affiliates, and the Committee’s July 30, 2020, letter to you sought communications with “any affiliated company.”

Document type: Contract
Date: 2021-02-11

Contract — affiliates, and the Committee’s July 30, 2020, letter to you sought communications with “any affiliated company.”, dated 2021-02-11, issued by Small Business Administration (SBA) Inspector General recently found that the.

Cited in: The Six-Person Prime Contractor That Ran EIDL · RER Solutions, Inc.

Full text

February 11, 2021

Mr. Jay Farner
Chief Executive Officer
Rocket Loans
1274 Library Street, 2nd Floor
Detroit, MI 48226

Dear Mr. Farner:

The Select Subcommittee on the Coronavirus Crisis and the Committee on Small
Business are continuing our investigation into the management of the Economic Injury Disaster
Loan (EIDL) program during the coronavirus crisis. On July 30, 2020, our Committees launched
an inquiry into a contract, currently worth $750 million, that the Trump Administration awarded
to RER Solutions (RER) to manage this program. Rocket Loans (Rocket) and its affiliate, Rapid
Finance (Rapid), are RER’s subcontractors and are expected to receive more than $360 million
in taxpayer funds.

The Small Business Administration (SBA) Inspector General recently found that the
EIDL program has been mired in fraud—with as much as $78 billion in taxpayer funds diverted
to potentially fraudulent loans, rather than going to small businesses that urgently need help
during the pandemic. Documents and information obtained by our Committees have heightened
our concerns that Rocket failed to implement adequate fraud controls. Our investigation has also
raised questions as to whether the contract is in the best interest of the American taxpayer given
the large share of the contract’s value that RER stands to receive relative to the amount of work
it is performing on the contract. Unfortunately, Rocket has refused to cooperate with this
inquiry. We write today to urge you to provide the documents and information necessary for
our Committees to complete our investigation.1

1
In addition to refusing to produce key documents and information related to Rocket’s role in this project,
you have refused to produce any documents on behalf of Rocket’s affiliate, Rapid Finance, even though the
Committees made clear at the outset of the investigation that we were interested in responsive material from all
affiliates, and the Committee’s July 30, 2020, letter to you sought communications with “any affiliated company.”
Letter from Chairman James E. Clyburn, Select Subcommittee on the Coronavirus Crisis, and Chairwoman Nydia
M. Velázquez, Committee on Small Business, to Jay Farner, Chief Executive Officer, Quicken Loans (July 30,
2020) (online at https://coronavirus.house.gov/sites/democrats.coronavirus.house.gov/files/2020-07-
30.Clyburn%20to%20Rocket%20Loans%20re%20Contracting.pdf). You serve as Chief Executive Officer of
Rocket Loans, Quicken Loans, and their parent company, Rocket Companies. Rapid Finance is part of “ The Rock
Family of Companies,” which includes the entities that you lead. See Quicken Loans, The Rock Family of
Companies (accessed on Dec. 23, 2020) (online at www.quickenloans.com/about/partner-company). Upon
receiving the Committees’ requests, Rocket’s General Counsel and Chief Compliance Officer informed Committee
staff that Rocket’s “ultimate parent company has notice of the requests and recognizes that the Committees want any
correspondence from any entity within the family of companies related to the EIDL program.” Email from Colin
Darke, General Counsel and Chief Compliance Officer, Rocket Loans, to Majority Staff, Select Subcommittee on
the Coronavirus Crisis (Aug. 4, 2020).
Mr. Jay Farner
Page 2

Inadequate Fraud Controls

On December 17, 2018, SBA’s Office of Disaster Assistance awarded RER a contract
with a ceiling of $100 million to assist SBA with processing disaster loan applications.2 Because
SBA set aside the award for small businesses, only businesses meeting certain size thresholds
were eligible to compete for the contract. After the onset of the coronavirus pandemic, SBA
used its emergency contracting powers to issue a $50 million task order under this contract for
loan recommendation services related to the coronavirus. After that initial task order on March
29, 2020, the Trump Administration expanded the award amount to $750 million without any
additional competition.3

Our Committees launched this investigation on July 30, 2020, “to ensure that taxpayer
dollars are being spent in the best interest of the American people and not diverted to fraud,
waste, or abuse.” 4 Unfortunately, as the investigation has progressed, concerns regarding the
program’s fraud controls have only increased.

On October 28, 2020, the SBA Inspector General issued a report finding that SBA
approved billions of dollars in potentially fraudulent EIDL loans and advances. The report
identified: (a) approximately $62.7 billion in potentially fraudulent loans made to applicants
using the same IP addresses, email addresses, bank accounts, or business addresses; (b) $14.3
billion in loans made to bank accounts that differed from the ones listed on the original loan
applications; and (c) approximately $1.1 billion in loans made to businesses that registered after
the program’s cutoff date. The Inspector General noted that, among other problems, “controls in
the subcontractor’s system”—meaning controls implemented by Rocket and Rapid—“were not
always consistently flagging problematic loan applications.”5

The Committees have repeatedly asked Rocket to produce responsive documents and to
prioritize the production of documents detailing the fraud controls for this project, but your
company has refused to comply. For example, on September 8, 2020, Committee staff
specifically requested a description of all the fraud controls implemented by Rocket, any
reporting to SBA on the performance of those controls, and a list of the flags that Rocket used to
mark applications for SBA loan officers. On November 12, Committee staff again requested “a
complete list of all fraud checks conducted on EIDL applications, and any documents

2
USA Spending, Indefinite Delivery Vehicle Summary (online at
www.usaspending.gov/award/CONT_IDV_73351019D0001_7300) (accessed Feb. 2, 2021).
3
USA Spending, Contract Summary (online at
www.usaspending.gov/#/award/CONT_AWD_73351020F0071_7300_73351019D0001_7300) (accessed Feb. 2,
2021).
4
Letter from Chairman James E. Clyburn, Select Subcommittee on the Coronavirus Crisis, and
Chairwoman Nydia M. Velázquez, Committee on Small Business, to Jay Farner, Chief Executive Officer, Quicken
Loans (July 30, 2020) (online at https://coronavirus.house.gov/sites/democrats.coronavirus.house.gov/files/2020-07-
30.Clyburn%20to%20Rocket%20Loans%20re%20Contracting.pdf).
5
Small Business Administration, Office of Inspector General, Inspection of Small Business
Administration’s Initial Disaster Assistance Response to the Coronavirus Pandemic (Oct. 28, 2020) (online at
www.sba.gov/sites/default/files/2020-10/SBA%20OIG%20Report%2021-02.pdf).
Mr. Jay Farner
Page 3

demonstrating such fraud checks.”6 All of these documents are responsive to the Committees’
July 30 request.

Rocket has not provided the requested documents. Rocket’s counsel initially informed
Committee staff that there was no written record of the fraud controls, but Rapid and Rocket
employees confirmed during a recent briefing that: (a) records exist regarding the performance
of the fraud controls; (b) the project team produced “a couple dozen” reports to SBA that
included the results of those controls; (c) the project team kept a list of the potential fraud “alert
messages” generated by the loan recommendation software and presented to SBA loan officers;
and (d) project team members took notes of SBA’s requirements for classifying loan
recommendations (e.g., “auto-decline,” “recommend decline,” “manual review,” or “recommend
approve”).7

Potential Waste of Taxpayer Funds

This investigation has also raised serious questions as to whether the EIDL contract,
which was intended to be set aside for small businesses, is in the best interest of the American
taxpayer. The prime contractor, RER, appears to be performing only a small portion of the work,
while receiving 51% of the contract’s value—over $380 million. According to RER, its
personnel comprised a “small percentage of overall staffing,” perhaps only “15-20%” of a
project team consisting of “a couple hundred people.”8 The remainder of the work appears to be
performed by Rocket and its affiliate, Rapid.

For small business set-aside contracts—such as the contract at issue here—SBA’s
regulations prohibit a prime contractor from paying more than 50% of the amount paid to it by
the government to a subcontractor that is not a small business. 9 RER asserts that it is complying
with this subcontracting requirement by paying Rocket less than 50% of the overall value of the
contract. However, RER appears to be performing only a small percentage of the work and
receiving the biggest share financially, raising questions about whether the contract is in the best
interest of taxpayers.10

Over the past six months, our Committees have repeatedly requested information to shed
light on the performance of this contract. Specifically, the Committees have requested

6
Email from Staff, Select Subcommittee on the Coronavirus Crisis, to Margaret Daum, Squire Patton
Boggs, Counsel to Rocket Loans (Nov. 12, 2020).
7
Briefing by Will Tumulty, Chief Executive Officer, Rapid Finance, and Jeremy Condon, Vice President
of Software Engineering, Rocket Loans, to Staff, Select Subcommittee on the Coronavirus Crisis (Dec. 2, 2020).
8
Briefing by Errin Green, Chief Executive Officer, RER Solutions, to Staff, Select Subcommittee on the
Coronavirus Crisis (Aug. 13, 2020).
9
Small Business Government Contracting and National Defense Authorization Act of 2013 Amendments,
13 C.F.R. § 125.6(a)(1).
10
See Statement of Guiding Principles of the Federal Acquisition System, 48 C.F.R. § 1.102(a) (noting that
“[t]he vision for the Federal Acquisition System is to deliver on a timely basis the best value product or service to
the customer, while maintaining the public’s trust and fulfilling public policy objectives”). The Committees have a
strong interest in ensuring the efficacy of contracting rules.
Mr. Jay Farner
Page 4

information on the number of RER, Rocket, and Rapid employees who have worked on this
contract to gain a better understanding of the work performed by each party. The companies
have refused to provide this basic information, asserting they did not track headcount or keep
hourly records over the term of the project.11

Information recently provided to our Committees casts doubt on the assertion that
employee headcount on this project cannot be determined. During a recent staff briefing, Rocket
and Rapid officials admitted that every employee who worked on the EIDL project signed a non-
disclosure or confidentiality agreement as required by the Statement of Work. Rocket should
therefore be able to easily provide the personnel information the Committees seek.

For all these reasons, we request that you produce by February 25, 2021, the following
priority documents—many of which have been previously requested by Committee staff—in
addition to all other outstanding documents responsive to the Committees’ July 30, 2020,
document requests:

1. All non-disclosure or confidentiality agreements signed by Rocket employees or
contractors relating to the EIDL contract;

2. All documents indicating the attendance by Rocket employees or contractors at
meetings or conference calls relating to the EIDL contract;

3. All documents and communications regarding SBA’s requirements,
specifications, or guidance regarding the business process rules for managing the
application work flow, including but not limited to how the loan software should
classify applications for various recommendation queues (e.g., approval, denial,
or manual review), and descriptions of the relevant SQL code;

4. All documents and communications regarding fraud checks conducted on EIDL
applications, including any reports regarding the performance of those fraud
checks;

5. All reports and updates provided by the project team to SBA, including but not
limited to reports and updates tracking the number of applications received,
decisioned, and pending; and reports and updates documenting the performance
of the loan recommendation software or fraud checks; and

11
See, e.g., Letter from Colin Darke, General Counsel, Rocket Loans, to Chairman James E. Clyburn,
Select Subcommittee on the Coronavirus Crisis, and Chairwoman Nydia M. Velázquez, Committee on Small
Business (Sept. 22, 2020); Letter from W. Neil Eggleston, Kirkland & Ellis LLP, Counsel to RER Solutions, to
Chairman James E. Clyburn, Select Subcommittee on the Coronavirus Crisis, and Chairwoman Nydia M.
Velázquez, Committee on Small Business (Oct. 2, 2020); Letter from Colin Darke, General Counsel, Rocket Loans,
to Chairman James E. Clyburn, Select Subcommittee on the Coronavirus Crisis, and Chairwoman Nydia M.
Velázquez, Committee on Small Business (Nov. 24, 2020); Letter from W. Neil Eggleston, Kirkland & Ellis LLP,
Counsel to RER Solutions, to Chairman James E. Clyburn, Select Subcommittee on the Coronavirus Crisis, and
Chairwoman Nydia M. Velázquez, Committee on Small Business (Nov. 25, 2020).
Mr. Jay Farner
Page 5

6. A list of all potential alert messages generated by the project’s loan
recommendation software and presented to SBA loan officers.

In addition, please provide the following information by February 25, 2021:

1. Rocket’s total revenue, expenses, and profit from performing the EIDL contract to
date;

2. A list of all fraud checks conducted by the RER-Rocket-Rapid team on EIDL
applications and a description of how each check serves to detect and prevent
fraud;

3. Rocket’s assessment or estimate of the amount of improper payments that have
been made to applicants who were processed through Rocket’s loan
recommendation software; and

4. A description of SBA’s rules, specifications, and requirements for how the loan
software should classify applications for various recommendation queues (e.g.,
approval, denial, or manual review).

Sincerely,

_______________________ _______________________
James E. Clyburn Nydia M. Velázquez
Chairman Chairwoman
Select Subcommittee on the Coronavirus Committee on Small Business
Crisis

cc: The Honorable Steve Scalise, Ranking Member
Select Subcommittee on the Coronavirus Crisis

The Honorable Blaine Luetkemeyer, Ranking Member
Committee on Small Business

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