[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                     ACTION THROUGH INNOVATION: PRIVATE SECTOR 
                       SOLUTIONS TO RECOUPING STOLEN PANDEMIC 
                       LOAN FUNDS

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                              
                           SEPTEMBER 27, 2023

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 118-027
             Available via the GPO Website: www.govinfo.gov
                              __________
                                           
                   U.S. GOVERNMENT PUBLISHING OFFICE                    
53-334                  WASHINGTON : 2024                    
          
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                    ROGER WILLIAMS, Texas, Chairman
                      BLAINE LUETKEMEYER, Missouri
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                         BETH VAN DUYNE, Texas
                         MARIA SALAZAR, Florida
                          TRACEY MANN, Kansas
                           JAKE ELLZEY, Texas
                        MARC MOLINARO, New York
                         MARK ALFORD, Missouri
                           ELI CRANE, Arizona
                          AARON BEAN, Florida
                           WESLEY HUNT, Texas
                         NICK LALOTA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                          JARED GOLDEN, Maine
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                          GREG LANDSMAN, Ohio
                       MORGAN MCGARVEY, Kentucky
                  MARIE GLUESENKAMP PEREZ, Washington
                       HILLARY SCHOLTEN, Michigan
                        SHRI THANEDAR, Michigan
                          JUDY CHU, California
                         SHARICE DAVIDS, Kansas
                      CHRIS PAPPAS, New Hampshire

                  Ben Johnson, Majority Staff Director
                 Melissa Jun
                 
                             C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Roger Williams..............................................     1
Hon. Nydia Velazquez.............................................     2

                               WITNESSES

Mr. Richard C. Breeden, Chairman, Breeden Capital Management, 
  LLC, Lantana, FL...............................................     5
Mr. JT Taylor, Senior Director of Fraud Investigations and 
  Operations, ID.me, Mclean, VA..................................     6
Mr. Dean Zerbe, National Managing Director, Alliantgroup, 
  Washington, DC.................................................     8
Ms. Linda Miller, Former Deputy Executive Director, PRAC, 
  Currently Chief Executive Officer of Audient Group, LLC, 
  Washington, DC.................................................    10

                                APPENDIX

Prepared Statements:
    Mr. Richard C. Breeden, Chairman, Breeden Capital Management, 
      LLC, Lantana, FL...........................................    33
    Mr. JT Taylor, Senior Director of Fraud Investigations and 
      Operations, ID.me, Mclean, VA..............................    46
    Mr. Dean Zerbe, National Managing Director, Alliantgroup, 
      Washington, DC.............................................    68
    Ms. Linda Miller, Former Deputy Executive Director, PRAC, 
      Currently Chief Executive Officer of Audient Group, LLC, 
      Washington, D..............................................    82
Questions and Answers for the Record:
    Questions from Hon. Velazquez to Ms. Linda Miller and Answers 
      from Ms. Linda Miller......................................    86
Additional Material for the Record:
    Discussion Draft.............................................    88

 
ACTION THROUGH INNOVATION: PRIVATE SECTOR SOLUTIONS TO RECOUPING STOLEN 
                             PANDEMIC FUNDS

                              ----------                              


                     WEDNESDAY, SEPTEMBER 27, 2023

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 9:58 a.m., in Room 
2360, Rayburn House Office Building, Hon. Roger Williams 
[chairman of the Committee] presiding.
    Present: Representatives Williams, Stauber, Meuser, 
Salazar, Molinaro, Alford, Bean, LaLota, Velazquez, Phillips, 
McGarvey, Gluesenkamp Perez, Scholten, Chu, and Davids.
    .
    Chairman WILLIAMS. Good morning. Before we get started I 
want to recognize our colleague from the great state of 
Missouri for the prayer and the pledge.
    Would you please stand?
    Mr. ALFORD. Let's go to God in prayer.
    God, we are just so thankful to be here today on this Small 
Business Committee. We ask a blessing on our Chair and our 
Ranking Member that they will guide us and direct us as we 
question the witnesses today and give us discernment and 
wisdom, God, that you will help us with our votes to lead this 
great nation to greater prosperity through small business, the 
fabric of America, God. Through Jesus Christ I pray. Amen.
    I pledge allegiance to the flag of the United States of 
America. And to the Republic for which it stands, one nation 
under God, indivisible, with liberty and justice for all.
    Chairman WILLIAMS. Good morning, everyone. And I now call 
the Committee on Small Business to order.
    Without objection, the Chair is authorized to declare a 
recess of the Committee at any time.
    I now recognize myself for my opening statement.
    Welcome to today's hearing where we will be looking at the 
unacceptable amount of fraud that occurred during the COVID-19 
pandemic and what could be done to recoup those stolen taxpayer 
dollars.
    During the pandemic, the SBA took an outsized role in 
helping America's economy. The PPP and the EIDL loan programs 
were incredibly important for our nation's entrepreneurs and 
allowed many businesses to keep their doors open throughout all 
the uncertainty.
    However, the after action reports show that these programs 
were extremely susceptible to fraud. The OIG estimates that 
$200 billion dollars in taxpayers' money were given out to bad 
actors which accounts for almost 20 percent of all pandemic 
lending. This is completely unacceptable and we must find ways 
to rectify these issues.
    If we keep doing business as normal, the OIG says that they 
will have more than 100 years of casework to go through in 
order to properly investigate all the loans that have been 
tagged as fraudulent. In the private sector, if there was an 
accounting hole of this magnitude, the business owners would do 
all they could to get his receivable back into the bank 
account. This Commitmtee is working to find creative solutions 
to do just that and recoup the stolen pandemic funds for the 
taxpayers.
    I am proud that in our last two markups, this Committee 
passed four COVID fraud bills that must be done to recover 
those stolen dollars. We cannot allow the American taxpayer to 
be on the hook for 200 billion, and we must do a better job to 
maintain public trust that this level of fraud was an isolated 
event.
    I look forward to discussing with our witnesses' innovative 
ideas on how to catch fraud early and ensure hard-earned 
taxpayer dollars are being used for their intended purpose. 
This could mean greater use of data matching tools and proving 
interagency collaboration or mandating more strict standards 
for identity verification in any program that gives out 
taxpayer dollars.
    Additionally, we must find a better way to recover stolen 
funds on the back end. There will always be fraudsters and 
criminals looking to take advantage of any government program 
that is giving our money but we must have the ability to catch 
these bad actors and bring them to justice so they will not be 
able to continue defrauding the American people. Regardless of 
what solutions are brought to the table, it is clear we cannot 
continue with business as usual.
    Too many times in government we hear that something can't 
be done or that isn't how it was done in the past. Well, the 
private sector does not think like this. They encounter a 
problem; they immediately go to work and then they fix it.
    I am excited to hear from our witnesses today on new ways 
we can work to prevent and detect fraud moving forward. I thank 
all our witnesses for being here, and I look forward to this 
discussion.
    With that I will now yield to the distinguished Ranking 
Member from New York, Ms. Velazquez.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    We are here today to discuss the SBA's efforts in 
recovering fraudulent loans and preventing future fraud. Over 
the past 3 years, this Committee has played an integral role in 
examining the pandemic relief programs which helped millions of 
small businesses stay afloat in unprecedented times. 
Approximately $1.2 trillion of economic aid was dispersed 
through SBA's pandemic relief programs over the course of the 
pandemic, with much of that originating in the first 9 months 
of the pandemic under the Trump administration.
    While there may be disagreement on the actual estimates of 
fraud, it is clear we need to work together to protect the 
integrity of SBA programs from bad actors. The SBA under the 
leadership of Administrator Guzman has taken strong steps to 
root out fraud in the pandemic relief programs and put strong 
controls in place to prevent future fraud.
    Earlier this year we heard testimony from Administrator 
Guzman that SBA is doing just that. In 2022, SBA established a 
Fraud Risk Management Board aligning its practices with GAO's 
oversight policies. A new role was also created-the SBA's 
Special Counsel for Enterprise Risk to advise the Administrator 
on fraud and risk management activities. The agency continues 
to work collaboratively with the SBA Inspector General, the 
interagency COVID-19 Fraud Enforcement Task Force, and the 
Department of Justice to recover stolen funds.
    With that said, we must be clear. The SBA is not an 
investigative agency, and it does not have a team of auditors, 
investigators and attorneys, or state-of-the-art data analytics 
technology to root out and prosecute fraud. That is the role of 
the Inspector General. It is important that we understand the 
difference between the missions of the SBA and the Office of 
the Inspector General if we are going to effectively develop 
policies to prevent and recover fraud.
    To that end, the single, most important action we can take 
to combat fraud is to fully fund the Inspector General's budget 
request. Unfortunately, their budget for fiscal year 2024 was 
slashed from 47.7 million to 32 million in the House Financial 
Services and General Government Appropriations Bill. We are 
just days away from a government shutdown which will limit the 
OIG's and law enforcement efforts to recover fraudulent funds. 
Put simply, this is unacceptable. We must take our 
responsibilities seriously.
    In the last Congress, I joined with Representative 
Luetkemeyer to sponsor legislation to extend the statute of 
limitations for fraud in PPP and EIDL to 10 years. These two 
bills which became law sent a strong message that unscrupulous 
behavior would not be tolerated and that those who commit fraud 
will be held accountable in the years to come--but it is all 
for not if we do not give the Inspector General the resources 
it needs.
    I look forward to hearing from our witnesses today, and I 
am certainly open to new, creative ideas provided we are 
committed to fully funding the Office of the Inspector General 
and the law enforcement community.
    Thank you, Mr. Chairman. I yield back.
    Chairman WILLIAMS. Thank you very much.
    And I will now introduce our witnesses.
    The first witness here with us today is Mr. Richard 
Breeden. Mr. Breeden is the Chairman of Breeden Capital 
Management, LLC, located in Greenwich, Connecticut. Mr. Breeden 
founded Breeden Capital Management in 2005 focused on taking 
concentrated investment stakes in mid-cap companies and 
supporting staffs to improve shareholder value. In addition to 
serving as the Chairman of Breeden Capital Management, he also 
serves as Chairman of the Nominating and Governance Committee 
of the Board of Steris PLC and is a trustee of the George H. W. 
Bush Presidential Library. Prior to starting his company, Mr. 
Breeden served as the 24th Chairman of the U.S. Securities and 
Exchange Commission, as well as several positions under 
Presidents Reagan, Bush, and Clinton. Mr. Breeden attended 
Stanford University where he received his B.A. and went on to 
attend Harvard Law School where he earned his J.D.
    Mr. Breeden, thank you for being with us today, and we look 
forward to the conversation that is ahead with you.
    Our next witness with us today is Mr. JT Taylor. Mr. Taylor 
is a senior director of Fraud Investigations and Operations at 
ID.me located in McLean, Virginia. ID.me allow individuals to 
securely verify their identity online, helping to prevent fraud 
and abuse. Prior to his time at ID.me, Mr. Taylor worked for 
the U.S. Secret Service as a special agent, as a supervisory 
intelligence operations officer for the Office of the Director 
of National Intelligence, and as an intelligence officer for 
the U.S. Navy. Mr. Taylor went to West Virginia. They play TCU 
this Saturday. I did not know if you knew that or not. Where he 
earned his bachelor of science in management information 
systems, as well as Norwich University where he earned his 
master of science, and Louisiana State University where he 
earned his master of business administration.
    Mr. Taylor, thank you for joining us today, and we look 
forward to our conversation.
    The next witness with us today is Mr. Dean Zerbe. Mr. Zerbe 
is the national managing director of Alliantgroup located in 
Houston, Texas. At Alliantgroup, Mr. Zerbe is responsible for 
monitoring tax-related legislative activities here in 
Washington to keep clients and staff informed and help direct 
Alliantgroup service offerings to ensure client needs are met. 
Prior to his time at Alliantgroup, Mr. Zerbe was senior counsel 
and tax counsel to the Senate Committee on Finance where he 
worked with the Chairman of the Finance Committee, Senator 
Grassley on tax legislation. During this time on the Finance 
Committee, he was involved with almost every piece of tax 
legislation signed into law including the 2001 and 2003 tax 
reconciliation bills among others. Mr. Zerbe holds an LLM in 
taxation from NYU and J.D. from George Mason University.
    Mr. Zerbe, thank you for joining us today. We look forward 
to our conversation that is ahead.
    And I now recognize the Ranking Member from New York, Ms. 
Velazquez, to briefly introduce our last witness appearing 
before us today.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Linda Miller served as the Deputy Director of the Pandemic 
Response Recovery Committee. She is one of our country's 
foremost experts on preventing and detecting fraud. Prior to 
launching her own consulting business, she was a Principal at 
Graham Thornton where she led the firm's fraud and financial 
crimes practice. She was also the Assistant Director in the 
forensic audits and investigative service group at the 
Government Accountability Office. She has a wealth of 
experience and has dedicated her career to helping 
organizations identify and manage fraud.
    Welcome, Ms. Miller, and I look forward to your testimony. 
Thank you.
    Chairman WILLIAMS. Thank you. And again, I appreciate all 
of you being here today.
    Real quickly, just as a reminder, before recognizing the 
witnesses I would like to remind them that their oral testimony 
is restricted to 5 minutes in length. And if you see the light 
turn red in front of you it means your 5 minutes has concluded 
and you should wrap up your testimony. If you go too long I 
will give it a little of this (gavel tapping). You will hear 
that. Okay?
    I now recognize Mr. Breeden for your 5 minute opening 
remarks.

   STATEMENTS OF RICHARD BREEDEN, CHAIRMAN, BREEDEN CAPITAL 
     MANAGEMENT, LLC; JT TAYLOR, SENIOR DIRECTOR OF FRAUD 
  INVESTIGATIONS AND OPERATIONS, ID.ME; DEAN ZERBE, NATIONAL 
 MANAGEMENT DIRECTOR, ALLIANTGROUP; LINDA MILLER, CEO, AUDIENT 
                           GROUP, LLC

                STATEMENT OF RICHARD C. BREEDEN

    Mr. BREEDEN. Thank you very much, Chairman Williams, 
Ranking Member Velazquez, Members of the Committee. I am 
honored to be here and appreciate your invitation.
    For about 35 years, perhaps a little more, about half my 
life, I have been involved in efforts to combat fraud, to help 
victims of fraud overcome the ravages of the crimes committed 
against them, and in many cases to try and recover money that 
has been stolen from the public.
    I have done that in a variety of settings in both the 
public sector and the private sector. I worked in the White 
House under Presidents Reagan and George H. W. Bush, 41, and 
during the time working in the White House for 41 I was very 
actively involved. One of the principal draftsmen of the 
legislation known as FARIA that helped solve the savings and 
loan crisis, which has involved a great deal of fraud and the 
legislation contained quite a few provisions intended to help 
recover the monies that had been involved in fraudulent loans.
    I was Chairman of the SEC for just under 4 years, and every 
single day involved fighting fraud. That is what the SEC does 
among other things but it is a never ending struggle and in any 
marketplace there are people who will abuse the market. And the 
SEC, for every day I was there, we were involved in antifraud 
efforts.
    And for the last 20 years I have administered a series of 
funds for victims of fraudulent activity. The last few years I 
have served as head of the Madoff Victim Fund on behalf of the 
Justice Department, and my firm works for both the Department 
of Justice and the SEC in administering funds for victims. A 
big part of that work is making sure to help make sure that the 
money in these funds makes it to the intended victims is to 
make sure that we identify and block false claims.
    So your topic today is very important. It is near and dear 
to my heart but it is important to taxpayers, to the SBA and 
its work and to faith in our institutions. So it could not be 
more important.
    About 11.4 million loans were made in the pandemic 
programs. In our work over the last 35 years, I have never seen 
a program with fraud incidents lower than roughly 30 percent. 
If government puts up a billboard that says, ``free money, 
apply here,'' lots of people will come. And unfortunately, not 
all of them are entitled to participate.
    So I think the estimates, we will never know the total 
amount of fraud but the estimates even at the high end of 200 
billion could be conservative. That is just the world we live 
in. And I think it is important as was mentioned to remember 
the time pressure that we were under and the great, great good 
that these programs accomplished. And nothing in the later 
efforts should take away from that.
    The amount of fraud, the SBA has estimated 25 billion; GAO, 
200 billion. It could be 400 billion. We will never know. There 
was an ocean of fraud and now the question is how much of the 
improper funds can we get back?
    There are a lot of ideas. My written testimony lays out a 
number of ideas as do the other witnesses. But I think overall 
the 100 years of fraud and 100 years' worth of investigations 
that I certainly have no problem. When I was at the SEC, we 
were always trying to make sure we had enough resources. And 
making sure that OIG has enough resources is an important 
question.
    But we do not have 100 years. And if we give them more 
resources, and it takes 3 to 5 years to train somebody to know 
what they are looking for, our time, and even on an extended 
statute of limitations will run out. So the goal to me should 
not be let's figure out how to get 100 years to 93 years or 86 
or 72l; it is how do we accomplish the most we can possibly 
accomplish over the next 5 years.
    To do that I would say we have to supplement the resources 
that exist, whether at current levels or enhance levels, but 
find ways to break up the caseload, bring other people onto the 
playing field, and use the private sector to go after some of 
the bad actors.
    I suggest in my testimony forming small groups, private 
sector contractors. Medicare and Medicaid do something similar. 
The SEC does it. The DOJ does it. Other agencies do it so I am 
not certainly having something totally innovative but in this 
area I think it could pay great dividends.
    Most importantly is to have a mentality of an outrageous 
sense of urgency here to get after this problem and get as much 
done as possible. Thank you, sir.
    Chairman WILLIAMS. Thank you.
    And I now recognize Mr. Taylor for his opening remarks.

                     STATEMENT OF JT TAYLOR

    Mr. TAYLOR. Thank you, Mr. Chairman.
    Chairman Williams, Ranking Member Velazquez, and Members of 
the Small Business Committee, I am honored to be here today.
    My name is JT Taylor, and I serve as the senior director of 
fraud at ID.me.
    Before this role I dedicated a significant portion of my 
professional career to the U.S. intelligence community and the 
U.S. military, serving in both as an intelligence operations 
officer. Later, I served as a special agent with the United 
States Secret Service, where I led a series of pivotal domestic 
and international fraud and cybercrime investigations.
    My tenure in intelligence operations and my investigative 
endeavors have granted me a comprehensive and nuanced 
perspective on the challenges inherent to digital fraud and 
cyberthreats.
    When the pandemic gripped our world, governmental bodies 
like the Small Business Administration and the Department of 
Labor stood on the frontlines swiftly allocating relief funds. 
However, haste led to vulnerabilities in security and identify 
verification. The SBA's Office of Inspector General identified 
worry signs. Numerous IP anomalies pointed towards foreign 
intrusions and coordinated fraud attempts. The misuse of 
employer identification number was rampant with multiple PPP 
loans under single EINs.
    Furthermore, there was a starting discovery of businesses 
declaring post-deadline establishment dates and recurring use 
of identical contact details across different applications.
    The funding system supporting these initiatives are 
intrinsically linked with the broader business ecosystem. 
Conventional practices involve businesses contributing to 
benefit funds calibrated on their workforce size.
    But the massive, unexpected unemployment claims threaten 
this balance. State debts have increased and there is now an 
impending risk of businesses, particularly smaller ones, facing 
escalating per employee taxes. This is a multi-dimensional 
problem with repercussions for the entire U.S. economy.
    The pandemic served as a double-edge sword. On one side is 
unveiled resilience and adaptability of our institutions. On 
the other it exposed areas where we were woefully unprepared, 
chiefly in the arena of cybersecurity and fraud detection.
    In these challenging times, states sought robust, scalable 
solutions. Twenty-seven states turned to ID.me which is not 
just another tech company but a leading credential service 
provider. Independently certified against rigorous standards 
set by the National Institute of Standards of Technology, ID.me 
embodies the pinnacle of digital identify verification.
    Supporting a user base exceeding 113 million, the impact of 
ID.me on fraud prevention has been profound. Partner states 
witnessed transformative results. Fraud rates drastically 
diminished. Authentic claims experienced seamless processing 
and financial savings were substantial.
    Beyond the monetary gains, the rejuvenation of public trust 
in an era when faith in public institutions is fragile is 
invaluable. In this digital era, standards like this curated by 
NIST are not optional but foundational. Overlooking these 
guidelines as seen sporadically during the pandemic leads to 
compromising security.
    In today's digital world, data has emerged as a prime 
commodity. Amid this landscape, data brokers who amass, refine, 
and frequently monetize user information have risen in 
prominence. Although they often work within current legal 
constraints, their vast data repositories offer a Goldeneye for 
malicious entities.
    The financial drain due to digital fraud during the 
pandemic serves as a testament to the perils posed by easily 
accessible data. There is an urgent need for our defense 
mechanisms to adapt considering this threat landscape. A 
comprehensive strategy that merges the strengths of both the 
private and public sectors is imperative.
    The Macomb School of Business from the University of Texas 
at Austin revealed that a concerning 11 percent of PPP loans 
exhibited suspicious traits. Notably, the top 12 lenders with 
the highest rates of suspicious loans are all Fintech lenders. 
Given the disparity between the statute of limitations for bank 
fraud and wire fraud, it is imperative that Congress takes 
action to address the inconsistency, particularly in the 
context of the PPP loans.
    In addressing the multifaceted nature of fraud, a dual 
pronged approach is essential. First, we bolstered the 
collaboration of data sharing across agencies. By harnessing 
the capabilities of the Pandemic Analytic Center of Excellence 
and fostering deeper ties within the private sector, we can 
integrate data matching earlier in the benefit payment cycle.
    Simultaneously, it is crucial to democratize data 
validation tools. The Social Security Administration's 
electronic consent based Social Security Number verification 
tool, currently exclusive to financial institutions, should be 
extended to approve credential service providers. Such an 
expansion would ensure equitable access benefitting a broader 
demographic and further strengthening our antifraud measures.
    Agencies should adopt digital identity solutions such as 
those perfected at ID.me with strict adherence to the NIST 800-
63-3 guidelines. This ensures robust identity proofing 
minimizing fraudulent access and upholding the integrity of 
public portals.
    In our collective journey--and the challenges of the 
pandemic, it is imperative that we absorb its lessons. Our 
trials and triumphs underscore the essence of teamwork, 
innovation, and unwavering commitment to establish identity 
verification protocols. Whether it is the commendable work by 
organizations like ID.me or the diligent oversight by entities 
like SBA OIG, we have seen the potency of dedicated efforts. We 
are urged to build on this momentum, reinforce our defenses, 
honing our strategies and equipping ourselves better. The 
American people deserve benefit programs that prevent, detect, 
and recoup fraudulent payments.
    I thank the Committee for this platform, and I am happy to 
answer any questions you may have.
    Chairman WILLIAMS. Thank you very much.
    And let me just say this. You are going to see people 
coming and going. They are not leaving. We have got other 
hearings. They will come, they will leave, and so forth, so if 
that is something you were wondering about that will happen.
    Next, I want to recognize Mr. Zerbe for his 5 minute 
opening remarks.

                    STATEMENT OF DEAN ZERBE

    Mr. ZERBE. Thank you, Mr. Chairman. Thank you, Ranking 
Member, for having me today at this important hearing about how 
to recover funds that were put forward in the SBA COVID Relief 
Program.
    I am coming forward today to talk about a specific 
bipartisan solution that has had bipartisan results over the 
years recovering billions of dollars in other government agency 
programs, namely basically rewarding and incentivizing 
whistleblowers to come forward and lay out the details of fraud 
that they are seeing.
    Just as a quick background on me, Mr. Chairman. You laid it 
but specific to this you said I worked for Chairman Grassley on 
the Senate Finance Committee. I wrote the IRS whistleblower law 
that then served as the model for the SEC whistleblower law and 
the CFTC and other government programs. And I now also practice 
as an attorney in this area representing whistleblowers.
    I would just say that the benefits of a whistleblower 
program are pretty straightforward. First of all, you have to 
understand in fraud, fraud is purposely being hidden. It is 
hidden in the nature of it. If you want to get it, you have got 
to get insiders with informed, knowledgeable detailed 
information. That is how you uncover fraud, and study after 
study has shown that. And we have seen that, for instance, in 
the IRS programs. They did not know beans about what was going 
on with offshore accounts until a whistleblower came in and 
blew it all out for them. The whistleblowers give you the keys 
to the kingdom in terms of what is going on. So they are a 
proven way to do it.
    I think in particular that it is useful for the SBA to 
consider this because of the resource limitations and where 
they are going. The idea of the whistleblower is that they are 
going to help the government agency, whichever it is, better 
target and package and go after the bad actors. In other words, 
when I am filing a whistleblower complaint, I can assure you it 
is with a bow on it and on a T-ball in terms of what I am 
trying to do because I want to provide a narrative of what is 
going on. I want to provide all the documents. I want to 
provide everything from teeth to tail of what is happening. 
Why? Because I want to get the agency to move so that my client 
can get paid. So you are doing a lot of the lift for the agency 
in terms of assisting them in terms of the work. You are also 
doing a better job for the agency of helping them target the 
bad actors. Even the best government agency has a difficult 
time identifying, okay, who is really here? You have the 
whistleblower coming in. They know who the bad actor is. They 
have got the goods on them and they are much better at 
identifying, which actually is the positive of leaving the 
honest folks out there alone. So you are better targeting 
resources as well, too, with that. So I think with the SBA that 
is good.
    I think another thing that is helpful here is in reading 
the SBA IG's reports, they clearly have a culture of embracing 
whistleblowers and that is terrific. Clearly, they are bringing 
folks in. They are taking that. One of their biggest cases that 
they mentioned in the white paper was hundreds of millions of 
dollars from one whistleblower. And what you are trying to do 
is build that out and encourage more whistleblowers to come 
forth, particularly well placed, knowledgeable, informed 
insider whistleblowers that are coming forward. So I think you 
are benefitting from the fact that the SBA already has got a 
welcome mat forward and you are trying to expand beyond that in 
terms of it.
    One thing I think will be music to ears--since the time 
from being a staffer on the Senate side is CBO should score 
this. They should score this as a revenue raiser. They have 
scored other money. I am sorry, other whistleblower programs. 
The AML bill that just passed scored $4 million. I think all 
these scores are low by the way. For instance, my program, they 
scored it out at I think a few hundred million dollars joint 
tax. It has brought in billions of dollars since it came in. 
But they will score it and your staff will work with them and I 
am sure get that there.
    The other thing I want to mention is the deterrent ability 
of whistleblowers. Look, when you are out there as a fraudster 
and all you are thinking is, well, I have just got to get it by 
those folks over at the agency, that is one calculation. If you 
have got a whistleblower program they have got to say, okay, 
well, now I have got to trust everybody else in this room. I 
have got to trust my banker, my secretary. Any of them can dime 
me out. And so it changes dramatically the way the equations go 
of can I get away with it? It also affects their behavior. What 
we find in tax is that they are constricting who is involved. 
They try to limit what it is so it has an impact on their 
behavior. It has a deterrent impact as well, too.
    The last thing I would just note just on a highlight, my 
written goes into it more, I think four hallmarks for a good 
whistleblower program, one having a mandatory award program, 
not discretionary. Have a floor and a ceiling based on the 
amount recovered broadly defined. You want a dedicated payment 
so that the funds are there. You are not having to go run to 
the approp boys to get dollars for it. And these are standard 
by the way. What I am laying out is what we have in all the 
whistleblower award programs. Have an established office within 
OIG that wakes up thinking about the whistleblowers and is 
putting out the welcome mat for them. And then you have 
independent review.
    The whistleblower, look, when you are getting very good 
whistleblowers I am getting not just, you know, Billy in the 
dark room. I am getting the vice president of Tax coming 
forward. They are putting their life at risk in terms of doing 
this. They need to have confidence. It does not mean they are 
going to be guaranteed a payment but if their provided 
information is used and it ends up collecting money, they are 
going to get a fair shake and that somebody independently is 
going to look at that. It is not just to the whim.
    So I thank you, Mr. Chairman, having me here today. I 
appreciate it very much.
    Chairman WILLIAMS. Thank you very much.
    And now we recognize Ms. Miller for her 5 minute opening 
remarks.

                   STATEMENT OF LINDA MILLER

    Ms. MILLER. Thank you, Chairman Williams, and Ranking 
Member, Ms. Velazquez, and Members of the Committee.
    I sit here today as a former Olympic athlete, a former 
government executive, a former partner at a large accounting 
firm, and a small business owner. And I am bringing all of 
those perspectives to my comments today.
    I spent my career working to help the government fight 
fraud. I led the development of the GAO framework for managing 
fraud risks in federal programs, and worked with Congress to 
draft the Fraud Reduction and Data Analytics Act of 2016.
    When I was the partner at Grant Thornton, my team led the 
development of the Treasury Antifraud Playbook. I sat on the 
task force that developed the COSO Fraud Risk Management Guide 
which governs the private sector. I serve on the Advisory Panel 
of U.K. Public Sector Fraud Authority. And I sit as a Member of 
the Identity Theft Resource Centers Biometric Working Group.
    As soon as PPP and COVID EIDL programs were unveiled, those 
of us in the fraud world saw this as a field day for fraud 
actors. We did not have to think about it to see how much fraud 
was going to happen in these programs.
    An example, the COVID EIDL grant program was essentially 
money that was known to not need to be repaid back. Anybody 
that applied for that money got it without having to provide 
any eligibility information. And you know, at that point the 
only thing keeping somebody from stealing that money was their 
own moral compass. And that is not exactly a good fraud 
control.
    At that time, the fear and desperation of America's small 
business was such that the decision to get this money out with 
few, if any controls to verify the eligibility of the 
information provided by borrowers was widely accepted. Speed 
was the goal.
    From celebrities stealing PPP loans and buying luxury cars 
to adversarial nation state actors executing coordinated and 
elaborate schemes, there were staggering levels of fraud in 
these programs.
    The finger of blame can be pointed in several different 
directions and it has been over the last 3 years. SBA had not 
seriously considered fraud risks prior to the pandemic and it 
was unprepared for the breadth and the sophistication of the 
adversary.
    Congress created program rules and time pressure that made 
it nearly impossible for the SBA to verify the eligibility of 
applicants. And unscrupulous lenders looked for ways to game 
the system and pocket outrageous profits and fees.
    Today, the work of clawing back the stolen pandemic loan 
funds is left to the SBA OIG and its law enforcement partners. 
As the deputy executive director of the PRAC, I worked closely 
with Mike Ware, SBA's Inspector General. IG Ware and his team 
have worked tirelessly to investigate and prepare for 
prosecution thousands of fraud cases and the work has only 
begun.
    Thanks to this Committee, Congress has recently extended 
the statute of limitations on pandemic fraud to 10 years. And 
given the caseload, the IG is going to need at least that long 
to bring fraud actors to justice.
    For the past 3 years, the SBA Inspector General's work has 
yielded a 200 percent return on investment. But its backlog is 
enormous and the office is stretched thin. This is not the time 
to cut the Inspector General's budget. Funding the IG at his 
requested levels will ensure this exceptionally productive work 
can continue.
    But the backlog is not just with investigators. Bringing 
fraud actors to justice requires prosecutors to try those 
cases. The U.S. attorneys are also stretched thin, and there is 
no shortage of high quality cases to prosecute. Innovation in 
recouping pandemic loan fraud must require more than simply 
putting good cases on the U.S. attorneys' desks.
    Today's hearing is also exploring the role of identity 
theft in pandemic loan programs, so it is important to note 
that identity theft plays a role in loan fraud, but it was not 
the largest driver of fraud in PPP or COVID EIDL. Front end 
identity verification technology, including remote biometrics, 
is but one tool in SBA's toolset and it is by no means a 
panacea.
    Fraud actors created shell companies, often using stolen 
information to apply for loans. But this type of identity theft 
base fraud is uncovered through conducting due diligence on the 
information in those applications and SBA has done quite a bit 
more of this due diligence to date. They now require tax 
transcripts of loan applicants. They use vendor information to 
verify a bank account. And they flag certain EIN prefixes, none 
of which was done at the start of the pandemic.
    Despite these improvements, SBA does have more work to do. 
They have to continue to mature their preventative antifraud 
capabilities. They must adopt a culture that is conducive to 
fraud risk management and they have to collaborate with the OIG 
to ensure that lessons learned are incorporated into their 
antifraud controls.
    I was a rower in the 2000 Olympics, and as such I know a 
thing about teamwork. My career has straddled the public and 
private sectors for a reason. Because I believe that the 
government and the private sector make a powerful team. The 
government relies on the private sector innovation, and the 
private sector requires services like main street saving loan 
programs that only the government can provide.
    I look forward to discussing the productive ways the 
private sector can assist the government in recovering loans 
and preventing fraud going forward. Thank you.
    Chairman WILLIAMS. Thank you very much. And good job on the 
5-minute rule. It is great.
    I will now recognize myself for 5 minutes.
    When I first heard about the 200 billion dollars in 
potential fraud in the SBA pandemic lending programs, it made 
me think about how a business owner would act in this 
situation. They would have to decide whether they do all they 
can to collect the $200 billion that is on their books as a 
receivable, or to write it off as a loss. No private entity has 
the luxury of writing off such a massive number, so I think it 
is our duty to be good stewards of the taxpayers and find ways 
to give this money back which we have already begun to talk 
about.
    The SBA's Inspector General told us that they currently 
have over 100 years of casework if they are going to 
investigate all the loans that have been flagged for fraud. 
This is obviously an impossible task and there must be a better 
way to help them get this money back.
    So Mr. Zebre, during your time as senior counsel to the 
Senate Finance Committee, you crafted legislation under Senator 
Grassley to overhaul the IRS whistleblower program as you said 
and my team and I are exploring the idea of creating a similar, 
self-sustaining program which will allow any citizen to collect 
a commission if they report COVID fraud that results in money 
returned to the Treasury.
    So the question is, do you think it would be possible to 
create this type of program that would empower every day 
Americans to report fraud? And what are some of the things we 
should be aware of as we look to create this program?
    Mr. ZERBE. I think that is an excellent question, Mr. 
Chairman.
    I have seen it. A number of government agencies have 
created these whistleblower award programs. And so I think very 
much SBA is a good possibility in terms of also looking at 
creating a whistleblower award program. You already have the 
Qui Tam False Claims Act where they are bringing a few cases in 
right now from attorneys from whistleblowers and that has had 
some success. But I think having in parallel with that an in-
house whistleblower award program will very much be a way to, 
as you say, commission to bring in the energy of the 
whistleblowers that are attorneys, that are advisors, to help 
the SBA move forward. So yes, I think it is a very good 
candidate for the SBA to look at doing. Absolutely.
    Chairman WILLIAMS. Great. Thank you.
    Mr. Breeden, you are currently working as special master 
for the victims of Bernie Madoff's Ponzi scheme. This requires 
you and your team to go through massive data sets to find out 
what claims are legitimate and which ones are fraudulent.
    So the question is, can you speak on how massive financial 
recovery is possible when there is such a large quantity of 
data to go through?
    Mr. BREEDEN. Yes, sir. It is definitely a challenge. In the 
Madoff Victim Trust which I administer we have had about 70,000 
claims covering $80 billion in claimed losses. We have approved 
about 10 billion of that. So there is always a significant 
difference. And some of it is legitimate, and some not between 
what gets originally claimed and what you end up approving 
after you have reviewed it very carefully.
    We have had data documents, brokerage statements and so on 
from victims going back 20 years. Millions of pages of 
documents covering hundreds of thousands of transactions. And I 
love technological systems. Our company, our victim trust, we 
use systems to scan things all the time. But the most effective 
tool is an experienced person sitting looking at the analytics 
and deciding that there is a problem that needs greater follow 
up. So big data can do a lot of things but it is not going to 
haul crooks in to identify and have someone go after them. So 
it is a mix of systems and trained people.
    And one of the problems we have today is starting now to 
bulk up investigative resources in the SBA, for example, that 
is great but it takes 3 to 5 years to mint somebody that really 
knows what they are looking at. And so you have got to lag 
ineffectiveness. I think it is still possible. We have done the 
Madoff work and identified thousands and thousands of improper 
loans, and some that were referred for prosecution and that 
have generated recoveries but that is not our principal role, 
with a relatively small group of people. And that is why I 
think the combination of mini-SWAT teams that are focused on 
recovering money and focused on reading the, you know, out of 
12 million loan files. All right. Suppose you took the 100,000 
largest loans and have people who know what they are looking at 
read the files and look at where are the cases that are best 
cases to prosecute?
    Chairman WILLIAMS. Thank you. My time is up and I now 
recognize the Ranking Member for 5 minutes of questions.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Ms. Miller, we have established that the Inspector General 
and law enforcement are the lead organizations to investigate 
and recover fraudulent monies. What is the most important 
action that we can take to help recover stolen funds?
    Ms. MILLER. Well, if we want to recover stolen funds, the 
action needs to be focused at the IG because the IG and the law 
enforcement partners of the IG are the only entities who have 
the authority to do investigations and prepare cases for 
prosecution.
    Ms. VELAZQUEZ. In your opening statement, you mentioned the 
fact that we passed the law to extend to 10 years to go after 
the bad actors. Through the legislation we gave them, OIG, more 
time but now they need the resources. If the OIG is not fully 
funded we will not be able to capitalize on these two new laws; 
correct?
    Ms. MILLER. Correct.
    Ms. VELAZQUEZ. Mr. Zerbe, IG Ware testified before our 
Committee that their HUD line produced 90,000 actionable leads 
that will take more than 100 years to examine. The law 
enforcement community has said they need more resources to 
investigate, prosecute, and recover fraudulent monies.
    How does your proposal meet the needs of the law 
enforcement community and improve prosecutorial outcomes?
    Mr. ZERBE. Thank you for that.
    Just one quick note. When you are talking about Mr. Madoff, 
I cannot help but note that it was a whistleblower, Mr. 
Markopolos, that revealed Mr. Madoff. Just as an aside.
    I think that is an excellent question. I think it is 
twofold. When you are incentivizing whistleblowers, it is one 
thing to get a tip that they may get at SBA that is of some use 
but these tips kind of tend to be, hey, I saw a guy at a bar 
and he had a fancy car. I mean, they are not that useful a lot 
of them. And when you are incentivizing a whistleblower and 
encouraging, they are going to come in with a full package. 
They are going to come with a lot more detail, much more robust 
assistance in terms of what is going on. So really helping the 
agency do its work. So helping them expand their work.
    But to your point, too, and one thing to consider, maybe 
this is a way to split the baby is that a number of the 
whistleblower award programs do allow for a partial recovery of 
the funds for the IG shop itself. In other words, HHS IG with 
the Qui Tam program. They basically get reimbursement for their 
investigations. CFTC similarly with their whistleblower 
program, they get to reimburse their costs for their expenses 
for these whistleblower programs. So it kind of aligns 
everyone's behavior. So something maybe for the Committee to 
think about of a way to finesse the issue. But that would be 
now it is. Primarily, it is allowing the agency to work more 
expeditiously, ma'am.
    Ms. VELAZQUEZ. Thank you.
    Ms. Miller, in your view, would this proposal be a more 
cost-effective way to recover fraudulent funds as opposed to 
fully funding the Office of Inspector General and the law 
enforcement community?
    Ms. MILLER. I mean, I would not say that we should do that 
instead of fully funding the Office of Inspector General. I 
could not speak to how much that is going to improve 
prosecutorial outcomes but it is possible. It will cost money. 
You will have to create an office, and you will have to pay 
those people salaries. And so the scoring could come back.
    Ms. VELAZQUEZ. Here we are at the brink of a government 
shutdown over the budget; right?
    Ms. MILLER. Right. Exactly.
    Ms. VELAZQUEZ. Okay. Mr. Taylor, privacy advocates have 
concerns about the large amount of data ID.me collects to 
verify users' identities--data like Social Security numbers, 
military records, bank and credit card records, biometric data, 
and government documents. Does your company share this data 
with third parties?
    Mr. TAYLOR. Thank you for the question, Ranking Member 
Velazquez. I appreciate it.
    Our privacy policy is one of the most robust in the 
industry. I would counter that our privacy policy is actually 
even more stronger than the average grocery store that you 
visit on a daily basis. We do not do any type of selling or 
trading of personal data. Additionally, from a standpoint----
    Ms. VELAZQUEZ. To be clear, you do not sell or share this 
data with third parties?
    Mr. TAYLOR. That is correct, ma'am.
    Ms. VELAZQUEZ. Okay.
    Mr. TAYLOR. No selling or trading----
    Ms. VELAZQUEZ. Does ID.me benefit monetarily from the data 
provided by American citizens?
    Mr. TAYLOR. ID.me makes money via the actual identity 
verification itself and successful transactions, meaning 
successful identity verifications versus transaction based.
    Ms. VELAZQUEZ. Thank you.
    Mr. Breeden, based on your experience overseeing the Madoff 
Victim Fund, could you please share any lessons learned from 
your experience that could help law enforcement recover from 
pandemic fraud?
    Mr. BREEDEN. Well, thank you.
    In addition to Madoff I did WorldCom and Enron and British 
Petroleum and a couple of JPMorgan cases. And so I have 
actually reviewed, my staff and I, about 150 people all told 
over 20 years. Have reviewed over 4 million claims to these 
victim funds.
    Chairman WILLIAMS. Time is up.
    Ms. VELAZQUEZ. Thank you.
    Chairman WILLIAMS. Time is up and we can put that in 
writing if need be. Okay.
    I now recognize Representative Alford from Missouri for 5 
minutes.
    Mr. ALFORD. Thank you, Mr. Chairman and Ranking Member, for 
holding this important, very important hearing today. And thank 
you for our witnesses, all of you, for being here.
    We are here for one reason and one reason only. In the 
words of Jerry Maguire, ``Show me the money.'' This is taxpayer 
money we are talking about here. Congress knew that this money 
had to get out the door fast. We had an economic crisis from 
the pandemic. So the House and the Senate came together to do 
just that. Some fraud was expected but not $400 billion worth 
of fraud on the American taxpayers.
    I am still disgusted that Administrator Guzman would not 
bother to come down here and talk to us about her lower 
projects of fraud and what she is doing about it to get that 
money back for the American people.
    That is why we introduced 3 weeks ago the CAB Act. We 
cannot get inside the Small Business Administration to go visit 
Ms. Guzman. We want to change that. The Congressional Access to 
Bureaucratic Officers. According to the Inspector General's 
report, 33 percent of all EIDL loans were estimated to be 
fraudulent. These loans were administrated solely through the 
Small Business Administration. And I know that Administrator 
Guzman released a report contradicting that but let's stick to 
the fraud, abuse, and misuse expert, the IG.
    This is in stark contrast to the PPP loans which are only 8 
percent estimated to be fraudulent. These were loans 
administrated through lending partners, private businesses who 
could get it done right.
    The first step in solving any problem is recognizing that 
there is one and addressing the issues. Clearly, there are 
problems. We are here today to find answers.
    Mr. Breeden, I want to start with you. You talked about in 
your testimony a couple of quotes. Remember the good in this 
program at the time that we had it, up to $400 billion as we 
are now recognizing. You call it an ocean of fraud which I 
think is very apt. Does the good outweigh the bad in this 
program?
    Mr. BREEDEN. I do not know that I am qualified to answer 
that. I think we were faced with a crisis the likes of which in 
my lifetime I have never seen. It would have been nice to be 
tighter in how we handled it. We did not. That is water over 
the dam from my perspective. The question is how do we go after 
the money that was taken improperly?
    I have spent 20 years doing that for the SEC, for the 
Justice Department, and you do not do it by writing reports. 
You do it by taking the largest transactions, going through 
them, putting knowledgeable people reviewing it, and where you 
find problems, refer it, get teams and prosecutors to go after 
it. And we have to remember that iceberg of stolen money a few 
years from now will be an ice cube. Time is of the essence.
    Mr. ALFORD. Well, clearly we do not have the resources to 
do this right now with the Inspector General's office. You are 
proposing the private sector fill in the gaps. Could this work 
with the whistleblower program? Put everyone on commission and 
lets get this $400 billion back.
    Mr. BREEDEN. Yes, sir. I think you could. That is what I am 
suggesting that other agencies supplement their internal 
sources with people on the outside. I have for the last 10 
years worked for the Department of Justice. I am not a 
government employee but under contract we work for them. Every 
day we try and find fraud and refer it to prosecutors.
    Mr. ALFORD. Are there any prosecutorial risks once we get 
to court with these when the private sector is involved versus 
someone with the government?
    Mr. BREEDEN. None whatsoever.
    Mr. ALFORD. There you go.
    What do we learn from this now? Really quickly, can you 
give me one thing that we can improve on next time, God forbid 
we have another emergency like this?
    Mr. BREEDEN. A little slower. A better pace. Systems 
knowing ahead of time you are going to have a lot of fraud and 
that you have to go through the data as you make each and every 
loan. It is way better for the taxpayers to stop the fraud 
before it happens then to go after it later.
    Mr. ALFORD. Thank you, sir.
    Ms. Miller, quick question. You said you worked with the 
Inspector General on this. Have you met with the Inspector 
General?
    Ms. MILLER. Yes. Many times.
    Mr. ALFORD. Have you met with Administrator Guzman on this 
topic?
    Ms. MILLER. No.
    Mr. ALFORD. Why not?
    Ms. MILLER. I worked for the Pandemic Response 
Accountability Commitmtee, so Mike Ware, the IG is a Member of 
that Committee. So I worked closely with him. I did not have a 
reason to meet with----
    Mr. ALFORD. If you happen to talk to her would you tell her 
we would really like for her to come down here and explain the 
differences between her number and the number of the IG and 
what we are going to do to get this back? Would you do that for 
me? Thank you very much.
    Ms. MILLER. Yeah, I have some ideas about the differences, 
too, I could share.
    Mr. ALFORD. Well, thank you very much. I yield back.
    Chairman WILLIAMS. Thank you. I now recognize 
Representative Davids from the great state of Kansas for 5 
minutes.
    Ms. DAVIDS. Thank you, Chairman. And thank you to you and 
to the Ranking Member for holding this hearing today.
    As several of our witnesses have already pointed out, 
combatting waste, fraud, and abuse of government dollars should 
be something that we are all interested in. The Small Business 
Administration's COVID-19 relief programs, like the Paycheck 
Protection Program and the Economic Injury Disaster Loans 
certain saved countless small businesses from closing. But 
unfortunately, American taxpayers and many other small 
businesses were victimized by fraudulent actors that stole 
those desperately needed funds, a total of which is estimated 
to be over $200 billion. And to date the SBA and Office of 
Inspector General have successfully recovered about $30 billion 
in fraudulent COVID-19 funds.
    But certainly, there is more work to be done. Given the 
unprecedent scope of these pandemic programs, we have a lot 
ahead of us. But I know we are currently responding to 
pandemic-related fraud. But we also need to be prepared to 
properly mitigate widespread fraud during future emergencies. 
And that means ensuring that our government oversight resources 
are prepared in utilizing the best practices that we have 
learned during the COVID-19 pandemic. I do think that everyone 
here today shares a common goal of protecting American taxpayer 
dollars and ensuring that we are being fiscally responsible 
while doing that.
    So before I dive into my question I do want to thank all of 
our witnesses for sharing your perspectives, for your service, 
and making sure that we have a better stewards of the 
taxpayers' dollars.
    So the first question, Ms. Miller, I would like to ask you. 
Given the SBA OIG has shared this concept of 100 years' worth 
of pandemic-related casework to properly review, review the 
cases, I am curious how you--maybe you can share some of the 
insights you have about how we can better prevent the fraud, 
waste, and abuse going forward as we look at--not if, but when 
we face future emergencies.
    Ms. MILLER. Yes. And I think that is a really important 
point because we are talking about recovering pandemic stolen 
funds today, but it is water over the dam. And it is really 
important to prepare agencies for the future. SBA had not 
implemented many, if any, of the practices of the GAO framework 
for managing fraud risk in federal programs which GAO issued in 
2015. The comptroller general has made comments publicly in 
several hearings about his disappointment that agencies did not 
take that document more seriously and follow those practices.
    And so going forward, SBA has begun to take some steps. 
They have established a Fraud Risk Management Board, which is a 
good, centralized entity that shows some commitment. But they 
need to continue to build, and all agencies, especially SBA and 
anybody that is administering a lot of direct funding to the 
public, preventative antifraud controls that use data. And that 
is really important. SBA has begun that work but there is much 
more work for SBA to do in the future if they want to make sure 
that they can be prepared for the next.
    And I want to make a point about recovering funds. A lot of 
the funds that were stolen were identity theft funds. Those 
were nation state actors. We are not going to get those back 
from whistleblowers or anybody else. They are gone. We are not 
going to get that money back, unfortunately.
    Ms. DAVIDS. So one of the things that I did want to ask you 
about as well as the suggestion of incentivizing 
whistleblowers. I am curious in your view with the SBA OIG in 
their current capacity housing some sort of whistleblower 
management office what, really quickly, if you could tell me 
what your thoughts are on that.
    Ms. MILLER. Yeah. I mean, they are going to have to add 
staff to fund that office. And so, you know, given that the IG 
is already stretched, you know, it could be. I am really not 
qualified to weigh in on the cost benefit of it but it would 
definitely add resources, and the SBA OIG has mentioned that he 
needs more resources than he already has now. So that has to be 
considered.
    Ms. DAVIDS. I am low on time.
    Mr. ZERBE. If I could add to the conversation.
    Ms. DAVIDS. Oh, yeah.
    Mr. ZERBE. The only thing I would just say to that is I do 
not know the details either but I would say it may be minimal 
because they are already dealing with folks coming in with tips 
and resources in the thousands. So I do not know if it is going 
to need a big expansion. I am sorry.
    Ms. DAVIDS. No, I appreciate that.
    In the limited time I have left, I might follow up with all 
of you with some of the additional questions I have but I do 
want to highlight a couple of things, particular from the 
voices from the private sector. One of the things that I have 
noticed is that some of our systems of data management and 
vetting probably need to be updated and upgraded. And that 
might also be something that the private sector could be 
helpful with SBA on. From this Committee's perspective I might 
follow up questions on that as well. Thank you.
    Chairman WILLIAMS. I now recognize Representative Bean from 
the great state of Florida for 5 minutes.
    Mr. BEAN. A very good morning to you, Mr. Chairman. And 
good morning, Small Business Committee. I have been cheering 
over the weekend so my voice is here but I got just enough to 
get through 5 minutes of questions. Panelists, it is very good 
to see you this morning.
    Here is the biggest thing. We do not agree on much but we 
do agree that there is fraud. We all agree that there is fraud. 
Here is the numbers. Here is the discrepancy of disagreement. 
Secretary Guzman says there is only 36 billion in fraud; yet, 
Inspector Ware says maybe there is 200 to 600 billion. Which is 
it?
    Ms. Miller, do you want to start us off?
    Ms. MILLER. Yeah, well, I think that it really depends on 
how you define it. So the SBA believes that certain EIDL loans 
and certain PPP loans should not be considered fraudulent 
because, for example, if an EIDL loan is in repayment the SBA 
believes that a loan that is in repayment, it is illogical to 
consider that that loan would be fraudulent. The SBA IG does 
not agree. So they do not agree on the terms.
    Mr. BEAN. Gotcha. But that number is bigger than 36 billion 
you think?
    Ms. MILLER. We do not know. I mean, I do think it is bigger 
than 36 billion.
    Mr. BEAN. Let me go to Mr. Breeden. You say that number is 
bigger than 36 billion?
    Mr. BREEDEN. Massively bigger.
    Mr. BEAN. It is. I think that is the correct answer that it 
is bigger than 36 billion.
    Mr. BREEDEN. In 35 years I have never seen a program with 
less than 30 percent roughly false claims. So that puts you at 
a much, much higher number.
    Mr. BEAN. They come out. One of the hardest things that I 
have had to deal with, I guess, and maybe you are familiar with 
it. And it deals with Barbie. I do not know if you are familiar 
with Barbie. You know about Malibu Barbie or Presidential 
Barbie, but we now have Swindler Barbie. And I want to show you 
some of the actual logins that our vendors accepted as real 
people. And you can see behind me right now.
    Mr. Taylor, are you familiar with this? Are you familiar 
with the scam that was run?
    Mr. TAYLOR. I am, sir. What you are looking at is a mess 
that made it through Fintech platforms.
    Mr. BEAN. I gotcha. Now, what can we do in the future so 
that Barbie or Ken--he got in on this action, too, by the way--
what can we do to prevent Barbie and Ken from getting in on the 
fraud?
    Mr. TAYLOR. At ID.me, we deal with Ness 1:00:43xx quite 
regularly. We stop them in their tracks through something 
called Presentation Attack Detection, sir. PAD.
    Mr. BEAN. So there is software that we just did not employ 
or did not use?
    Mr. TAYLOR. That is correct, sir. Whenever we get somebody 
on camera we ensure that they are a live person.
    Mr. BEAN. Very good. Would it shock any of you, I just read 
an article this morning that Tencent, a big Chinese company 
that is a major investor in Womply, which is one of our 
vendors, we paid them $2 billion to administer this fraud. 
Would that shock anybody that we paid Beijing to make sure that 
this fraud happens?
    Mr. Breeden, does that shock you?
    Mr. BREEDEN. No, sir.
    Mr. BEAN. Yeah. We call this Crazy Town for a reason a 
little bit.
    Here is just a toss up question I have. The frustrating 
thing is there was talk of just letting smaller loan frauds go. 
Just saying, you know what? We will just let that go. But I say 
no. I say no, and I think everybody up here says no. I filed 
the ``We Want Our Money Back Act,'' which says we want our 
money back and we are not going to let it go. And so I have 
that bill. There are other bills that say lets extend the 
statute of limitations to go after it. There is another bill 
that says anybody that is suspected of fraud shall be 
prohibited from any government program until it is worked out. 
I think that is a great bill, too.
    What else do we need to do? What else do we need to do to 
get our money back?
    Ms. Miller, jump in.
    Ms. MILLER. Yeah, well, one thought is that you can offer 
amnesty to those people who pay back the money. Amnesty from 
prosecution for those individuals that are willing to 
voluntarily give the money back. I suspect there are a number 
of people who have the money and they know that they got it 
erroneously. They got it fraudulently. And if they thought they 
were protected from prosecution they might give it back.
    Mr. ZERBE. Can I--I am sorry. Go ahead.
    Mr. BEAN. No, go ahead. Go.
    Mr. ZERBE. I would add that the IRS is facing the same 
level of fraud in the Employee Retention Credit Program. And 
the amnesty is something that they are basically putting out 
there to say why don't you come in and meet Jesus and get 
right. So that may be something to consider as well.
    Mr. BEAN. Ten-four. Thoughts, Mr. Breeden?
    Mr. BREEDEN. Wanted dead or alive posters probably have a 
long history in reward programs, whether you call them 
whistleblowers or something else are certainly part of the 
solution. But I go back to if you have got a problem that you 
think you might have had 3 or 4 million bad loans, you cannot 
wait 100 years. So put together teams of people, parcel those 
out, and start looking.
    Mr. BEAN. Thank you very much.
    Mr. Chairman, I have run out of voice and I have run out of 
time. I yield back.
    Chairman WILLIAMS. Thank you very much.
    I now recognize Representative Scholten from the great 
state of Michigan for 5 minutes.
    Ms. SCHOLTEN. Thank you so much, Mr. Chair. And thank you 
to the witnesses for coming here to testify today about this 
truly important topic.
    I want to start by saying that the 1.2 trillion in aid that 
the SBA has distributed over the course of the pandemic was 
truly essential, a lifeline to so many businesses in keeping 
their doors open. And in the context of this important 
discussion today I do not want to lose sight of that. You know, 
I think that there is a lot of agreement here today about the 
frustration over the inability to pinpoint how much fraud there 
was because a lot of our constituents, many of our constituents 
were struggling to make ends meet during the pandemic, and 
their hard-earned tax dollars were going to fund these 
programs.
    Ms. Miller, in your testimony you state that the truth most 
likely lies somewhere in the middle. I am a future-oriented, 
problem-solving individual. You recommend that Congress 
establish a well-funded--more taxpayer dollars--centralized 
antifraud office. Can you elaborate on how this would allow the 
federal government to prepare for the next emergency and how we 
might be able to avoid this type of situation in the future?
    Ms. MILLER. Sure. Yeah, cross governmental, 
intergovernmental agency issues are notoriously difficult to 
solve because every individual agency is focused on its mission 
and its budget. And so getting them to coordinate their 
activities is always very difficult. We knew this when I was at 
GAO. We talked about this a lot.
    This is an intergovernmental problem. It crosses all of 
government, both federal, state, and local. You need a 
centralized entity within the federal government that is not 
the Inspector General. The IG's job is to get the money back 
after it has been fraudulently obtained. The agencies, like the 
SBA, are the ones that are responsible for preventing the fraud 
to begin with. But each individual agency, if working together, 
can do things like sharing data.
    Like, for example, it may not be known that the ``Do not 
pay,'' the Treasury ``Do not pay'' portal currently today does 
not have access to the Social Security Death Master File as we 
speak, 3-1/2 years after the pandemic. I mean, that is a 
problem of data sharing and collaboration and creating data use 
agreements. The Pandemic Analytic Center of Excellence has 
created over 95 data use agreements between agencies. That is a 
model for what the government should do but not in the IG 
community; in the management side of the House.
    Ms. SCHOLTEN. And as these recovered funds are coming back 
in to the Treasury, how does the government track these funds? 
Are there any transparency measures in place so that the public 
can watch and know the efficacy of recovering these funds and 
where they go?
    Ms. MILLER. Yeah. The Treasury has an Office of Recovery 
Program and they also have an Office of Payment Integrity. And 
both of those offices coordinate the systems that provide that 
information to the public. So really it is the Department of 
Treasury that tracks that information.
    Ms. SCHOLTEN. And how is that released to the public? Can 
we find that online? On the Treasury's Twitter account?
    Ms. MILLER. Yeah.
    Ms. SCHOLTEN. Is it a report?
    Ms. MILLER. I think the Department of Treasury is actually 
really working right now in its Office of Payment Integrity to 
improve that transparency in the public-facing websites. And 
those are happening as we speak. I think that in the next year 
to 2 years we are going to see a lot of improvement in the 
information that is shared to the public. The PRAC also has a 
pretty great website that provides a lot of that transparency.
    Ms. SCHOLTEN. Okay. I know I speak for many constituents 
that proactive communication about this and connecting that 
information to the public so that they can have confidence in 
this would be, you know, would be key.
    Ms. MILLER. Agreed.
    Ms. SCHOLTEN. Additionally, you know, in my last minute, I 
wonder if you might be able to pinpoint any steps that we might 
be able to take not only in preventing fraud or cracking down 
on it once it occurred but even putting steps in place to close 
the gaps to keep it from happening in the first place, are 
there more point to point contacts that we can ensure that the 
money is getting directly where it needs to go? You know, 
disseminating to local governments or nonprofit organizations 
first. Any and all of the above. Or if you have any insights as 
well.
    Ms. MILLER. Yeah. I think that maintaining integrity of the 
funding that is going to citizens, whether that is through 
federally funded state administered programs, like SNAP or, you 
know, some of these benefit programs that go through the states 
or directly to the citizens from a federal agency. The 
importance is to identify quickly before the payment is made, 
and we have talked about this a bit today, whether or not the 
individual who is applying for that benefit is who they say 
they are and they are entitled to it. And that is going to 
require data. Data sharing. Data analytics. Advanced analytics 
that can use artificial intelligence and other tools and it is 
very vital that agencies get those tools to be able to prevent 
fraud, waste, abuse in the future.
    Ms. SCHOLTEN. Thank you. I yield back.
    Chairman WILLIAMS. The gentlelady yields back.
    I now recognize Representative Meuser from the great state 
of Pennsylvania for 5 minutes.
    Mr. MEUSER. Thank you very much, Mr. Chairman. Certainly, 
thank you to all of our witnesses here today.
    A very important subject. Very troubling subject. I do not 
think the American people or taxpayers really have an 
understanding of the level of fraud that has just come out of a 
relatively small agency like the SBA. It certainly makes you 
think what levels of fraud occur elsewhere. You know, CMS. You 
name it.
    So we have a big problem with this $5 trillion company of 
ours known as the United States federal government and the $6 
trillion of spending that takes place. So your ideas, your 
backgrounds, experiences are very helpful to us.
    So we had the EIDL, the PPP, and the ERTC. EIDL had a 
wildly unacceptable level of fraud, almost insane what occurred 
there. So the investigations need to take place. PPP was a lot 
less, particularly on a percentage basis. PPP needed to be 
rushed. EIDL needed to be rushed. So it is not necessarily 
about assigning blame or which administration but a lot of 
times you have got to focus on where the problem occurred in 
order to fix it.
    ERTC, I do not have the data in front of me on what type of 
fraud existed there. I do not think the Employee Retention Tax 
Credit, which is pretty important and it is still going out in 
important ways. And I agree with my colleagues on both sides of 
the aisle that these were very important. I mean, we could have 
gone into a depression if we shut down businesses and did not 
fund them to keep their employees. I mean, we would have had 
serious problems. But on the same note, the level of fraud.
    So you know, they say that an acceptable level of 
fraudulent activity could be 2 to 3, even 4 percent. You know, 
in my business, and I probably had no business being in charge 
of our credit department, but we had AR at any given time at 
about $50, $60 million and we did not write off bad debt. It 
was never higher than 1 percent. And we were not all that 
sophisticated. So the idea that this occurs is crazy. So I 
think crazy.
    Now, on the same note we have the IG coming in telling us 
that there is, what was it? I forget his numbers right now, 
$240 billion in fraud? And then the SBA administrator tells us 
it is, no, it is $50 billion. I mean, well, that is a pretty 
wide spread of discrepancy. So that is also highly troubling.
    So back to Ms. Miller, your idea of the centralized 
antifraud. Look, the credit card companies, the banks do it. 
Why can't the SBA do it?
    Mr. Breeden, I will start with you and just go right down 
the line. What should we be doing? Can we put you in charge 
perhaps?
    Mr. BREEDEN. I am not sure I would.
    Mr. MEUSER. It is worth the money by the way; right? With 
the type of billions and billions that we are talking about.
    Mr. BREEDEN. Certainly having someone in charge of going 
after it, going after the monies that have been stolen is a 
great idea. I do not know that it ought to be any one person as 
opposed to a lot of people's job. It is a task too big for any 
one person. I am not sure creating a new bureaucracy in 
government is really going to solve the problem. The ones that 
we have already have not solved it. So we have to understand 
that if you are going to have free markets, if you are going to 
have a capitalist economy there is going to be fraud. If you 
have a socialist economy there will be fraud, too. So we have 
to build antifraud protections into everything we do and be 
aware that there have to be limits on how many businesses we 
shut down, how fast we want to help people, things like that if 
we do not want the fraud to get out of control. But right now 
we have a problem of getting after the people before the money 
is all gone.
    Mr. MEUSER. All right. So collections enforcement.
    And what about prevention, Mr. Taylor?
    Mr. TAYLOR. Thank you, Congressman.
    It is about identify verification at the front end before 
these types of benefit programs go out. Implementing the IAL2 
standard issued out by NIST is the first step. And being the 
fact that that is a government solution that should be a 
nonpartisan issue.
    Mr. MEUSER. Absolutely.
    Down the line? Thank you.
    Mr. ZERBE. Congressman, I want to reemphasize something 
that has kind of been lost. Let me make sure you all understand 
a couple of facts about fraud.
    The IRS does root canal audits on people. When they do root 
canal audits they only find offshore accounts in 7 percent--
legal offshore accounts in 7 percent of those audits. The 
number one way the IRS finds fraud in offshore accounts is 
whistleblowers. Study after study shows the number one way that 
you find fraud is whistleblowers. And with all due respect to 
just say, well, we are going to depend on the SBA folks, they 
are doing good work, but if you want to find fraud, the way the 
private sector finds fraud is they have whistleblowers. The way 
the government is finding fraud is through whistleblowers.
    Mr. MEUSER. I yield back, Mr. Chairman.
    Chairman WILLIAMS. The gentleman's time is up.
    I now recognize Representative Gluesenkamp Perez from the 
great state of Washington for 5 minutes.
    Ms. GLUESENKAMP PEREZ. Thank you, Mr. Chair.
    Mr. Zerbe, I appreciate those sentiments.
    You know, I think that people want to build a government. 
You cannot legislate good behavior. Good behavior comes from 
the heart. You can penalize bad behavior. You can incentivize 
good behavior. And I think we have really in the Committee 
hearing today sort of beat to death this thing of we need to go 
after the bad guys. And it is costing us to not do that.
    But I really appreciated in your testimony, Congressman 
Breeder that--Breeden, excuse me--that normal people, small 
business owners not having the time and the capacity to 
understand the bureaucracy of a government that is no longer 
operating at a human scale. So you just walk into this pit and 
fall through a problem and then there goes your livelihood. And 
so I really appreciated your pointing out putting things in 
plain English. What are the eligibility criteria? Can you read 
this if you have a reading disability? Or you know, and who is 
doing that work?
    So I wondered if you could speak to how that was built in.
    Yes, sir. Thank you.
    Ms. BREEDEN. Thank you, Congressman.
    I think that is terribly important. One of the things that 
we focus on as part of antifraud protections in every victim 
trust we do is to make sure that the communication of 
eligibility standards is as clear as you can make it. All 
Madoff Victim Trust. The plan was not written by a bunch of 
lawyers and a bunch of boilerplate. It is in frequently asked 
questions plain English because there are a lot of people who 
might file a mistaken application or one that they are not 
eligible for but they do not understand that. So take that part 
of it off the equation.
    Ms. GLUESENKAMP PEREZ. Right. And it is who is at the table 
when these rules are being written. You do not have normal 
people. You have a Congress built out of a bunch of frankly 
lawyers and people who have grown up in it and not the people 
who might be applying for these programs. And I think that is a 
real flaw.
    Mr. BREEDEN. Yes. But the laws can be complicated. But when 
you have a program that is going to make loans that has 
eligibility standards that is where either an agency itself or 
in cases we do, the private sector, you spend a lot of time 
trying to write very clearly so people understand what is 
required and what is not allowed. It does not mean people will 
not go ahead and violate it.
    Ms. GLUESENKAMP PEREZ. Sure.
    Mr. BREEDEN. There will be some.
    Ms. GLUESENKAMP PEREZ. But we need to make it as easy as 
possible for people to do the right thing.
    Mr. BREEDEN. I completely agree.
    Ms. GLUESENKAMP PEREZ. So thank you for that.
    And you know, Ms. Miller, I also likewise appreciated your 
testimony. We had Inspector General Ware come in and testify a 
few months ago about the incredible work his office is doing to 
investigate these cases of potential fraud and recoup the 
stolen money. At the same time he shared that his office had 
identified 90,000 actionable leads and that his office needs 
more resources to investigate these leads and the DOJ needs 
more funding for attorneys to prosecute these fraudsters. 
Ninety thousand sure feels like a lot to me. It feels like he 
has got a lot on his plate. And I am wondering, you know, we 
are staring down the face of a shutdown here, so how is that 
going to affect the oversight in law enforcement communities' 
ability to crack down on fraud? And is the government losing 
out on money that we could be recouping would you say?
    Ms. MILLER. I mean, for sure. In short, he is going to lose 
the time of all the people who could be doing those 
investigations when the government shuts down.
    Ms. GLUESENKAMP PEREZ. Yeah. Yeah.
    Thank you so much to all of our witnesses for being here. 
And thank you, Mr. Chair. I yield back.
    Chairman WILLIAMS. All right. Next, I want to now recognize 
Representative Stauber from the great state of Minnesota for 
his 5 minutes.
    Mr. STAUBER. Thank you very much and to all the witnesses, 
thanks for being here.
    Ms. Miller, congratulations on being a Member of our 
Olympic team. I was an aspiring Olympic athlete. I was not good 
enough to make the Olympic hockey team but I gave it my best 
shot. I always wanted to be an Olympic athlete. That was a goal 
of mine.
    I will say this, Mr. Taylor, Mr. Meuser just asked you what 
is the biggest thing to stop fraud and your answer was identity 
verification; correct?
    Mr. TAYLOR. That is correct, Congressman.
    Mr. STAUBER. Just changing gears here and then I am going 
to get back to our subject. Would that be considered in the 
same light for our national elections?
    Mr. TAYLOR. Identify verification could go for any type of 
program, Congressman.
    Mr. STAUBER. Thank you.
    Ms. Miller, with your experience, what do you think is the 
monetary amount of fraud that someone should go to prison for?
    Ms. MILLER. I do not have experience to make that decision.
    Mr. STAUBER. Any idea? Any guess?
    Ms. MILLER. No.
    Mr. STAUBER. Would it be 50,000, 100,000?
    The reason I am asking this is, this fraud was put on the 
American people. And there are people that did not get EIDL 
loans that should have got it. And there are people that 
struggled to get PPP loans in a faster timeframe and did not. 
And it was taxpayer money that went out.
    Does anybody have an idea? Any of the other three witnesses 
to my question to Ms. Miller? What should be the amount 
somebody should go to prison for, for stealing the taxpayers' 
money? What is it? Mr. Breeden?
    Mr. BREEDEN. Sir, I think the threshold of what can be 
prosecuted should be fairly low. The theory of broken windows 
in law enforcement that just because somebody only broke one 
window, if that happens across an entire city it can have a 
very bad effect. So the level ought to be low. Then you have to 
have prosecutorial discretion where prosecutors have to look at 
it and say is this an egregious fraud or is it not?
    Mr. STAUBER. The broken windows theory as a former police 
officer I subscribe to that theory. Absolutely.
    You know, in Minnesota we had Feeding our Future. It was a 
nonprofit meant to feed people. There were over $250 million of 
COVID-19 federal funds that were stolen. And these fraudsters 
bought luxury cars, real estate, and other unlawful futures. 
The Small Business Administration, I think, and our government, 
and our Inspector General, we need to hold these people to 
task. If we are talking about millions and millions of dollars, 
and Ms. Miller mentioned earlier in her testimony that some of 
these identify theft folks, we are not going to get the money 
back. To me, I understand, I mean, the broad spectrum of the 
fraud. But we need to make a statement as a country. This is 
taxpayer money. And I guess a certain percentage is expected 
but we have to go after it. We have to go after it to make the 
statement. Nobody should steal the U.S. taxpayers' money. And 
they did it during a pandemic when our nation was brought to 
her knees. That is just simply wrong. And so the experience 
that you all have shared with us, there is so much knowledge 
here.
    Mr. Breeden, I think that you being in the private sector, 
you had mentioned a couple minutes ago that you are not a 
government employee and you are doing really good work. I do 
not necessarily subscribe to another government group or 
another Committee. The private sector here has shown the way. 
We just have to listen and give you the authority and the 
ability and the staff to do what you do best. Obviously, the 
SBA has failed here. There is no question about it.
    I want to thank you for your testimony and just your years 
of experience. We need more of this. And this is a bipartisan 
issue that we need to work on.
    Mr. Chair, I yield back.
    Chairman WILLIAMS. The gentleman yields back.
    I now recognize Representative LaLota from New York, the 
great state of New York, for 5 minutes.
    Mr. LALOTA. Thank you, Mr. Chairman. The great state of New 
York, sir.
    Chairman WILLIAMS. Got it.
    Mr. LALOTA. Two hundred billion dollars. Two hundred 
billion dollars. Lets put that in perspective.
    If Congress had that $200 billion back we could give the 
average taxpayer a $2,000 tax cut. Or we could defer conflict 
with China by buying four new aircraft carriers, eight new 
submarines, and 27 new Navy destroyers. Or we could fully fund 
the state and local tax deduction which a lot of my 
constituents would like. Two hundred billion dollars. 
Approximately one in five COVID loans were potentially 
fraudulent. Thank you, Chairman, for hosting this important 
meeting and shining a spotlight on this important issue that my 
constituents care a heck of a lot about. And for our witnesses 
for being here to help inform our Committee on this issue.
    Despite the widespread fraud, the SBA has downplayed the 
fraud stolen from our fellow taxpayers and has given a free 
pass to anyone who has stolen less than $100,000 by refusing to 
investigate those smaller loans. The SBA's disregard for this 
issue is exemplified by the administrator's failure to testify 
before this Committee's July hearing with the Inspector 
General. It is our job on this Committee to fight waste, fraud, 
and abuse in the Small Business Administration, and that job is 
made much more difficult when the SBA administrator does not 
show up.
    That leads me to my first question. Mr. Taylor, sir, in an 
effort to expedite funds, the SBA did not check the ``do not 
pay'' lists before sending money out. Is that a normal 
procedure?
    Mr. TAYLOR. The self-certification allowed by SBA at the 
beginning of the pandemic was totally uncalled for and 
unprecedented.
    Mr. LALOTA. And what is the effect on not doing that 
diligence?
    Mr. TAYLOR. The massive fraud that we are seeing today.
    Mr. LALOTA. Mr. Breeden, you have quite the impressive 
resume, sir. I looked it up. Harvard Law, Chairman of the SEC, 
and you are a native Long Islander most importantly. So that 
well qualifies you to be on this panel.
    My question, sir, is what effect does the SBA's decision to 
not investigate those smaller loans have on future behavior?
    Mr. BREEDEN. I think it is very deleterious, sir. It sends 
a message that, okay, you can play around the edges and people 
just will not bother. And I think the principle that if you 
steal from your neighbors, you steal from your fellow citizens, 
that will always be a matter worthy of government's attention 
is the right message to send.
    Mr. LALOTA. It is a behavioral thing, right, that if folks 
know there are consequences to their negative behavior they are 
less likely to conduct that negative behavior; no?
    Mr. BREEDEN. Yes, sir.
    Mr. LALOTA. Mr. Taylor, back to you, sir. I know that we 
talked a little bit about Barbie before. We are going to do it 
just shortly once again.
    How can the private sector help to identify, to do identify 
verification better to help prevent fraud?
    Mr. TAYLOR. Thank you, Congressman.
    Getting back to the Presentation Attack Detection that I 
was mentioning to the previous congressman about, that would 
have stopped those types of attacks on those Fintech platforms.
    The fraud that was experienced specifically around the PPP, 
the top 12 lenders around that were all Fintech platforms. They 
would have allowed something like that to go through. 
Currently, identity verification, whenever you implement 
liveness detection at the IAL2 that is approved by NIST, it 
stops that in its tracks. Additionally, SBA OIG, specifically 
IG Ware talked about it the last time that he was here, talked 
about the overlapping of IP addresses and suspicious IP address 
activity, if this was 5 years ago that is an effective way to 
go about doing an investigation. It no longer holds that value 
at the IP address level. You have a to get into the big data 
that is associated with that IP address as well as the device 
intelligence associated with it.
    Mr. LALOTA. So doing things like that obviously come at a 
cost; right? That it takes more to invest in better technology, 
better process. That comes at a cost. Would you assess that as 
positive ROI, is the return on that investment positive for the 
taxpayers? If we go through that diligence, raise the bar, do 
better identify verification, do we have less fraud? And is the 
less fraud worth * does it give us extra money to pay for those 
costs, sir?
    Mr. TAYLOR. Yes, sir. As a matter of fact, everywhere that 
ID.me has been implement across 27 states during the pandemic, 
fraud rates went down. The pass rates went up. So it is a 
matter of inclusivity in these programs. It is a matter of 
stopping the fraud in its tracks. And also, the false positives 
associated with misidentifying an individual, which you can do 
if you are just targeting an IP address.
    We are not allowed, at ID.me, we have a policy. We keep the 
false positive rates very low. Well below 1 percent. The fraud 
rates, the same thing. The fact that we are talking about 
programs that have 18-21 percent in the fraud rate is unheard 
of in the private sector.
    So with that being said, I would be very cautious that any 
type of program that is concentrated only on the IP address. 
Additionally, in Puerto Rico, we took the pass rates from 23 
percent up to 78 percent at a cheaper cost.
    Mr. LALOTA. Thank you very much. My time is expired. Thank 
you, Chairman.
    Chairman WILLIAMS. The gentleman yields.
    I now recognize Representative Salazar from the great state 
of Florida for her 5 minutes.
    Ms. SALAZAR. Thank you, Mr. Chairman. The great state of 
Florida indeed. And thank you for coming to explain to us your 
knowledge and everything, all the steps that you have taken.
    Mr. Taylor, I hear that in the state of Florida you are 
able to establish a very good technique that we could replicate 
in the rest of the country. Could you please explain for my 
constituents what did we do right in Florida versus other 
states?
    Mr. TAYLOR. Thank you, Congressman.
    The relationship with Florida has been an absolutely 
fantastic one.
    Ms. SALAZAR. Okay.
    Mr. TAYLOR. We have implemented the IAL2 policy there that 
I spoke about previously. So the fact that when you have 
identify verification gating a lot of the public benefit 
programs there----
    Ms. SALAZAR. And how does that work in particular so I can 
understand. I do not have a criminal mind so I am not sure what 
people think. Shat do you need to do in order to defraud the 
government? So why the facial identification is important?
    Mr. TAYLOR. Less about the facial recognition side and more 
about the actual Liveness detection. The fact that a person is 
a real individual. The mask that made it through and the Barbie 
Swindler. Those do not make it through ID.me in the State of 
Florida. Because we have that Liveness detection built into the 
platform.
    Additionally, we have unsupervised sites. So if a person 
cannot get through, let's say that there is a language barrier, 
we support over 200 languages on that side. So the person can 
come through, talk to a trusted referee. And we are talking 
about wait times that are less than 5 minutes to get onto those 
platforms.
    Lastly, I would turn your attention to Hurricane Ian last 
year. The devasting impacts with that, obviously in the 
billions dollars and loss. We have a thread intelligent cell 
that lives out on the Dark Web that looks for fraudsters going 
after these types of benefit programs. We actively go out and 
look for the bad guys going after these public benefits, and we 
did that in the state of Florida. So much so that whenever 
Hurricane Ian occurred, we had the in-person terminals that the 
IME has, and the people were able to verify their identity, get 
their FEMA funds right there in the spot instead of having to 
wait in line to go to a state office or something like that.
    Ms. SALAZAR. So the facial identification could be the 
answer for the federal government to stop future fraud across 
the board or across the nation. Would you consider----
    Mr. TAYLOR. It is one part of an entire fraud suite of 
tools that we would recommend.
    Ms. SALAZAR. Explain to my constituents why after the 
pandemic we had so much fraud. I would imagine that people were 
claiming that they could not find work or that they did not 
have a job. Explain to me the scenario after COVID.
    Mr. TAYLOR. During the first 9 months of the pandemic you 
had self-certification of these benefit programs. Combine that 
with the speed at which they were decimated, you are talking 
about an unprecedented amount of capital that went out into the 
economy. That incentivized a lot of nation state actors, as 
well as your traditional domestic fraudster to go after these 
benefit programs.
    Ms. SALAZAR. Okay.
    Mr. TAYLOR. Your constituents have not only suffered from 
the standpoint of losing your identity, possibly for tax 
purposes or filing for unemployment but also they may have 
inadvertently had their identity used in a credit scheme that 
would target a small business.
    Ms. SALAZAR. Okay. So we know that the SBA, there is a 
dispute of the amount of money that went to the wrong hands 
through the PPP program. Do we have a figure of how much money 
went to the wrong hands? Or how many millions of dollars were 
lost after the pandemic for claims from people that did not 
deserve or were not the right beneficiaries of these monies for 
unemployment benefits?
    Mr. TAYLOR. Thank you, Congressman. I would agree with IG 
Ware that the likely fraud is somewhere in that realm of $650 
billion. The fraud number right now that he is planning on 
going and prosecuting at 200 billion.
    Ms. SALAZAR. Two hundred billion dollars. And this money 
that we are talking about is included in that figure of 200 
billion?
    Mr. TAYLOR. That is correct, Congressman.
    Ms. SALAZAR. Okay. Thank you. I yield back.
    Chairman WILLIAMS. Next, I now recognize Representative 
Phillips from the great state of Minnesota for 5 minutes.
    Mr. PHILLIPS. Thank you, Mr. Chairman. Thank you for 
holding this hearing, and to all of you for being with us.
    Let me just start by saying I share every one of my 
colleagues' disgust by the scale of fraud that took place 
during the pandemic, and we have got to do everything we can to 
investigate and most importantly recoup billions of dollars 
that were literally stolen from American taxpayers. Stolen 
during what I consider a tragic moment in our history.
    The good news in my estimation is that we have got a clear 
roadmap, and that is to give the SBA Inspector General the 
resources that his office needs to go after these fraudsters.
    I come from a business background myself, like the 
Chairman, where return on investment is the name of the game. 
The IG's office has requested $47 million in discretionary 
funding for its operations in fiscal year 2024. Unfortunately, 
the House Appropriations Committee underfunded that request by 
about $15 million. Yet, over the past 2 years, OIG's efforts 
have yielded over $9 billion in financial accomplishments, 
recoveries, fines, and forfeitures. Considering these numbers, 
an extra $15 million in my estimation seems like a heck of a 
good return on investment to me. Inspector General Hannibal 
Ware has proven that his office delivers results for taxpayers 
and Congress simply needs to give him the tools to do his job.
    So I would welcome suggestions from our witnesses today. 
And we ought to consider them fairly, but we cannot lose sight 
of the fact that the number one thing we can do to recoup fraud 
is to fund the Inspector General's office fully.
    Let me just start with you, Mr. Zerbe. I really appreciate 
the bipartisan tone in your testimony. I think you are right, 
that eliminating fraud, waste, and abuse of the SBA is a 
bipartisan exercise. Must be bipartisan. In the same way that 
small business relief was. I am intrigued by your proposal to 
establish a whistleblower program at the SBA. It has proven 
successful at other agencies, of course. But one of my concerns 
is that the IG currently lacks resources to actually 
investigate what I think are about 90,000 actionable leads that 
it has already identified.
    So what do you make of this concern?
    Mr. ZERBE. Thank you for that, Congressman.
    I think a couple of thoughts for you. One is that I agree 
they have got kind of a fire hydrant drinking moment right here 
but I still think that the whistleblowers will be able to: (a) 
better target the most important fraud cases, and also just so 
you understand, when you are submitting, particularly when you 
have an award program, it is not just a tip and things like 
that. The whistleblower and his attorney, they are providing a 
whole package for the agency. I mean, we are putting in the 
documents, the material, a view of the law, a narrative. We 
want it on a T-ball for them to be able to just do it. So it is 
making the agency much more time efficient and effective in 
terms of what they are doing.
    One thing, too, to consider and you might think about as 
you are looking at legislation in this area, it is not uncommon 
for the whistleblower award programs and the Qui Tam programs 
in other agencies to allow for a reimbursement of the costs the 
agency has with their investigation as well, too. In other 
words, yes, we recovered these funds, and yes, you know, we are 
going to reward the whistleblower. But we are also going to 
reimburse the SBA for its costs as well, too. So it may be 
something to consider to address the concern you have got about 
limited agency resources to say, great, we are going to in a 
sense incentivize not only the private sector to come forward 
and assist the SBA through the whistleblowers but we are also 
going to incentivize the SBA to embrace those whistleblowers 
and work with them because then they will basically be able to 
have their costs met. So that may be a way to address your 
concerns, Congressman.
    Mr. PHILLIPS. And based on that absurdly high number, 
90,000 leads, are there alternatives concerning the resources, 
levers, tools we have available to us? In your estimation, are 
there other mechanisms we should be considering to reduce that 
workload and ensure that every one of those leads is 
investigated?
    Mr. ZERBE. Well, I think that is where it is going to help 
not to repeat. But I think having seen a lot of these kind of 
tips, particularly more from my IRS work, a lot of them tend to 
be pretty thread bare. I mean, just, well, you know, Jimmy has 
got a fancy car and you guys should go look at him. I think, 
you know, when you are getting the whistleblower you are 
getting an insider informed and you are getting the big fish. 
So the SBA----
    Mr. PHILLIPS. Okay. So quality, not quantity?
    Mr. ZERBE. Yeah. And the IG white paper highlighted one. 
They had one whistleblower who came forward and it was over 
$600 million that they had identified thanks to this one 
whistleblower. So you are right. It is able to get the big fish 
and the worst actors, if you will, and target them better on 
that. Yes, Congressman.
    Mr. PHILLIPS. Okay. I appreciate it. I have only got about 
20 seconds left.
    I just want to refer to a letter that I plan to send to 
both the House and Senate Appropriations Committees requesting 
that they fulfill the OIG's full request of $47 million in 
discretionary funding because holding these bad actors 
accountable should be bipartisan goals, and I surely invite my 
colleagues on both sides of the aisle to join me in that 
endeavor.
    With that, Mr. Chair, I yield back with exactly 1 second 
left.
    Chairman WILLIAMS. Great job.
    I would like to thank our witnesses today for their 
testimony and for appearing before us.
    Without objection, Members have 5 legislative days to 
submit additional materials and written questions for the 
witnesses to the Chair which will be forwarded to the 
witnesses.
    I ask the witnesses to please respond promptly.
    So if there is no further business, without objection the 
Committee is adjourned.
    Thank you all very much.
    [Whereupon, at 11:35 a.m., the committee was adjourned.]
    
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