 
question. Obviously, the Secret Service and our Cyber Fraud 
Task Forces regularly work transnational crime. And so, this is 
nothing new to us. We are financial-crimes investigating 
experts.
    So, when we work these cases annually, we're kind of used 
to following the trail, the money trail. So, we will follow 
that. We will continue to do that. We have some great 
relationships internationally with numerous countries that 
allow us to partner with them and identify transnational 
organized groups.
    And, as I said earlier, we have several investigations, you 
know, hundreds of investigations that involve transnational 
organized groups that I just can't talk to today, but I hope to 
at a later time bring more information to this committee.
    So, we will continue to follow that money, recover as much 
as we can for the U.S. taxpayer, and bring those that have 
committed this fraud to justice as best we can.
    Mrs. Miller-Meeks. And is there work with the technical 
assistance or training for states, especially where they 
interface with the Federal Government?
    Mr. Dotson. Yes, ma'am. So, I talked about, earlier, our 
National Computer Forensics Institute in Hoover, Alabama. You 
know, countless Federal, state, and local partners, primarily 
state and local partners, have received specialized training 
there, you know, technical training that includes for our 
forensic examiners. They are also issued special equipment in 
order to do those examinations.
    And it is such a great force multiplier for the Secret 
Service. It gives us additional thousands of extra 
investigators, detectives from our state and local departments 
that we can equip, and then have them focus on these 
investigations along with us.
    Mrs. Miller-Meeks. Thank you very much. I yield back my 
time.
    Chairman Clyburn. Thank you very much.
    The chair now recognizes Mrs. Maloney for five minutes.
    Mrs. Maloney. Thank you, Mr. Chairman, for your leadership 
and for this hearing.
    Small Business Administration relief programs were vital to 
keeping local business open in New York City, which, as you 
know, was hit early. We were the epicenter of the whole 
epidemic and the pandemic.
    And, unfortunately, the report released by the select 
subcommittee today shows that significant fraud occurred in 
Small Business Administration relief programs under the former 
Trump administration because of failures to implement even the 
most basic fraud prevention safeguards. And it is disheartening 
to learn the extent to which identity theft harmed many of our 
most vulnerable residents.
    Thankfully, the Biden administration has prioritized a 
whole-of-government approach to combating pandemic relief 
fraud, and the SBA has introduced new controls to ensure funds 
go to the intended recipients.
    So, my first question is to Mr. Ware: Can you describe 
SBA's efforts over the past year to prevent fraud in the 
Economic Injury Disaster Loan program?
    Mr. Ware. Thank you for your question. Yes, I can. It's 
important for me to state that the efforts to raise the 
controls that were lowered is not really an administration 
thing from one to the next. This was an ongoing situation, 
which is why it's important for me to at some point address 
this point. Six percent, that's not an accurate portrayal of 
the improper payment rate.
    What happened is that we pivoted to making sure that the 
control environment was strengthened from the very beginning. 
And the December report that I put out was to address the 
serious concerns to lift the control environment. So, things 
started to change from that point, dealing with requiring--like 
checking the Do Not Pay List, not allowing folks to change the 
bank routing information after loan approval, starting with the 
rule of two again.
    Raising all these type of controls was something that took 
some time, unfortunately, but started and continued to where we 
are today, where we have a much stronger controlled 
environment.
    Mrs. Maloney. Thank you. Uncovering and prosecuting fraud 
that has already occurred in pandemic relief programs is vital, 
and requires close collaboration across Federal agencies.
    Mr. Horowitz, how do different entities, such as Inspectors 
General and the Secret Service, work together to get cases to 
the Department of Justice for prosecution, and why is this 
collaboration so important?
    Mr. Horowitz. Thank you, Congresswoman. It's critical to 
this effort, and what we've done is we've created at the PRAC 
our own task force to bring together--law enforcement task 
force, to bring together the law enforcement community within 
the IG community to partner with the Secret Service, the FBI, 
others in Federal law enforcement, so that we can share the 
expertise we each have in these areas.
    We each bring unique abilities to these efforts. The SBA IG 
agents, for example, have tremendous expertise in PPP, EIDL, 
and related program fraud issues. The Labor IG has that with 
regard to unemployment insurance. And it's critical that we do 
that.
    We are having IG offices--my own office has had agents 
volunteer and contribute to this effort, and we've had a great 
partnership with the Department and been a critical part, I 
think, of their task force as well as we've brought them these 
cases.
    We are all committed to making sure that we use every 
single available tool to not only hold individuals and entities 
accountable for fraud and wrongdoing, but to ensure we are 
recovering every single penny for the taxpayers. That's our 
responsibility and our goal.
    Mrs. Maloney. Thank you.
    Finally, there's bipartisan legislation now being 
considered by the House that would extend the statute of 
limitations on the Paycheck Protection Program and Economic 
Injury Disaster Loan program fraud for 10 years.
    My final question, Mr. Chambers: Mr. Chambers, would it be 
helpful for Congress to extend the statute of limitations on 
pandemic relief fraud so that DOJ can hold all those who 
committed fraud accountable?
    Mr. Chambers. Thank you for the question, Congresswoman. 
Not only would it be helpful, it is near essential. With the 
amount of relief that was provided and the amount of potential 
fraud, there is an incredible volume of cases in the hopper and 
an incredible volume of cases yet to come.
    As you all know, cases, particularly the ones that are more 
complex, take time. And with the greater volume, that means 
less time per case. To the extent that Congress can help to get 
the statute of limitations extended, it would be appropriate 
and, again, not only helpful, but essential.
    Mrs. Maloney. Well, I just want to say that Congress needs 
to help law enforcement and ensure that law enforcement has 
strong tools to prosecute pandemic fraud, so that small 
business owners and working families in the U.S. can get 
crucial relief without becoming victims of fraud. I want to 
thank all the panelists and the chairman and ranking member.
    I yield back. Thank you.
    Chairman Clyburn. Thank you very much.
    The chair now recognizes Mr. Foster for five minutes.
    Mr. Foster. Thank you, Mr. Chair, and thank you to our 
witnesses.
    I've been struck in all of your testimony how central 
identity fraud and particularly online identify fraud is to the 
money that the taxpayers lost on this.
    Am I correct that the large-scale criminal gangs are 
essentially operating 100 percent using online identify fraud? 
Is that an essential part of these large-scale things? They're 
not having people show up in person at an office and collecting 
things. Mr. Dotson.
    Mr. Dotson. Congressman Foster, yes, that's a great 
question. Yes, for the majority of the cases that we 
investigate, that's what we see. You know, it was basically an 
online application and the use of other people's identity. 
Particularly, I would say, in the unemployment area, 
unemployment insurance fraud, we saw a lot of identity theft.
    Mr. Foster. And in terms of something where someone has to 
show up in person, I believe that we have a good tool to 
prevent identity fraud there in the form of the REAL ID-
compliant ID card, which I think will be required, for example, 
to get on airplanes next May, something like that. So, that 
that will be--you know, for non-online identity fraud, that 
will be a really pretty solid tool for citizens to--are there--
do you pretty much concur that that's going to make it much 
more difficult to present multiple fake identities in an in-
person environment?
    Mr. Dotson. Yes, sir. Any time someone has to present real 
identification, it's going to eliminate a lot of fraud.
    Mr. Foster. OK. Then, so, we're left pretty much with the 
online aspect. And there's a very powerful tool that's now 
actually being rolled out in a number of states, these so-
called Mobile IDs, sometimes digital driver's licenses, that 
essentially associate a REAL ID-compliant driver's license or 
ID with a cell phone.
    And a modern cell phone has the ability to identity itself 
as a single traceable device, so that you can use it to assert 
your identity online and prove that you are who you say you 
are, that you own not only a REAL ID-compliant driver's 
license, but one that is associated with the cell phone that it 
was registered with. And then so what that allows you to do is 
to pretty much prove you are who you say you are.
    Now, if we had such a system in place where that was the 
standard for applying for any kind of Federal benefit, you 
know, get out your cell phone, convince your cell phone that--
you know, log into your cell phone, let your cell phone prove 
it's the one associated with the digital--with the REAL ID-
compliant driver's license, would that largely have short-
circuited all of the fraud that we've seen with identity fraud?
    Mr. Dotson. It would definitely have limited some, but I 
will say--you know, any time you put in an extra level of 
identification, it's going to benefit the program. It's going 
to eliminate some fraud.
    By far, it will not eliminate all of the fraud. Our, you 
know--our complex criminals are ever-evolving, just like we 
are, investigations, trying to circumvent different parameters 
that are set, particularly in identification and their identity 
online.
    So, there will always be an issue there that we'll be 
fighting just because it is online. But yes, sir, in short, it 
would help eliminate some fraud.
    Mr. Foster. And there seems to be a difference between the 
sort of fraud that the SBA was seeing where these were like 
real people with fake businesses versus--or were these largely 
fake people that didn't exist or you're stealing someone else's 
ID?
    Mr. Ware. All of the above. So, we had quite a bit with 
businesses that existed but didn't have the number of employees 
that they said they had, businesses that started way after the 
date that you were eligible to be started but still got 
through. And then we saw some that were just fake altogether, 
and tons of identity theft as well within the SBA's programs.
    Mr. Foster. And that's why looking at, for example, tax 
data is the way to find out the business doesn't really exist.
    Mr. Ware. That's one of the ways, but that was something 
that was not done in this instance.
    Mr. Foster. Were there legal impediments or just it was too 
much volume of things to approve?
    Mr. Ware. There were legal impediments. The Act, in 
essence, said that they couldn't do that.
    Mr. Foster. OK. If you could get us a little more detail on 
that for the record, I would be very interested, because that 
sounded like we were shooting ourselves in the foot in terms of 
eliminating that kind of fraud.
    I'd like to also point out that there is an Act that I am 
sponsoring called the Improving Digital Identity Act of 2021. 
It's cosponsored by myself, Ranking Member Katko of the House 
Homeland Security Committee, Congressmen Langevin and 
Loudermilk. And what this does is it encourages the government, 
all agencies to get together and come up with a standardized 
way of proving you are who you say you are when you're applying 
for a Federal benefit or other purpose, with I believe the idea 
in most people's mind that that would be the NIST standard for 
mobile ID associated with a REAL ID-compliant ID.
    And so I'd be interested in your reaction. You can respond 
for the record to see if that would be a useful step forward 
here, because I'll be asking that again for the record.
    And my time is up, and I will yield back.
    Chairman Clyburn. Thank you very much, Mr. Foster.
    The chair now recognizes Ms. Malliotakis for five minutes.
    Ms. Malliotakis. Thank you, Mr. Chairman.
    Thank you all for your testimony today and for being here. 
I think it is a very important topic that should have been 
probably done before issuing another $1.9 trillion in the COVID 
package last year.
    I wanted to followup on some of the questions that were 
raised regarding the estimated 400 billion that was believed to 
have been stolen from the 900 billion COVID unemployment relief 
program. NBC had reported that at least half of that money was 
taken by international fraudsters. You alluded to some of the 
investigations that have been taking place.
    How much of that funding has the United States been able to 
recover for the taxpayers?
    Mr. Dotson. Well, ma'am, again, as far as numbers, you 
know, I know we've recovered about $1.26 billion, that there's 
a slight amount there that it's international, but the majority 
of that is domestic.
    We continue to investigate those cases that involve 
transnational organized groups and the funds they stole, and we 
will followup. And anything we can recover, we will recover. 
Obviously, when it leaves the United States and goes 
international, it makes our job tougher to recover funds.
    Ms. Malliotakis. The 1.26, that is--what is the latest 
estimate that has been stolen? Is it still $400 billion or is 
it more than that overall, not just internationally, 
domestically as well?
    Mr. Dotson. Well, I just have to say, as many of us have 
stated, we have no idea the actual fraud amount. We know it's 
substantial. We just--those analyses are still ongoing, and I 
think we hope to have those numbers.
    Ms. Malliotakis. Now, there's been minimal efforts to 
review state eligibility determinations, which were the most 
common cause of the unemployment fraud.
    Do you have any recommendations for how the Federal 
Government can better ensure that these funds are used 
appropriately? Would it be feasible for the Federal Government 
to audit funds that we give to states or municipalities let's 
say of a million or more to try to ensure that their process is 
appropriate to ensure that the funds are going for their 
intended purpose?
    Mr. Horowitz. Certainly, Congresswoman, the oversight 
effort of following Federal funds is something that we all do 
as Inspectors General. It's something that's very important to 
do.
    And I know from talking with the IG at the Labor Department 
how much of a challenge it's been because of the decentralized 
nature of the unemployment insurance system that has been set 
up, created by Congress and through administrative actions over 
long periods of time.
    And the importance of reforming those, I think, is 
something that's very worthwhile and significant that we've 
seen here the need to do.
    Ms. Malliotakis. I want to thank you all for the work that 
you do, because I think it's incredibly important that we get 
to the bottom, and also learn from the process, how do we fix 
it? Because too much money is being wasted when people are 
truly in need of it or programs are truly in need of it.
    New York, California, Illinois, it was reported that there 
were among--there were 12 states that used COVID relief money 
that was supposed to be used to reopen schools and that it 
somehow shifted to equity, implicit bias training, critical 
race theory.
    What are--are you aware of that, No. 1? No. 2, any other 
egregious examples of how funds were used by municipalities or 
states not for their intended purpose?
    Mr. Horowitz. I have seen the reports on that, but I'll 
just say, this is an area, where I mentioned earlier, data gaps 
and data challenges exist for us. We're still waiting for a 
fair amount of data. This has been going on since 2020, over 
two-plus years.
    Agencies need to do a better job of getting data to the 
public. The public has a right to know where the money went. 
We've issued reports in 2020 and 2021 about those gaps, about 
information being listed. Thousands of grants, for example, 
going out where we can't make heads or tails, let alone the 
public, of who were the end--where did that money ultimately 
go? And that's something that I think needs to be looked at as 
well.
    Ms. Malliotakis. And when you say agencies, Federal 
agencies, state agencies, or both?
    Mr. Horowitz. Federal agencies I'm now talking about. And 
this has been a long-time issue. Comptroller General Gene 
Dodaro has testified about this many, many times I know. We've 
talked about as well, the importance of data and data accuracy. 
Congress made an important step forward with the DATA Act 
several years ago, but there's certainly more work to be done.
    Ms. Malliotakis. Well, again, thank you for your work. I 
think we need to make sure that you guys have the resources to 
do your job to make sure that taxpayers' money is protected and 
used for their intended purpose.
    Thank you, Mr. Chairman.
    Chairman Clyburn. Thank you.
    The chair now recognizes Mr. Raskin for five minutes.
    Mr. Raskin. Mr. Chairman, thank you very much.
    Which one of you talked about the conflict or the tension 
between speed and accuracy? You did, Mr. Horowitz. And I get 
that, and I remember clearly that when we were doing, you know, 
the EIDL program or doing PPP our constituents were desperate 
to get the money, legitimately desperate. But then, as you 
suggest, we've got criminals waiting in the wings to rip off 
the program.
    So, when we did this and we created it under the Trump 
administration, what controls and regulations were put into 
place to make sure that transnational criminals and other 
thieves weren't ripping off the taxpayers?
    Mr. Horowitz. So, the problem at the outset was that, you 
know, for example, the PPP program, about $400 billion went out 
in two weeks out of an $800-billion program, relying 
essentially only on self-certification. And so, we had 57,000 
PPP loans be approved for entities/individuals who were on the 
Treasury Department's and other agencies' Do Not Pay List. No 
one checked.
    So, what I've said is, you need--I understand completely 
the need for speed. No one is suggesting in the IG community, 
the oversight community, you wait weeks or months. I just think 
there were several steps that could have been taken that easily 
match some existing data, basic checks that could have 
prevented some of the fraud.
    Because, you know, all the data shows that if you put a 
roadblock in front of a fraudster in the first instance, they 
usually won't come back and try another door. Now, that may not 
be true for some of the more sophisticated actors, but the goal 
is to stop as much of the fraud as possible.
    Mr. Raskin. Right. I mean, I just find it outrageous. I 
understand that there was huge need and so on, but the failure 
to institute the most simple mechanisms of accuracy to check 
where the money is going is just indefensible.
    And, you know, we don't want to act with speed in getting 
money to the wrong people, to criminals. And I certainly have a 
lot of constituents who were legitimately in line to get it who 
never got it. And then to hear that there are other people who 
are getting it who are just ripping off the system is just--to 
me, it's appalling.
    Well, Mr.--yes.
    Mr. Horowitz. I was just going to say can I add also----
    Mr. Raskin. Yes.
    Mr. Horowitz [continuing]. what people don't tend to focus 
on is identity theft, not only how it rips off the program and 
it depletes the program from helping people it was intended 
for, but we've now heard of instances where the people who were 
intended beneficiaries, when they tried to show up for the 
benefit, couldn't get it.
    Mr. Raskin. Oh, I had a bunch of constituents like that.
    Mr. Horowitz. They thought they were the fraudsters.
    Mr. Raskin. I had a number of constituents who said, I 
applied and they said I'd already gotten--I'd already gotten my 
money.
    So, you know, the greatest country on earth can do better 
than this in distributing a huge amount of money. I hope, Mr. 
Horowitz, that we've learned our lessons for the next crisis. 
There's going to be another crisis in the history of the United 
States, so I hope we've learned our lesson and we're going to 
institute some real mechanisms of control.
    Mr. Ware, I understand your office got $25 million in the 
American Rescue Plan to combat waste and misdirection, fraud 
and corruption in the process. How are you using that money to 
investigate fraud, and to improve the underlying SBA program?
    Mr. Ware. Well, thank you very much for the question. At 
the onset, setting up these controls exactly like you are 
talking about, we were the first in the oversight committee 
to--I mean community to put out a report on pandemic-related 
fraud and issues that were happening. We had three reports out 
before the first loan went through the door asking for these 
controls to be raised.
    We were first in the Nation to make an arrest on PPP fraud. 
We staffed up our office utilizing that money. To date, we 
have, what, over 300--over 300 arrests, close to 400, as a 
matter of fact--convictions and--that we have taken a part on. 
We joined every single task force. We've returned over $1 
billion in funds and helped SBA to recover another $3.1 
billion, and that number is growing.
    Mr. Raskin. Well, that's great to hear. And it's obviously 
a shrewd investment and payoff for us to do it.
    Mr. Horowitz, are there additional resources that are 
needed to identify and combat fraud in the pandemic relief 
programs, knowing that we're going to get a lot more money back 
if we do the job right?
    Mr. Horowitz. Congressman, there absolutely are. I think 
one of the things that has been frustrating, frankly, through 
the various appropriation processes that I know for--not for 
the PRAC specifically but for the IG members, like IG Ware's 
office, the Labor IG office, other IGs, has been the lack of 
followup funding and the fact that the emergency funding, which 
was obviously not an annual appropriation, required the IGs to 
make now decisions on do we cut back on employees right as--I 
can tell you the fraud numbers and the investigative work is 
growing.
    The recoveries, by any measure, if you want to look at 
return on investment, any measure of return on investment will 
show that taxpayers benefit by multiples, 14, 15, even more 
than that percent--times the money invested in IG work.
    I just hope the Congress in their--in looking at the 
appropriation process considers not for our office, the PRAC, 
but for the IGs that are doing this work, for the law 
enforcement agencies that are doing this work, that effort.
    And for the PRAC, I'll just make one observation, which is 
we've set up this data analytics effort at the PRAC. We're 
identifying fraud. Analytics work is the only way you can 
figure this out with $5 trillion in money going out the door.
    During the Recovery Act in 2009, Congress created the 
Oversight Board then. It created a data analytics platform. It 
sunset in 2015. The administration, Congress, and the Treasury 
Department, which ultimately got that data analytics platform, 
decided not to keep it.
    To your point, five years later, here we were with no 
analytics platform in the IG community and we had to start from 
scratch. Congress appropriated in the American Rescue Plan $40 
million to us to startup what had sunset in 2015.
    And you are exactly right, we will have more earthquakes, 
hurricanes, fires, other, unfortunately, disasters, hopefully 
no more pandemics. But as we all know, all of those happen. We 
need those tools. We're talking to the--on the Senate side, 
after the last hearing we had there in March, they've followed 
up with us about extending this analytics platform. We're 
engaged in those discussions.
    Gene Dodaro the Comptroller General, is very supportive of 
that. And that's something I think is also very important.
    Mr. Raskin. Thank you, Mr. Chairman. Thank you. I yield 
back.
    Chairman Clyburn. Thank you very much.
    Now, we were noticed that there would be time for a second 
round of questions, and we are going to allow that at this 
time.
    Now, as we go to a second round, the chair is going to 
recognize himself for a second round. I am particularly 
interested in the last issue raised by Mr. Raskin, not just for 
any future pandemics, but I come from a part of the country 
where we've experienced similar fraudulent activity relating to 
hurricanes and the kind of disaster relief that has gone out, 
not just to do--for the families involved, but the people who--
the fly by-night organizations that step up and all of a sudden 
they're big-time contractors and they're getting all kinds of 
money.
    Now, I seem to recall--in fact, in the report that we're 
releasing today, we are dealing with this issue where the SBA 
Office of the Inspector General, as you just noted, said that 
the SBA failed to use sufficient controls to prevent PPP fraud, 
and quoting from your report, lowered the guardrails in the 
EIDL program, significantly increasing fraud vulnerabilities. I 
mean, after you all identified there's a problem here, the 
guardrails were lowered and increased vulnerabilities.
    Now, that doesn't sound like anybody is trying to prevent 
fraud and abuse and protecting the additional money that's 
going to come. That sounds like somebody is trying to make it 
easier for these criminals to get at the money in the first 
place.
    And when you order people to put the money out, when there 
are red flags saying this looked like a crook, and you had no 
ability to stop it, I want you to speak to that, Mr. Ware.
    Mr. Ware. Thanks. Initially, like Mr. Horowitz spoke about, 
there was a huge struggle between the need for speed versus the 
need for control. I'm at the table screaming for the need for 
control after identifying that we have major issues. Each one 
of the flags that I raised were met with, but there could be a 
reason for that. So, I raise another flag. There could be a 
reason for that. Another flag.
    And then I said, aha, but all these flags come together in 
one circle. So, it's just not one instance with an illogical 
Social Security number, or that the bank account was changed at 
the end or an illogical email or hundreds if not thousands of 
loans from the same IP address.
    Again, the need for speed, thinking that these flags and 
them not having sufficient resources to clear the flags would 
be a hindrance for speed, that was the issue that the agency 
was faced with up front, initially. Beginning in December of 
that year, of 2020, finally came to the realization that we 
have a large enough problem that the controls have to be raised 
once again.
    Chairman Clyburn. It's one thing to have a need for speed. 
It's something else to use the need for speed as a subterfuge 
for getting money out of the door to people known to be 
criminals, or felt to be criminals. Lowering the guardrails has 
got nothing to do with speed. That sounds more like 
convenience.
    With that, I'll yield five minutes to Ms. Malliotakis, if 
you would like to.
    Ms. Malliotakis. Just to followup on the questions, I know 
I talked a lot about the international fraudsters. 
Domestically, can you talk a little bit about some of the cases 
that--where there have been arrests that you can speak about, 
and what is the responsibility of the states in these cases? 
Because, again, the UI criteria was usually established by the 
state, right? So, they bear some responsibility here. And are 
you getting cooperation from local authorities?
    Mr. Chambers. Congresswoman, thank you for that question. 
As you point out, the UI programs are, in the first instance, 
administered by the State Workforce Agencies. They, during the 
pandemic, took the first role in distributing funds.
    As part of our work to combat that fraud, we have relied on 
the State Workforce Agencies to provide the data that 
applicants gave them when they applied for unemployment 
insurance. And that's the data that's going to lead to 
prosecutions, and, eventually, convictions.
    I'm happy to say that we have data from all 50 states at 
this point, the data is coming in, as well as from all 
territories. There's a lot more to receive, but we have had 
cooperation from all 50 states.
    In terms of what the states can do--and Congressman Foster 
raised this a moment ago--standardization of the data would be 
incredibly helpful for the purpose of our work in identifying 
where fraud has occurred.
    It's a large thing to ask. Many of these State Workforce 
Agencies may, you know, not have had occasion to have to 
collaborate or work together. But we've seen with this 
pandemic, when the Federal Government is giving money through 
these State Workforce Agencies, we need to have a way to 
analyze that data without wasting months or years cleaning it 
up. So, one thing I think that would be very helpful is 
standardization of data for those applying for unemployment 
benefits.
    Chairman Clyburn. Thank you very much.
    The chair now recognizes Mrs. Maloney for five minutes, or 
Mr. Foster for five----
    Mrs. Maloney. Hi. Thank you, Mr. Chairman.
    Chairman Clyburn. OK.
    Mrs. Maloney. Mr. Chairman.
    Chairman Clyburn. Yes.
    Mrs. Maloney. In 2020, Congress took bold action to provide 
unprecedented relief to Americans struggling because of this 
terrible pandemic. Yet, due to the failures of the Trump 
administration, fraud prevented many vulnerable Americans from 
receiving the much-needed aid that they justly deserved. Your 
select committee's report clearly shows that the Trump 
administration failed to implement basic fraud controls in the 
COVID-19 Epidemic Impact Disaster Loan program, or EIDL. These 
failures had devastating effects for many Americans in need who 
were seeking this vital aid.
    So, my question to you, Mr. Ware, is what were the most 
concerning deficiencies that enabled fraud in the early 
administration of the EIDL program?
    Mr. Ware. Well, one of the most concerning--the most 
concerning thing was self-certification was the route that was 
taken. So, you just had to say that you had a business, so you 
had X amount of employees, and you could get money. That was 
the most concerning thing, and the thing that we sounded the 
alarm on very early, that this can't be the way.
    Mrs. Maloney. I've got to say I was very concerned by the 
unprecedented amount of fraud, because programs such as the 
Paycheck Protection Act and the EIDL program ran out of funds 
so quickly. They ran out really early. One of them ran out in 
one day. Individuals and small businesses and communities of 
color were disproportionately unable to receive any relief or 
the relief that they needed.
    So, Mr. Horowitz, could you speak about the harms to 
communities of color when fraud consumed the resources of these 
vital relief programs? You know, the fraudsters were ready to 
pounce and the regular people were still filling out the forms 
while they stole the money from the system. So, could you 
please respond?
    Mr. Horowitz. Yes, Congresswoman. It's a very important 
point, something we've written about and have held hearings on. 
And people can go to our website and see the hearings we've 
held about these issues, about how underserved communities and 
individuals who had challenges applying through the internet.
    So, we saw underserved communities that were economically 
impacted not be able to get benefits that were intended for 
them. We've seen the same, by the way, with rural communities 
that didn't have good internet service or strong internet 
service be challenged in applying for programs that you had to 
apply through the internet. We were in the middle of a 
pandemic, of course.
    We've seen challenges for elderly applicants in navigating 
through the internet application process. And so we've 
identified a lot of different issues that came up through these 
processes that need to be addressed.
    I mean, what--at bottom line, what we saw in multiple 
agencies, they were woefully unprepared to be able to deal with 
this kind--these kind of programs in a way that they should 
have been able to deal with at a basic level. They could have 
been more sophisticated. You could continue to increase their 
ability to deal with it. But even at the most basic level, so 
many agencies we found were unprepared to deal with these 
challenges.
    Mrs. Maloney. Thank you.
    Mr. Ware, in your opinion, could SBA have taken additional 
steps to prioritize underserved small businesses and 
communities of color during the early rollout of the PPP?
    Mr. Ware. In my opinion, yes. And the report that we put 
out probably like two weeks into the program, in essence, laid 
out how they could do that. At the onset, SBA wasn't even able 
to tell that it went there. So, we had them change the way that 
they were doing the NIST codes that would provide for 
demographic information. There would have been no way for them 
to know whether they were served or not served initially.
    Mrs. Maloney. Well, I want to thank all the panelists. My 
time has expired. And I thank you for doing all that you are 
doing to try to make sure the pandemic funds get to the people 
who really need it and that it is distributed fairly and 
honestly and equitably. I thank you.
    And I yield back to the chairman and thank you for this 
very important hearing.
    Chairman Clyburn. Thank you very much.
    The chair now recognizes Mr. Foster for five minutes.
    Mr. Foster. Thank you, Mr. Chair.
    Mr. Chambers, you mentioned data standardization as an 
important priority toward making the system work better next 
time. Does this occur, for example, in lists of bad actors, 
where you might have different state and Federal agencies 
accumulating lists of wrongdoers, and then it just is very 
labor-intensive to find out that this person applying for 
something is, in fact, on someone's list of bad actors, or is 
that pretty well-organized at this point?
    Mr. Chambers. Congressman, it's even more basic than that. 
The standardization that I'm speaking of is things as basic as 
Social Security numbers, addresses, phone numbers, email 
addresses collected in a similar fashion, maintained in a 
similar fashion. So that, for example, when we get state work 
force data from four or five different states, we can quickly 
compare and analyze those things to look for red flags.
    Mr. Foster. Essentially, a unique identifier for the human 
beings that you're trying to figure out who's who, you have a 
data base index for the wonks and all of you.
    Mr. Chambers. Precisely.
    Mr. Foster. Yes. And so that is, I think, the motivation 
behind getting--doing a good job of a secure digital ID, where 
you take the data that exists in a REAL ID-compliant driver's 
license or a passport if you want one and put it in--you know, 
in people's cell phones so that there is no question that that 
is the person and their cell phone, but then use that 
effectively as the unique identifier. So, you can walk into 
anything in person or online and prove you are a single legally 
traceable person.
    And, you know, it's my feeling that when we talked about 
return on investment, there isn't really a higher return on 
investment that our government can make than making such a 
streamlined way of being able to prove you are who you say you 
are.
    I am very encouraged that the work that NIST has been doing 
for the last decade is now--you know, it exists in every one of 
your cell phones. The latest couple releases of IOS and Android 
have implemented the NIST standards, so that it will actually--
and they're being--internationally, they're also being adopted 
by the ISO.
    So, that there is technologically the possibility of being 
able to assert your digital identity online and in person in a 
very streamlined way. And, you know, I think that's a natural 
job for government, that we put a tremendous amount of work 
into getting the data behind the REAL ID-compliant IDs, and 
that just taking the additional step of putting that on 
people's cell phone and allowing that to be the standard for, 
you know, basically applying for Federal benefits.
    Mr. Horowitz, when we talk about return on investment, are 
there estimates of the total losses for government from 
identity fraud? Does anyone take it upon themselves to just 
look through all the agencies, all the programs, and say, 
Here's how much money we could save by--with a high-quality ID 
system in this country?
    Mr. Horowitz. It's a great question, Congressman. I'm not 
aware of an executive branch-wide effort to do that. And I 
think that's one of the frustrations we have as--in the 
oversight community, is this sort of siloed approach, with 
agencies focusing on their individual issues and their 
individual standards as opposed to across the executive branch 
and the issues that arise.
    And one of my concerns in this space is the perfect being 
the enemy of the good. Starting doing some basics at the 
outset. Everybody wants to find the perfect solution. What's 
the right approach? This is not going to happen overnight that 
that's going to get fixed.
    The fact that, you know, as we've found in the PPP program, 
a single telephone number was used in connection with 1,400 PPP 
applications. One Social Security number was used in 29 states 
to get UI benefits.
    Mr. Foster. But if they had been required to, OK, fine, you 
applied, get out your cell phone, prove you are who you say you 
are, and use that single identifier. And the fact that you 
can't clone a modern cell phone, because they have the Secure 
Enclave and key generation, all that inside it. They're like--
basically like one of these security dongles. And so you could 
use that to make sure that--if you have a unique ID that you 
are demanding every time you apply for any Federal benefit, it 
seems like you could have just stopped that in its tracks.
    And the return on investment from getting that--you know, 
the mobile IDs that are being implemented in individual states, 
to get that implemented nationally and used universally by the 
Federal Government would just be a huge cost savings.
    And it's also my hope that if we actually--when we get 
legislation for this, that it will actually have a huge 
positive pay-for in the Congressional Budget Office sense, 
which is always an interesting question, that where you can 
actually save a lot more taxpayer money from a small 
investment. And we wrestle with that all the time.
    I just want to thank you again for all the work you're 
doing. It's really important that everyone sees our government 
is working as well as it can be under--even under stressful 
situations.
    So thank you, and I yield back.
    Chairman Clyburn. Thank you, Mr. Foster. The chair now 
recognizes Mr. Raskin for five minutes.
    Mr. Raskin. Thank you, Mr. Chairman.
    I want to start just by thanking you for your resolute 
determination to ferret out the corruption and the fraud which 
undermined the programs that we voted for our people. So, thank 
you for that.
    And I also want to salute President Biden for making an 
investment and for asking for more funds to be invested in the 
anticorruption, antifraud efforts across the agencies.
    Let's see. Mr. Dotson, the SBA's Office of Inspector 
General and SBA and the Secret Service got together to go after 
fraud and recovered I think from our report it was reported 
more than $1 billion that had been stolen from the EIDL 
program.
    Can you tell us, first of all, how you did that? And then 
second, is it mainly organized criminals, like organized gangs 
or groups or traditional organized crime here or abroad that 
you're going after, or is it lone ranger individuals?
    Mr. Dotson. Well, thank you for the question, Congressman. 
The efforts put forth with the Secret Service and SBA OIG and 
our partners here has been extraordinary. There's no doubt 
there.
    In working with them to identify fraud and also working 
with the financial sector from early on, we were able to 
identify several cases that involved what we looked to be as 
fraud. In following up those cases, we were able to recover, 
like you said, over $1 billion to date. And that's just by 
sheer hard work of thousands of investigators and detectives, 
like I said, from our Cyber Fraud Task Forces, not only out in 
the field actually following up cases, you know, doing the 
typical investigations of interviewing people and finding 
assets, but it also was, at a global scale, working with SBA 
OIG and the financial institutions who were identifying those 
types of fraud.
    Early on, we saw this--as Mr. Ware said, we saw this kind 
of happening real time, and we got out advisories through 
FinCEN that identified the fraud indicators that financial 
institutions should look for. And they did an outstanding job 
of trying to safeguard as much fraudulent funds as they could.
    Mr. Raskin. Thank you.
    Mr. Ware, your office gave us data showing that, with the 
help of the OIG, that banks and financial institutions had 
returned over $8 billion in EIDL funds to the SBA.
    Why did they return this money? Was that money that had 
been illegitimately taken by the banks and the financial 
institutions, or was it from fraudsters?
    Mr. Ware. No. So, it's for various reasons. Like, the 
people didn't collect, the people turned it back. They realized 
that--in many instances, that we're onto them. They left the 
money, didn't come for it. And we assisted SBA in getting that 
money back from the financial institutions. The number will be 
even bigger than that.
    Mr. Raskin. Gotcha. On this point about unemployment 
insurance, I understand that the Biden administration is asking 
for money to help the states modernize and upgrade their 
unemployment insurance systems, which would be of great benefit 
to the people of Maryland. Hundreds of thousands of people just 
had a nightmarish time trying to get the unemployment benefits 
that they were due in Maryland. So, I do hope we'll make some 
progress on that.
    Is your general response to all of these events, Mr. 
Horowitz, that it would be better when we engage in programs 
like this that we do it at the national level?
    I mean, I know that the Social Security system, for 
example, spends less than one percent of their money on 
bureaucracy, and they seem to be extremely efficient and 
there's very little fraud. And yet we have programs like this 
that are thrown up overnight, they're just rife with fraud.
    So, I mean, should we be doing this on the national level 
rather than in a decentralized state-by-state way?
    Mr. Horowitz. I certainly think what we've seen here is the 
need to more centralize it. How far you go, whether it's 
entirely Federal, or there's a better balance or a supported 
way that states can upgrade their systems. But we're now in the 
digital age, and what we saw at the executive branch level and 
at the local level is so many entities were not ready for a 
digital age problem that arose, right? People could not show up 
to pick up their benefits. They had to do it remotely. We 
weren't allowing people to go out. There were lockdowns. And 
people just weren't ready.
    If nothing else from this, it's let's step back, figure out 
how to fund, support to create modernized systems that can talk 
to one another, that can pick up these problems early on. This 
shouldn't happen. We shouldn't have 29 states giving benefits 
to the same Social Security number.
    Mr. Raskin. Right. And it just seems to me, Mr. Chairman, 
if we're at a national crisis and we are allocating national 
benefits, we should have national programs with national 
safeguards and controls, so we don't have people hopscotching 
from state to state to rip off the taxpayers in each state.
    I yield back to you.
    Chairman Clyburn. Let me--thank you, Mr. Raskin. Thanks to 
all of our witnesses here today.
    I was thinking--as Mr. Raskin was asking this question 
about a centralized process that seems to me up front would 
have prevented a lot of all of this, I was thinking about how 
far we tend to get away from this country's motto: E pluribus 
unum, out of many, one.
    If that were the practice more often, I think that a lot of 
what we're trying to do here--people look to the Federal 
Government for relief and assistance in this kind of instance. 
Yet, when we set out to provide it, we tend to do whatever we 
can to lessen the efficiency of the process.
    We said with the subcommittee from the very beginning, that 
we were going to ascribe three Es to whatever we were doing 
here. We wanted to be efficient, effective, and equitable.
    And it seems as if so much of what we've done to implement 
this program is in violation of all of that. We have not been 
as efficient as we could be, and, therefore, we have not been 
as effective as we should be. And the equity that should have 
been in this process was very, very lacking.
    And so I want to thank all of you for what you're doing and 
what I know you're going to do. I'm looking forward, Mr. Ware, 
to your report that in 30 days--if it's not going to be 30 
days, I would let the committee know, subcommittee know.
    Mr. Ware. Thirty-ish.
    Chairman Clyburn. I'm sorry, 30-ish. I know a little bit 
about the ``ish.''
    It's our responsibility, as yours, to ensure that these 
relief funds are available to all eligible Americans and not 
stolen by criminals and criminal enterprises. That's the thing 
that's getting me more than anything else. I don't excuse the 
run-of-the mill fraudster, but there seems to be a pretty big 
widespread enterprise at work here and I think that we've got 
to do more than we're currently doing.
    Now, I applaud the Biden administration for taking the 
steps that it's taken to protect these vital programs going 
forward. And I want to thank you once again for being a 
significant part of that.
    And, without objection, all members will have five 
legislative days within which to submit additional written 
questions for the witnesses to the chair, which will be 
forwarded to the witnesses for their response.
    With that, this meeting is adjourned.
    [Whereupon, at 12:05 p.m., the committee was adjourned.]


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