Examining Federal Efforts to Prevent, Detect, and Prosecute Pandemic Relief Fraud

Source document: Chrg 117Hhrg47805; document type: criminal-prosecutions.

Full text

U.S. GOVERNMENT PUBLISHING OFFICE
WASHINGTON :
47–805 PDF
2022
EXAMINING FEDERAL EFFORTS TO PREVENT,
DETECT, AND PROSECUTE PANDEMIC RELIEF
FRAUD TO SAFEGUARD FUNDS FOR ALL
ELIGIBLE AMERICANS
HEARING
BEFORE THE
SELECT SUBCOMMITTEE ON THE CORONAVIRUS
CRISIS
OF THE
COMMITTEE ON OVERSIGHT AND
REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
JUNE 14, 2022
Serial No. 117–86
Printed for the use of the Committee on Oversight and Reform
(
Available on: govinfo.gov,
oversight.house.gov or
docs.house.gov

(II)
COMMITTEE ON OVERSIGHT AND REFORM
CAROLYN B. MALONEY, New York, Chairwoman
ELEANOR HOLMES NORTON, District of
Columbia
STEPHEN F. LYNCH, Massachusetts
JIM COOPER, Tennessee
GERALD E. CONNOLLY, Virginia
RAJA KRISHNAMOORTHI, Illinois
JAMIE RASKIN, Maryland
RO KHANNA, California
KWEISI MFUME, Maryland
ALEXANDRIA OCASIO-CORTEZ, New York
RASHIDA TLAIB, Michigan
KATIE PORTER, California
CORI BUSH, Missouri
SHONTEL M. BROWN, Ohio
DANNY K. DAVIS, Illinois
DEBBIE WASSERMAN SCHULTZ, Florida
PETER WELCH, Vermont
HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia
JOHN P. SARBANES, Maryland
JACKIE SPEIER, California
ROBIN L. KELLY, Illinois
BRENDA L. LAWRENCE, Michigan
MARK DESAULNIER, California
JIMMY GOMEZ, California
AYANNA PRESSLEY, Massachusetts
JAMES COMER, Kentucky, Ranking Minority
Member
JIM JORDAN, Ohio
VIRGINIA FOXX, North Carolina
JODY B. HICE, Georgia
GLENN GROTHMAN, Wisconsin
MICHAEL CLOUD, Texas
BOB GIBBS, Ohio
CLAY HIGGINS, Louisiana
RALPH NORMAN, South Carolina
PETE SESSIONS, Texas
FRED KELLER, Pennsylvania
ANDY BIGGS, Arizona
ANDREW CLYDE, Georgia
NANCY MACE, South Carolina
SCOTT FRANKLIN, Florida
JAKE LATURNER, Kansas
PAT FALLON, Texas
YVETTE HERRELL, New Mexico
BYRON DONALDS, Florida
VACANCY
JENNIFER GASPAR, Staff Director
DEREK COLLINS, Clerk
CONTACT NUMBER: 202-225-5051
MARK MARIN, Minority Staff Director
SELECT SUBCOMMITTEE ON THE CORONAVIRUS CRISIS
JAMES E. CLYBURN, South Carolina, Chairman
MAXINE WATERS, California
CAROLYN B. MALONEY, New York
NYDIA M. VELA´ ZQUEZ, New York
BILL FOSTER, Illinois
JAMIE RASKIN, Maryland
RAJA KRISHNAMOORTHI, Illinois
STEVE SCALISE, Louisiana, Ranking Minority
Member
JIM JORDAN, Ohio
MARK E. GREEN, Tennessee
NICOLE MALLIOTAKIS, New York
MARIANNETTE MILLER-MEEKS, Iowa

(III)
C
O
N
T
E
N
T
S
Page
Hearing held on June 14, 2022 ...............................................................................
1
WITNESSES
Michael Horowitz, Chair, Pandemic Response Accountability Committee
Oral Statement ........................................................................................................
5
Hannibal ‘‘Mike’’ Ware, Inspector General, Small Business Administration
Oral Statement ........................................................................................................
7
Kevin Chambers, Director for COVID-19 Fraud Enforcement, Department
of Justice
Oral Statement ........................................................................................................
8
Roy D. Dotson, Jr., Acting Special Agent in Charge, National Pandemic
Fraud Recovery Coordinator, United States Secret Service
Oral Statement ........................................................................................................
10
* Written opening statements and the written statements of the witnesses
are available on the U.S. House of Representatives Document Repository
at: docs.house.gov.
INDEX OF DOCUMENTS
* OIG COVID-19 Fraud Investigations, Indictments, and Convictions; sub-
mitted by Chairman James Clyburn.
No additional documents were entered into the record for this hearing.

(1)
EXAMINING FEDERAL EFFORTS TO PREVENT,
DETECT, AND PROSECUTE PANDEMIC RELIEF
FRAUD TO SAFEGUARD FUNDS FOR ALL
ELIGIBLE AMERICANS
Tuesday, June 14, 2022
HOUSE OF REPRESENTATIVES
COMMITTEE ON OVERSIGHT AND REFORM
SELECT SUBCOMMITTEE ON THE CORONAVIRUS CRISIS
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:05 a.m., in room
2247, Rayburn House Office Building, and via Zoom; Hon. James
E. Clyburn (chairman of the subcommittee) presiding.
Present: Representatives Clyburn, Maloney, Foster, Raskin,
Krishnamoorthi, Scalise, Green, Malliotakis, and Miller-Meeks.
Chairman CLYBURN. Good morning. The committee will come to
order. Without objection, the chair is authorized to declare a recess
of the committee at any time. I now recognize myself for an open-
ing statement.
The coronavirus crisis caused significant economic suffering as
millions of Americans lost their jobs and businesses struggled to
keep their doors open. Congress took decisive action to ease this
pain, appropriating unprecedented relief for small businesses and
workers who lost their jobs. First, through the CARES Act, and
later, under President Biden, through the American Rescue Plan.
These laws funded the Small Business Administration’s Paycheck
Protection Program or PPP, and Economic Injury Disaster Loan
program or E-I-D-L, we call EIDL, as well as expanded unemploy-
ment insurance.
Unfortunately, criminals and criminal organizations took advan-
tage of Americans suffering during this crisis and committed sub-
stantial fraud against these critical pandemic relief programs,
stealing billions of dollars in aid. These acts of fraud are not
victimless crimes. This fraud exhausted funds badly needed by eli-
gible Americans, particularly funds allocated to support small busi-
nesses that are crucial to making the American economy thrive.
In some cases, pandemic relief fraud involved a tentative theft
that prevented innocent people from accessing unemployment in-
surance when they lost their jobs and were in desperate need of as-
sistance. In other cases, pandemic fraud put identity theft victims’
credit at risk as fraudulent relief loans were taken out in their
names.
The Trump administration contributed to this problem by failing
to put basic fraud controls in place to protect these vital relief pro-

2
grams and American taxpayers from fraud. Today, the select sub-
committee released a report showing that under the Trump admin-
istration, SBA failed to implement basic safeguards to prevent
fraud against the EIDL program. The Trump administration even
directed loan officers to approve EIDL loan applications when there
were clear indications that the applicants were engaged in identity
theft. This both depleted funds from a critical relief program and
put Americans at increased risk of suffering the consequences of
identity theft.
The SBA Office of Inspector General similarly found that during
the Trump administration, SBA failed to use sufficient controls to
prevent PPP fraud—and I’m quoting here, ‘‘lowered the guard-
rails,’’ end of quote, in the EIDL program, significantly increasing
fraud vulnerabilities.
We look forward to hearing from SBA Inspector General Ware
today about his office’s efforts to address the fraud that occurred
because of these failures, including his office’s work to recoup tax-
payer dollars lost to fraud. The Biden administration has taken ac-
tion to reverse the damage caused by the prior administration and
to prevent future fraud. In the EIDL program, the Biden adminis-
tration implemented measures to identify potential fraud, directed
loan officers to address indications of fraud before approving loans,
and took additional steps to make sure applications were legiti-
mate.
Further, through the American Rescue Plan, Congress made crit-
ical investments in fraud prevention and accountability, including
providing more than $200 million in funding for watchdogs to in-
vestigate fraud, waste, and abuse, as well as $2 billion to support
states’ modernization of unemployment insurance systems to re-
duce fraud vulnerabilities. The Biden administration has begun
using these funds to support state efforts to make unemployment
insurance systems both more accessible to eligible recipients, and
less susceptible to fraud.
This funding is also supporting the work of the Pandemic Re-
sponse Accountability Committee, or PRAC, chaired by Inspector
General Michael Horowitz. The PRAC has coordinated efforts to
conduct and investigate fraud across the Federal Government. We
will hear about those important efforts from Inspector General
Horowitz today.
As the Biden administration works to prevent and detect fraud,
they have also taken action to hold perpetrators of fraud account-
able. As he continued to do in this year’s State Of The Union,
President Biden directed the Department of Defense to appoint a
chief prosecutor to lead efforts to investigate pandemic relief fraud.
Kevin Chambers, who was named to this role in March, is here
with us today. Data the Department provided to the select sub-
committee showed that it has already charged nearly 1,500 people
with alleged fraud against pandemic relief programs. We look for-
ward to hearing from Mr. Chambers about the Department of Jus-
tice’s efforts.
There is more that must be done to bring perpetrators of fraud
to justice and to protect future emergency programs. We should
consider whether to extend statutes of limitations to allow inves-
tigators more time to uncover pandemic relief fraud, and we should

3
continue efforts to protect relief funds by fulfilling the Biden ad-
ministration’s requests for more funds to protect and strengthen
state unemployment insurance systems.
I would like to thank our witnesses for being with us today. I
look forward to hearing more about the administration’s efforts to
hold perpetrators of fraud accountable and what else we can do to
protect vital relief programs going forward.
I now recognize the Ranking Member Scalise for his opening
statement.
Mr. SCALISE. Thank you, Mr. Chairman, and I’d also like to wel-
come the witnesses and thank them for joining us today for this
important hearing.
In the initial days and months of the COVID pandemic, uncer-
tainty was rampant, and much of the economy was locked down.
Congress acted multiple times in a bipartisan way to deliver much-
needed relief as fast as we could to help save as many jobs as we
could. We knew keeping people employed was the best way to keep
our economy from crashing. Perhaps the most significant program
was the Paycheck Protection Program, known as PPP. Initially,
Congress gave the new program $349 billion in March 2020, and
mandated that the Small Business Administration implement the
program within 15 days of enacting this new program.
Over time, the program received more than $800 billion, and the
SBA estimates that it saved more than 51 million jobs. That’s
right. President Trump worked with Democrats and Republicans in
Congress to pass a program at the beginning of a global pandemic
that saved more than 51 million jobs and turned it around at rapid
pace.
Using loan data as of August 2020, the SBA office of Inspector
General has flagged an estimated $4.6 billion, which represents
roughly one-half of one percent of the total loan funding for poten-
tial fraud or other improper payments. Fraud of any kind is wrong,
but given the size of the program and the demands placed on the
agency by Congress to rush the money out of the door to save as
many jobs as possible, about one-half of one percent is better than
most Federal programs that have been around for decades. Sadly,
despite this fact, Democrats have continued their effort to under-
mine the PPP’s success by attacking the Trump administration and
financial institutions involved in the program despite the PPP’s
well documented successes.
In stark contrast to PPP, is the enhanced unemployment insur-
ance program. The Labor Department’s Office of Inspector General
estimates an improper payment rate of 18.7 percent in 2021. That
means about 6—$163 billion—$163 billion of the program’s $872
billion in Federal, state unemployment benefits paid during the
pandemic, could have been improperly paid with a significant por-
tion attributable to fraud.
The OIG found that, quote, ‘‘Based on their audit and investiga-
tive work, the improper payment rate for the pandemic UI program
is likely higher than 18.71 percent.’’ Why aren’t we having a hear-
ing on that? Great. Let’s go after the $4 billion, but why aren’t we
going after the $163 billion that’s being completely ignored in
fraud? There are numerous examples of domestic UI fraud.

4
One man from New York received $1.5 million over 10 months.
A California real estate broker got more than $500,000 over six
months. One person used the same social security numbers to file
UI claims in 40 different states. We’re not having a hearing on
this. In addition, the program was targeted by criminal organiza-
tions and enemy nation states. A ProPublica investigation found
that a substantial amount of UI fraud can be attributed to orga-
nized crime, both in the United States and abroad.
Estimates by some say at least 70 percent of the money stolen
ultimately went to foreign nationals in countries like China, Rus-
sia, and Nigeria. One state received fake unemployment claims
that came from IP addresses in nearly 170 different countries. That
was just one state’s reported fraud. So far, just over $4 billion has
been recovered of that 160-plus billion dollars in fraud from the en-
hanced UI program.
We should be doing everything we can to aggressively identify,
investigate, and prosecute the criminal fraud in pandemic unem-
ployment programs. That’s why I introduced a bill last week with
many of my fellow Republican colleagues to help encourage states
to recover fraudulent payments. I hope we’ll be able to get that bill
moved through Congress quickly.
On top of the egregious and unprecedented fraud, the pandemic’s
enhanced UI program has been cited as a leading contributor to the
historically high inflation that is crushing American families right
now. With all the legislative extensions, some claimants could re-
ceive up to 79 weeks of enhanced unemployment, about a year-and-
a-half of getting paid more money not to work than what they were
making at their job. And all this while businesses all across the
country are still looking for workers, you had the government pay-
ing hundreds of billions of dollars to pay people more money not
to work than they were working prior to the pandemic.
Democrats insisted on extending the program for another six
months and providing an additional $300 a week in their partisan
$1.9 trillion spending spree that caused the highest inflation in 40
years. The latest numbers have inflation hitting 8.6 percent last
month. This is costing the average American household an addi-
tional $327 a month. That’s right. Families across America are pay-
ing $300 a month more in higher inflation because of all the tril-
lions of dollars in spending here in Washington doing things like
paying people not to work.
Washington Democrats shamelessly used the pandemic to pursue
their socialist dreams of government dependency. They paid people
not to work, handed out big stimulus checks and expanded govern-
ment welfare programs, all while ignoring the warnings about in-
flation that would be caused. Instead of dumping cash into the al-
ready recovering economy, we should have been focused on reopen-
ing schools and getting our businesses back open safely and help-
ing those workers get back into their jobs.
While PPP and other pandemic programs have a few detractors,
they were overwhelmingly bipartisan and largely succeeded in de-
livering much-needed relief, and, again, saving 51 million jobs for
those hard-working families who are luckily still in the work force
today because of this program.

5
I hope that in our oversight of pandemic programs, my Democrat
colleagues will be able to recognize the difference between what
was needed to save the economy during unprecedented pandemic
versus pushing a partisan inflation inducing agenda.
With that, again, I look forward to hearing from our witnesses.
And Mr. Chairman, I yield back the balance of my time.
Chairman CLYBURN. Thank you very much, Mr. Scalise.
I would now like to introduce our distinguished witnesses. The
Honorable Michael Horowitz is the Inspector General for the De-
partment of Justice, and chairs the Pandemic Response Account-
ability Committee. Inspector General Horowitz testified before this
committee last March, and we appreciate his return to testify
today.
The Honorable Hannibal ‘‘Mike’’ Ware is the Inspector General
for the Small Business Administration. Inspector General Ware
also testified before this committee last year, and we look forward
to hearing from him again today.
Mr. Kevin Chambers is an Associate Deputy Attorney General
who is serving as Director for COVID 19 fraud enforcement. Thank
you for being here today.
Mr. Roy Dotson is the National Pandemic Fraud Recovery coordi-
nator for the United States Secret Service. Thank you.
And I would like for the—all witnesses please stand, raise your
right hands.
Do you swear or affirm that the testimony you are about to give
is the truth, the whole truth, and nothing but the truth, so help
you God?
Thank you. You may be seated.
Let the record show that the witnesses answered in the affirma-
tive. Without objection, your written statements will be made part
of the record.
Mr. Horowitz, you’re now recognized for five minutes for your
opening statement.
STATEMENT OF HON. MICHAEL HOROWITZ, CHAIR, PANDEMIC
RESPONSE ACCOUNTABILITY COMMITTEE;
Mr. HOROWITZ. Thank you, Mr. Chairman, Ranking Member Sca-
lise, members of the subcommittee. Thank you for inviting me to
testify today about the work of the PRAC, which Congress created
in March 2020 to oversee what is now over $5 trillion in pandemic
relief spending across 426 Federal programs at 40 agencies. Given
the magnitude of these responsibilities, we’ve developed a new
model of conducting oversight in a crisis that involves promoting
transparency by providing the public with accessible and com-
prehensive spending data on our website, pandemicoversight.gov,
collaborating across Inspector General community, in the oversight
community, to identify cross-cutting issues and risks, by detecting
and preventing fraud, waste, abuse, and mismanagement through
the use of leading edge data insights and analytic tools, and hold-
ing wrongdoers accountable by marshaling the investigative and
analytical resources of the oversight community.
A key to our success has been the transparency we’ve provided
to
the
public
about
pandemic-related
spending.
Pandemicoversight.gov, our website, empowers Americans to see

6
how their money is being spent and enables whistleblowers to help
us prevent and detect wrongdoing. However, we face several chal-
lenges in our efforts to advance transparency.
As we reported in November 2020 and October 2021, significant
agency data gaps present challenges to our pandemic oversight ef-
forts. And data completeness is just one of the challenges we’ve
identified as part of our oversight efforts. In September 2021, and
again last week, we issued reports highlighting the important les-
sons we’ve learned from reviewing some of the largest pandemic re-
lief programs. Among those lessons that we’ve detailed in those re-
ports are that agencies should be using the existing data to deter-
mine program eligibility rather than relying on individual self-cer-
tifications as occurred in many instances here.
I want to briefly mention the critical role collaboration has
played in our oversight efforts. From the earliest days of the pan-
demic, we regularly coordinated with GAO leadership, and simi-
larly engaged with our state and local oversight partners. For ex-
ample, the PRAC conducts quarterly briefings to share fraud indi-
cators with our state and local oversight partners. To date, close to
400 state and local officials have participated in those briefings.
We’ve also had strong working relationship with senior executive
branch officials. This level of engagement with IGs and the PRAC
has become a model for how to manage large-scale spending pro-
grams and to ensure that agencies benefit from the knowledge that
IGs have developed through our oversight work.
Let me turn to our accountability efforts. The only way to effec-
tively oversee $5 trillion in relief spending is with data. At the
PRAC, we’ve use advanced data science to further our oversight by
creating the Pandemic Analysis Center of Excellence, or PACE, to
deliver world class analytic, audit, and investigative support. Our
data analytic center is currently providing 37 law enforcement
agencies access to more than 150 million records from public, non-
public, and commercial data sources. The work of the PRAC and
partner IGs have already led to more than 1,200 indictments and
complaints, about 950 arrests and over 450 convictions.
We are committed to using all available tools to hold wrongdoers
accountable, including criminal, civil and administrative actions,
such as forfeiture and suspension and debarment. This investiga-
tive and oversight work has also led us to conclude that prevention
and detection of identity theft should be among the highest prior-
ities of Federal agencies. Identity theft has been endemic in the
fraud cases we’ve seen, and just yesterday, the PRAC issued a re-
port summarizing our key insights on this issue. We’ve also found
that identity theft victims have few avenues of assistance available
to them. That’s why the PRAC created the identity fraud Reduction
and Redress Working Group. Our working group is partnering with
IGs to identify ways agencies can help close those gaps and to help
identity theft victims move forward.
Finally, I want to voice my support for three bipartisan bills
pending in Congress that would assist our efforts to fight fraud and
pandemic-related spending. Two of those bills passed the House
earlier this month, as the chairman mentioned. The third is cur-
rently pending on the Senate floor that would allow us to increase

7
the jurisdictional recoveries for smaller false claims. I’m hoping for
prompt congressional action on all three bills.
Thank you for your continued strong support for our oversight
work, and I am pleased to answer any questions the committee
may have.
Chairman CLYBURN. Thank you very much, Mr. Horowitz.
The Chair now recognizes for five minutes Mr.—the Honorable
Hannibal Ware.
STATEMENT OF HON. HANNIBAL ‘‘MIKE’’ WARE, INSPECTOR
GENERAL, SMALL BUSINESS ADMINISTRATION
Mr. WARE. Chairman Clyburn, Ranking Member Scalise, and the
distinguished members of the subcommittee. Thank you for invit-
ing me to speak with you today and for your continued support of
my office.
My office is providing oversight of more than $1 trillion in pan-
demic funds. The unprecedented pandemic response demanded an
unprecedented oversight approach. Our office has performed audits
in real time, and we literally rewrote the book on how to present
findings in a timely and proactive manner. OIG reviews typically
take 10 to 12 months to conclude, whereas we published reports
meeting stringent review standards in little as two weeks.
To date, we have issued 22 pandemic-related reports. Our rec-
ommendations for corrective action to the agency have resulted in
SBA tightening their internal control systems and our work con-
tinues to focus on the various phases of the program to mitigate
fraud and ensure only eligible recipients receive funds. The impor-
tance of this ongoing oversight to the Nation cannot be overstated.
It is our goal, a goal I know that is shared by the PRAC and the
IG community, that the lessons learned will prevent future
missteps when taxpayer dollars are at stake.
This brings me to the fraud landscape and the urgency by which
I bring this message to you today. This subcommittee knows well
the tens of billions of dollars that have been identified by my office
as potentially fraudulent. The actions of these fraudsters will not
simply vanish. The evidence trail left behind can best be described
as footprints in concrete.
Our oversight accomplishments are significant, literally billions
of dollars, but we are nowhere near a full understanding of the
fraud landscape. What we do understand is that we are far beyond
the notion of potential fraud, and we are attacking this fraud head
on. Our investigators are topnotch and viewed as experts across the
law enforcement community. They have forged partnerships with
counterparts, joined task forces, and worked hand in glove with
prosecutors to bring wrongdoers to justice.
Our data analytics team is using cutting-edge artificial intel-
ligence and machine learning to develop high-impact leads, which
are aggressively pursued by our investigators. We are systemati-
cally approaching the use of these resources to develop the capa-
bility to detect fraud in near real time going forward.
In addition to independently developed leads, we’re combing
through financial suspicious activity reports, allegations of fraud
directly from financial constitutions, SBA program offices, and our
hotlines to prioritize our investigative work.

8
With under 70 criminal investigators on board, we alone are far
outmatched with the hundreds of thousands of investigative leads.
We have 399 open investigations regarding EIDL and PPP fraud,
which are associated with over $1 billion of estimated loss. Our in-
vestigators have proven to be tireless and collaborative, and rep-
resent the best of a whole-of-government response to this massive
theft of taxpayer funds.
Now, let me raise awareness of the fraud landscape before us,
and why it is vital that the statute of limitations is extended to
close the disparity between the 10-year bank fraud statute of limi-
tations, and fraud that is committed against non-banking institu-
tions, such as SBA. The House took action last week to pass such
measures. EIDL loans were provided a 30-month deferment period
for the first payment, with the program just closing a couple weeks
ago.
History tells us that the fraud fully reveals itself when loans
begin to default. Given we already have brought wrongdoers to jus-
tice associated with hundreds of millions of dollars in fraud, and
we have identified tens of billions of potential fraud as being
prioritized, there simply must be more time made available in the
interest of justice to the taxpayer.
We similarly are faced with a wave of fraud to be fully realized
in PPP. Already, over 66,000 loans have defaulted where SBA paid
the 100 percent guarantee to the lenders in the amount of $3.7 bil-
lion. An additional 1.2 million PPP borrowers have not requested
loan forgiveness on a program designed to forgive their debt. Need-
less to say, these are highly suspicious loans and will require focus
and scrutiny.
The President has submitted a $10 million increase to my office’s
base operating budget in Fiscal Year 2023. This increase will posi-
tion my office to carry forward approximately just half of the staff
we on-boarded to provide oversight of SBA’s pandemic response,
the quid suggests 30 positions. It is vital that the President’s budg-
et is supported and that we consider the fraud landscape that I’ve
presented to you today. The Nation can depend on us to provide
independent, objective, and timely oversight of SBA as we have
demonstrated.
Thank you for the opportunity to speak to you today, and I’m
happy to answer any questions you may have of me.
Chairman CLYBURN. Thank you very much, Mr. Ware.
The Chair now recognizes Mr. Chambers for five minutes.
STATEMENT OF KEVIN CHAMBERS, DIRECTOR FOR COVID 19
FRAUD ENFORCEMENT, DEPARTMENT OF JUSTICE
Mr. CHAMBERS. Mr. Chairman, Ranking Member and members of
the committee, thank you for the invitation to meet with you today.
The Department fully shares your concern about pandemic-re-
lated fraud and is committed to doing all that it can do to vigor-
ously prosecute pandemic fraud, bring to bear all appropriate
criminal, civil, and administrative tools. This is not a new commit-
ment. The Department has been prosecuting pandemic-related
fraud since COVID–19 arrived on our shores. Since then, U.S. at-
torneys offices have criminally charged approximately 1,300 de-
fendants, and the criminal division fraud section has criminally

9
charged and prosecuted 220 defendants in pandemic-fraud-related
matters. These cases, most of which are still in progress, have in-
volved over $1.1 billion in lawsuits. Many more matters are in the
investigative stage.
As with our criminal matters, our civil attorneys have also been
hard at work. They’ve opened 300 civil investigations into over
2,300 individuals and entities for alleged misconduct in connection
with pandemic fraud. Now, all of our attorneys are working tire-
lessly on other not yet public matters not included in these totals,
but the resolved cases do exemplify the Department’s efforts.
In the western district of Washington, just to give one example,
prosecutors secured a guilty plea for a foreign national who used
the stolen identities of more than 20,000 Americans to file for more
than $2 million in government benefits across multiple states. This
is just one example of the many cases already resolved by the De-
partment.
We are proud of the work done so far, but it is no time to pat
ourselves on the back. As with any government relief program,
there were those here and abroad who saw pandemic relief as an
opportunity for personal enrichment. These thieves employed a
number of schemes to carry out their selfish ends. They purchased
stolen identities and filed for unemployment insurance relief bene-
fits, using bank accounts opened online to receive the funds and
money mules to help transfer the benefits overseas.
They created fake businesses and received funds in the names of
those imaginary companies. They used fishing scams to trick
unsuspecting citizens into downloading malware onto their com-
puters and used that malware to steal personal and financial infor-
mation. Criminals have worked together in loose, online networks
using encrypted messaging applications to coordinate schemes to
file for SBA loans and unemployment insurance benefits. This is
not imaginary money.
Each dollar stolen was a dollar taken from a small restaurant
owner who wanted nothing more than to keep her staff on the pay-
roll, or taken from suddenly unemployed parents who needed help
feeding their families. Each dollar stolen could have been used to
obtain protective gear, COVID tests or other scarce resources. In-
stead, the stolen money was diverted into the hands of criminals.
As we approach the next phase of our enforcement work, we will
focus on data. Indeed, we will start with the data, and there is
plenty of it. For each fraudulent application, someone provided a
name, a mailing, email, or IP address, a bank account or other
data. Through use of advanced analytical tools, we will continue to
identify patterns and trends that will lead us to those who put
themselves above the safety and security of the American people,
and we will be bringing all of our tools to this fight.
We will deploy skilled, dedicated prosecutors across the Depart-
ment to lead the effort to prosecute these cases. And dedicated ana-
lysts will pour through millions of pieces of data to create the leads
that will result in investigations and ultimately convictions. We are
supported by investigators from across the Federal Government
who have committed resources to assist.

10
And I would like to thank the other witnesses at the table today,
all of whom have lent their support and commitment. I appreciate
their partnership.
Like the relief and like the fraud, our response must be unprece-
dented. The enormous amount of data and the years of work ahead
will require significant resources. The President’s 2022 budget
sought $41.2 million for COVID fraud enforcement efforts. Unfortu-
nately, that amount was not approved by Congress. The President’s
2023 budget contains the same request. These resources will speed
our data analysis and our identification of fraudulent schemes, and
that will increase our ability to bring people to justice and recover
funds.
And our experience so far shows a tremendous return on invest-
ment when it comes to resources committed to COVID–19 fraud en-
forcement. So, we ask for your continued support to properly staff
this effort with the agents, analysts and prosecutors needed to
bring these criminals to justice, and to seize their ill-gotten gains.
Once again, thank you for attention to this matter and for your
support. I’m happy to answer any questions you may have. Thank
you.
Chairman CLYBURN. Thank you very much.
Mr. Dotson, you’re recognized for five minutes.
STATEMENT OF ROY D. DOTSON, JR., ACTING SPECIAL AGENT
IN CHARGE, NATIONAL PANDEMIC FRAUD RECOVERY COOR-
DINATOR, UNITED STATES SECRET SERVICE
Mr. DOTSON. Good morning, Chairman Clyburn, Ranking Mem-
ber Scalise, and distinguished members of the select subcommittee.
Thank you for the opportunity to appear before you today to dis-
cuss the ongoing efforts in the United States Secret Service to
counter cyber-enabled financial crimes targeting the Nation’s finan-
cial infrastructure, in particular COVID–19 fraud.
My name is Roy Dotson, and I’m assigned to the Secret Service
Office of Investigation as the national pandemic fraud recovery co-
ordinator. The operative word regarding the CARES Act was speed.
U.S. citizens were suffering from the effects of COVID–19 and
needed assistance. Unfortunately, fast money sometimes equals
fast crime, and fast crime requires an equally fast response by law
enforcement.
The CARES Act was signed into law March 27th, 2020, and by
the first week of May, the Secret Service was investigating cases
involving unemployment fraud. It quickly became apparent that or-
ganized groups, as well as individuals, were targeting the system’s
programs. Within weeks, the Secret Service partnered with the Fi-
nancial Crimes Enforcement Network, or FinCEN, to issue two
advisories alerting the financial sector to potential fraud.
We also mobilized our more than 160 offices and 44 cyber fraud
task forces to focus on these investigations. These task forces are
comprised of partners from the state, local partners, many of them
received training at our National Computer Forensic Institution, or
NCFI in Hoover, Alabama. In 2008, NCFI has trained more than
18,000 state, local, Tribal and territorial partners for more than
2,500 agencies throughout all 50 states, and five U.S. territories.
Those receiving NCFI training and Secret Service-issued cyber

11
equipment, have become essential in assisting their local commu-
nities in countering COVID–19 fraud.
Our success in launching quick and efficient investigations is
made possible by our partnerships maintained nationwide with
Federal, state, and local government entities, as well as the private
sector. In July 2020, the Secret Service partnered with the Depart-
ment of Labor Office of Inspector General to publish our first joint
advisory on pandemic fraud. This advisory was sent to nearly
30,000 financial institutions and outlined fraud indicators associ-
ated with pandemic-related schemes.
It requested those in the financial sector to work with the Secret
Service to identify suspected fraudulently obtained unemployment
benefits. The Secret Service also collaborated with Small Business
Administration Office of Inspector General, and the Pandemic Re-
sponse Accountability Committee to send out additional advisories
when Economic Injury Disaster Loan and paycheck protection loan
fraud was detected.
The Secret Service’s efforts to recover stolen assets and hold
criminals accountable will be ongoing for years. Countering this
fraud and ensuring the integrity of the Nation’s financial infra-
structure remains a core focus of the Secret Service’s investigative
work. Over the past 26 months, the Secret Service has observed a
clear evolution of the type of frauds being perpetrated.
These fraud schemes are not unfamiliar to the Secret Service.
Phishing campaigns have given way to nondelivery of fraudulent
goods and services, and those schemes have evolved into more so-
phisticated cyber crimes, such as ransomware attacks and business
email compromises. I would like to highlight the successful comple-
tion of the Secret Service’s investigation into a Michigan unemploy-
ment insurance fraud scheme.
In this case, a contract employee for the state of Michigan’s un-
employment insurance agency conspired with others to submit hun-
dreds of false unemployment insurance claims. Over the course of
the subject’s criminal activity in exchange for bribes, she released
payment on 700 fraudulent claims, resulting in the illegal disburse-
ment of more than $3.7 million. The joint Secret Service investiga-
tion with the Department of Labor and multiple other Federal and
state agencies epitomizes the outstanding teamwork across the law
enforcement community.
The subject has already been sentenced to 58 months in prison
and ordered to pay restitution in the amount of nearly $3.8 million.
While this one case represents a single example of the exceptional
work being done by the Secret Service and our partners to prevent
and combat fraud, I’m also able to report that we continue to see
mission successes emerge from hundreds of other investigative ef-
forts. To date, the Secret Service has initiated over 1,000 criminal
investigations in the pandemic relief crimes, seized over $1.26 bil-
lion, and prevented approximately $2.3 billion in fraud losses.
Chairman Clyburn, Ranking Member Scalise and distinguished
members of the select committee, thank you for your time. I am
honored to represent the dedicated professionals of the Secret Serv-
ice, and I look forward to your questions.
Chairman CLYBURN. Well, thank you very much. Let me thank
the entire panel, not just for your very substantive presentations

12
here today, but also for your very timely presentations. I don’t
know that we’ve had four members who stayed within the time al-
lotted. You’re to be congratulated. I suspect that comes from expe-
rience at this sort of thing. So, thank you so much.
Of course, each member will now have five minutes with which
to ask any questions that they may have.
And I’m going to begin with a question for you, Mr. Chambers.
You mentioned in your opening statement about the steps that
President Biden has taken in directing your work.
Can you give us a little thumbnail sketch, a little bit like we just
heard, of your work?
Mr. CHAMBERS. Sure. So, Mr. Chairman, I should start by saying
while I’m new to this role, this role is new. The work of the Depart-
ment has been ongoing for two years, again, right from the begin-
ning of the pandemic. The women and men of the Department in
our U.S. Attorney’s Office and Justice Departments components
were tasked with, on top of their already-full-capacity workloads,
taking on these new and often complex cases.
My role as Director of COVID–19 fraud enforcement is to en-
hance and supplement the work that they’ve been doing. I see my
role as involving three primary pillars. First is to act as point of
coordination across the Department of Justice with respect to the
code enforcement work that is going on in all our offices and at
Main Justice.
Second is to serve as a line of facilitation and communication.
Over the course of the past two years, each prosecution, each civil
case has brought new lessons to be learned. And those lessons are
ones that in my role I will share across the Department to make
sure that we are working as effectively and as efficiently as we pos-
sibly can.
Third, in my role, we will be focusing on particular types of
COVID fraud, and we will be focusing specifically on large-scale
COVID-related fraud perpetrated by criminal organizations and
foreign actors. We’ve seen some of this already in some of the cases
that have been resolved, deal with that type of fraud. We will be
in the not-too-distant future standing up strike teams in specifi-
cally selected locations that will be made up of dedicated prosecu-
tors, dedicated investigative agents, and dedicated analysts, who
will do nothing but prosecute that type of large-scale fraud that al-
lows us to develop an expertise and will allow our U.S. Attorney
Offices and Main Justice components to continue to do the good
work they’ve been doing.
Chairman CLYBURN. Well, thank you very much for that. While
I do not in any way condone the small actors, and I do consider
the case—the Michigan case that Mr. Dotson just mentioned to be
big by my estimations, but—by what we know to be taking place,
it’s kind of small. And so, I’m glad to see you are going to focus
on these organizations that seem to be perpetrating tremendous
fraud among the American people.
But the Biden administration has also prioritized other forms of
fraud, and the Democrats in the Congress assisted in that effort.
We assisted by appropriating $40 million in additional funds to the
PRAC as part of the American Rescue Plan. Now, if I might—if you

13
can see the graphic on the—on yesterday, select subcommittee—I
don’t—there it is.
Select subcommittee, 1,200 indictments resulting from OIG pan-
demic-related at the PRAC; 1,150 ongoing investigations in
COVID–19 EIDL; and PPP and unemployment. I don’t know if you
can see this, but 450 convictions.
Now, I would like to ask for unanimous consent that we enter
this into the record.
Chairman CLYBURN. Mr. Horowitz, can you please describe spe-
cific PRAC activities coordinating and supporting the efforts of
these Federal agencies, such as the initiative to provide detailees
and data science fellows to various offices of the Inspector Gen-
erals?
Mr. HOROWITZ. Certainly, Mr. Chairman.
You know, in the CARES Act, Congress gave us various hiring
authority, and we’ve used that successfully to bring on board a
number of data scientists. This is just one example of the work
we’ve done to collaborate across the Inspector General community.
And we’ve hired numerous data scientists and mathematicians and
statisticians from around the country with the authority you gave
us. And what we’ve been able to do is assign those data scientists
and fellows to IG offices throughout the community.
And so, we’ve already placed about 20 data scientists to help IG
offices look at data and find anomalies and find issues. Because, as
you indicated, one of the things we want to do at the PRAC, and
I know our member IGs want to do, I know Mr. Ware is trying to
do it as are others, we’re looking for the entire scope of the wrong-
doing. And the way you do that is to use data and to use analytics
and to see the thousands of applicants that use the same social se-
curity number to get unemployment benefits or PPP benefits or
EIDL benefits, the same telephone numbers that are used in thou-
sands of applications, the same drop boxes in terms of mailing ad-
dresses, social security numbers.
We have a project right now, we’ve identified well over a million
suspiciously used social security numbers for multiple applications,
and what we’re looking to do is to understand from the Social Secu-
rity Administration whether the Social Security numbers and
names on the applications match the Social Security numbers and
names the Social Security Administration has for the true owner
of those accounts. We’re looking at over 1 million of those in-
stances. So, we’re trying to use, on a large scale, data analytics to
address some of the issues you referenced.
Chairman CLYBURN. Thank you very much. I had to be the first
one to violate the five-minute rule here.
So, I’m now going to yield five minutes plus to Dr. Green.
Mr. GREEN. Mr. Chairman, I don’t think I’ll need it, but thank
you. You’re kind. Thank you, Chairman Clyburn, and Ranking
Member Scalise, and I want to thank our witnesses for being here
today. I really appreciate the work you’re doing. You know, when
people break the law, they should pay the price for it, especially
considering how hurting everyone was during this time.
On Friday, the Bureau of Labor Statistics released its latest up-
date on the inflation crisis, which continues to eat away at Ameri-
cans’ wallets. The Consumer Price Index rose to 8.6 percent in

14
May, the highest it’s been in four decades. Prices are up on every-
day goods and services across the board. Rent is up a record 11.3
percent over the last year. The price of groceries has increased by
nearly 12 percent, the largest increase since Jimmy Carter was
President.
Gas prices have more than doubled since President Biden took
office and launched a crusade against American energy production.
On Inauguration Day, gas averaged $2.39 a gallon. Now, for the
first time ever, the average price of a gallon of gasoline is over $5.
The cause is obvious. It’s what happens when the President decides
to decrease the volume of flow through our pipelines, suspend new
Federal oil and gas leases, and stifle producers with costly regula-
tions.
Core CPI, which excludes food and energy prices, is at six per-
cent, reflecting that inflationary pressures are straining all sectors
of the economy. Overall, the typical family is having to spend
around 450 more dollars per month just to buy the same things
they would have normally bought a year ago.
Real wages are falling in a way that we haven’t seen in 40 years.
This isn’t surprising. As much as President Biden tries to pin the
blame on everything but his own policies, his administration has
shown more willingness to negotiate with Iran and Venezuela than
our own domestic oil producers.
Speaker Pelosi and President’s Biden wasteful and completely
partisan $2 trillion stimulus package supercharged inflation,
pumping vast sums of Federal spending into the economy and re-
quiring more borrowing and money printing. At the time, many
warned that this sort of stimulus would come with a heavy price.
Now, even the liberal website, Vox, ran a piece last month ac-
knowledging, and I quote, ‘‘The Biden stimulus made the U.S. in-
flation problem even more severe,’’ end quote. The Biden stimulus
was the turning point that marked the beginning of the inflation
crisis, which is making it much more difficult for Americans to save
and make ends meet.
And a key part of that was the reckless extension of Federal un-
employment benefits where many people got paid more to stay at
home than to return to work. Now we know that a significant
amount of the unemployment money was subject to massive fraud,
with the Department of Labor’s Inspector General estimating that
at minimum, $163 billion worth of unemployment spending could
be attributed to fraud or improper payments out of the estimated
$872 billion that was spent out of pandemic unemployment pro-
grams. We’re talking about an improper payment rate approaching
20 percent. With hundreds of billions of taxpayer dollars flushed
down the drain, most of it gone forever. Hopefully not.
Agent Dotson, my first question is to you. In the course of your
investigations, have you seen that a significant amount of fraud,
you know, is committed by transnational or criminal organizations,
and if so, do you mind detailing a little bit about that?
Mr. DOTSON. Mr. Congressman, thank you for your question.
There’s no doubt that transnational and domestic organized
crime groups committed fraud during this pandemic benefit pro-
grams and across the board. And we look at these investigations,
you know, not to get back to Michigan, but nobody has to—you

15
don’t have to be a citizen of Michigan to apply for Michigan unem-
ployment assistance. So, anybody anywhere can apply, and took
that opportunity. We are definitely—we have several ongoing in-
vestigations that I can’t speak to today——
Mr. GREEN. Sure.
Mr. DOTSON [continuing]. that do involve transnational organized
groups. I can highlight one case that dealt with a west African or-
ganized crime group that we have dealt with for years basically
that commit all types of cyber crime, including ransomwares and
business email compromise. And of course, this was a crime of op-
portunity, so they took that opportunity. They committed pandemic
fraud, but they have been arrested, and they are currently being
prosecuted. That’s kind of the black ax group out of western Africa.
Mr. GREEN. Excellent.
Mr. DOTSON. We’ve had some success, and we will continue to
look no matter where they are. We are able to go worldwide, not
only, you know, here at the Secret Service, but with our partners.
We will turn over every stone, and we will go after if it’s an orga-
nized group, or if it’s somebody that’s committed substantial fraud.
Mr. GREEN. I will take grace you’ve given me, Mr. Chairman,
and ask one last question.
If you had to predict the amount domestic versus, you know,
transnational, what would be your predictions, any one of you, on
the fraud? You think it’s mostly domestic? Is it mostly foreign? Is
there an even mix? What’s the rough guess?
Mr. DOTSON. Well, Congressman, I can say that at this time,
we’re still—as my distinguished colleagues here said—still trying
to ascertain the amount of fraud that’s occurred, and who’s com-
mitted that. To give those numbers wouldn’t be proper at this time.
Mr. GREEN. Fair enough.
Mr. DOTSON. I would say that it’s a combination.
Mr. GREEN. Well, again, let me reiterate my thanks to the hard
work that you’re doing trying to dig that out. Thank you.
Did you want to say something, sir?
Chairman CLYBURN. Are you asking in terms of volume?
Mr. GREEN. Yes.
Chairman CLYBURN. Or amount of money?
Mr. GREEN. Amount of money, actually. Yes.
Mr. WARE. We have—my office, as the Office of Inspector Gen-
eral, has a report that will be out shortly within probably the next
30 days or so that speaks to this. We have a report coming out on
foreign IP addressees that will tell a good part of the story of what
happened.
Mr. GREEN. Excellent. Thank you. Very good.
Mr. HOROWITZ. If I could just add, because it relates to legisla-
tion the House passed that the Chairman mentioned—that the
House passed last week, the bipartisan legislation to extend statute
of limitations. The challenge at this point of estimating it is finding
domestic fraud is a lot easier early on than finding the overseas
fraud.
Mr. GREEN. Sure.
Mr. HOROWITZ. We have to go through not only all of the re-
source issues that come with figuring out what happened from
overseas, but also from an investigative standpoint, we need ap-

16
proval to go get the information from overseas, and it highlights
the importance of having more than the five years the statute of
limitations currently is.
The statute of limitations that the House passed extends PPP
and EIDL fraud to 10 years, lining it up with bank fraud, which
Congress passed back when the S&L crisis hit 40 years ago or so,
for good reason back then. It needs to happen now. Hopefully the
Senate will pass it. Appreciate the House doing so already.
Mr. GREEN. Thank you.
Thank you, Mr. Chairman
Chairman CLYBURN. Thank you.
Thanks to this immediate past action and the work of Dr. Green
and Mr. Foster, this subcommittee has operated in a bipartisan
way to effectuate those kinds of results. So, thank you. You
thought I wasn’t watching, but I’ve been watching. Thank you,
guys.
Now, we’re going to go a little bit out of order, because of the
schedule of one of our members and, with the acquiescence of Mrs.
Maloney, the chair will now recognize Mr. Krishnamoorthi for five
minutes.
Mr. KRISHNAMOORTHI. Thank you so much, Mr. Chair, and thank
you for accommodating——
Mrs. MALONEY. Thank you, Mr. Chairman. Small business——
Chairman
CLYBURN.
The
chair
is
now
recognizing
Mr.
Krishnamoorthi. And I understood, Mrs. Maloney, that you had
agreed for me to go out of order.
Mrs. MALONEY. OK. All right. Whatever. Whatever works, Mr.
Chairman.
Chairman CLYBURN. Thank you. Mr. Krishnamoorthi.
Mr. KRISHNAMOORTHI. Thank you, Mr. Chair.
Thank you, Madam Chair Maloney, for accommodating my hear-
ing that’s happening in another committee simultaneously.
First of all, the select subcommittee released a new report today
revealing the Trump administration’s shocking failures to protect
critical pandemic relief funds from fraud.
The committee’s analysis and this document right here, which we
just released today—I think it’s going up—basically shows that 98
percent of DOJ’s prosecutions of fraud against the EIDL program
involved fraudulent applications submitted during the Trump ad-
ministration. Here’s actually one example why, and there’s a
graphic showing basically some guidance that the Trump adminis-
tration had given to officers at the SBA with regard to EIDL loans.
The select subcommittee found that under the Trump adminis-
tration, loan reviewers at the SBA were directed to approve appli-
cations for the EIDL program even when they had red flags that
indicated potential identity theft.
Inspector General Ware, your office has specifically investigated
identity theft fraud committed against the EIDL program through
January 2021. Isn’t that right?
Mr. WARE. That is correct.
Mr. KRISHNAMOORTHI. Did the choice to approve applications for
the EIDL program despite red flags indicating potential identity
theft increase the likelihood of fraud?

17
Mr. WARE. Well, thank you for your question. The work that we
are doing in this regard is ongoing. What we did—so we have not
fully completed that work within my office.
Mr. KRISHNAMOORTHI. I understand, but I guess my question is
this: Would approving EIDL program loans despite red flags with
regard to identity theft increase the likelihood of fraud?
Mr. WARE. Yes, it would. I believe that we did have a report that
asked them to flag items such as that. It gave them specifically
which ones we asked them to flag, and we also asked them to set
up a system where you could clear a flag if it was, indeed, a reason
for something happening.
Mr. KRISHNAMOORTHI. Right. And prior to the pandemic, SBA ac-
tually had a, quote, ‘‘rule of two control,’’ close quote, rule of two,
where basically two SBA employees would review and approve a
loan application, but the SBA OIG reported that this control was
abandoned for EIDL loans related to the pandemic.
Mr. Ware, did the choice to abandon the rule of two control for
the EIDL program increase the likelihood of fraud? I presume it
did.
Mr. WARE. Yes, it did.
Mr. KRISHNAMOORTHI. Whenever you dispense with a require-
ment that two people, you know, basically act as a check on fraud,
well, you’re going to have more fraud, and that was predictable.
Now, let me ask you this: Mr. Horowitz, from your work with
partners across the government, do you believe that EIDL and
other vital programs could have delivered quick relief while doing
a better job of preventing fraud?
Mr. HOROWITZ. Congressman, I think that is correct. What—the
challenge here in any program, particularly in a national emer-
gency that we’re facing, is speed versus proper payments and con-
trols. And what we saw here early on for several programs, includ-
ing PPP and EIDL, was that speed overrode any controls whatso-
ever.
And, so, having simply a situation where you’re requiring self-
certification and nothing more is an invitation to fraudsters to
come in and try and obtain benefits they shouldn’t otherwise get.
As Mr. Ware has reported, I think it was 57,000 applications in
PPP were individual—were for applicants who are on the Do Not
Pay List involving several billions of dollars. Well, that Do Not Pay
List is sitting in the Treasury Department. It doesn’t take a lot of
time to compare that data with the applications. So——
Mr. KRISHNAMOORTHI. And can you just tell us, do you know
what were among the biggest loans among those 57,000?
Mr. HOROWITZ. Mr. Ware.
Mr. WARE. I don’t have that—unfortunately, I don’t have that re-
port in front of me currently, so I can’t speak specifically to what
the biggest loans were, but any of them would have been an issue.
Mr. KRISHNAMOORTHI. And how much fraud are we talking about
just in those loans?
Mr. WARE. $3.6 billion.
Mr. KRISHNAMOORTHI. Yes, that’s a lot of money. Thank you so
much for your time.
Chairman CLYBURN. Thank you very much.
The chair now recognizes Dr. Miller-Meeks for five minutes.

18
Mrs. MILLER-MEEKS. Thank you, Mr. Chair.
And I’d like to thank all of our witnesses for taking time to come
and testify before the committee today. And I want to say for the
companies, the businesses, the employers in my district in Iowa,
the Second District of Iowa, they were tremendously appreciative
when the government closed down their businesses, and their busi-
ness had the potential to fail and never come back, not from their
own poor planning or poor execution or poor savings, but because
the government shut them down, they were tremendously appre-
ciative of the PPP program, how it was administered, that it was
administered through their local banks. And it was what helped to
save them through the pandemic and to come back and to be part
of the strong economy in Iowa today.
So, I’d like to take a brief moment to discuss the actual rates of
fraud in the programs we’re discussing today.
So, Mr. Ware, what was the fraud rate in the PPP program?
Mr. WARE. Thank you for your question. The fraud rate in the
PPP program is not something that we have calculated yet. What
you saw at the onset was a report that raised immediate awareness
that we had an issue, and that was where the 4.6-, $4.7 billion
came from in PPP.
Once we identified that we had issues, we pivoted into making
SBA raise the controls in order to prevent more up front, because
we realized the pay and chase model that would be necessary after-
ward would not be effective. So, we spun into identifying real
fraud, in terms of our casework and everything else.
I said earlier that we’re nowhere near understanding what the
full amount is.
Mrs. MILLER-MEEKS. I thought the fraud rate was 0.6 percent.
That was my understanding. So, I could see that you put in road-
blocks and guardrails.
Are you aware of the improper payment estimates for the pan-
demic unemployment insurance program?
Mr. WARE. Yes, I do. Yes, I am.
Mrs. MILLER-MEEKS. And what’s the rate there?
Mr. WARE. The rate there is like 18-point-something percent,
but——
Mrs. MILLER-MEEKS. 18.71 percent. So, 0.6 percent versus 18.71
percent. According to the Department of Labor Inspector General,
this means that if you use the estimated $872.5 billion in pandemic
unemployment insurance payments, at least $163 billion in pan-
demic UI payment benefits could have been paid improperly, with
a significant portion attributable to fraud.
Some of the states have reported on unemployment fraud, and
it’s jarring the amounts we’re talking about. For example, one man
filed for unemployment in 40 states and received more than
$222,000.
Even more jarring are the investigations that have found a sub-
stantial amount of this fraud can be attributed to organized crime,
including reports of up to 70 percent of the fraudulent money
ended up in the hands of Russian, Chinese, and Nigerian nationals.
So, what we’ve seen perpetrated on the Federal level is now the
same criminal organizations targeting state governments and state
benefit programs.

19
Mr. Dotson, I’d like to ask you to discuss, from your perspective,
what has been done and what can be done to combat this
transnational criminal fraud now and in the future, knowing that
it’s targeted these Federal programs and is looking at state pro-
grams, where they may not have substantial guardrails?
Mr. DOTSON. Yes, Congresswoman. Thank you for your question.
Obviously, the Secret Service and our Cyber Fraud Task Forces
regularly work transnational crime. And so, this is nothing new to
us. We are financial-crimes investigating experts.
So, when we work these cases annually, we’re kind of used to fol-
lowing the trail, the money trail. So, we will follow that. We will
continue to do that. We have some great relationships internation-
ally with numerous countries that allow us to partner with them
and identify transnational organized groups.
And, as I said earlier, we have several investigations, you know,
hundreds of investigations that involve transnational organized
groups that I just can’t talk to today, but I hope to at a later time
bring more information to this committee.
So, we will continue to follow that money, recover as much as we
can for the U.S. taxpayer, and bring those that have committed
this fraud to justice as best we can.
Mrs. MILLER-MEEKS. And is there work with the technical assist-
ance or training for states, especially where they interface with the
Federal Government?
Mr. DOTSON. Yes, ma’am. So, I talked about, earlier, our Na-
tional Computer Forensics Institute in Hoover, Alabama. You
know, countless Federal, state, and local partners, primarily state
and local partners, have received specialized training there, you
know, technical training that includes for our forensic examiners.
They are also issued special equipment in order to do those exami-
nations.
And it is such a great force multiplier for the Secret Service. It
gives us additional thousands of extra investigators, detectives
from our state and local departments that we can equip, and then
have them focus on these investigations along with us.
Mrs. MILLER-MEEKS. Thank you very much. I yield back my
time.
Chairman CLYBURN. Thank you very much.
The chair now recognizes Mrs. Maloney for five minutes.
Mrs. MALONEY. Thank you, Mr. Chairman, for your leadership
and for this hearing.
Small Business Administration relief programs were vital to
keeping local business open in New York City, which, as you know,
was hit early. We were the epicenter of the whole epidemic and the
pandemic.
And, unfortunately, the report released by the select sub-
committee today shows that significant fraud occurred in Small
Business Administration relief programs under the former Trump
administration because of failures to implement even the most
basic fraud prevention safeguards. And it is disheartening to learn
the extent to which identity theft harmed many of our most vulner-
able residents.
Thankfully, the Biden administration has prioritized a whole-of-
government approach to combating pandemic relief fraud, and the

20
SBA has introduced new controls to ensure funds go to the in-
tended recipients.
So, my first question is to Mr. Ware: Can you describe SBA’s ef-
forts over the past year to prevent fraud in the Economic Injury
Disaster Loan program?
Mr. WARE. Thank you for your question. Yes, I can. It’s impor-
tant for me to state that the efforts to raise the controls that were
lowered is not really an administration thing from one to the next.
This was an ongoing situation, which is why it’s important for me
to at some point address this point. Six percent, that’s not an accu-
rate portrayal of the improper payment rate.
What happened is that we pivoted to making sure that the con-
trol environment was strengthened from the very beginning. And
the December report that I put out was to address the serious con-
cerns to lift the control environment. So, things started to change
from that point, dealing with requiring—like checking the Do Not
Pay List, not allowing folks to change the bank routing information
after loan approval, starting with the rule of two again.
Raising all these type of controls was something that took some
time, unfortunately, but started and continued to where we are
today, where we have a much stronger controlled environment.
Mrs. MALONEY. Thank you. Uncovering and prosecuting fraud
that has already occurred in pandemic relief programs is vital, and
requires close collaboration across Federal agencies.
Mr. Horowitz, how do different entities, such as Inspectors Gen-
eral and the Secret Service, work together to get cases to the De-
partment of Justice for prosecution, and why is this collaboration
so important?
Mr. HOROWITZ. Thank you, Congresswoman. It’s critical to this
effort, and what we’ve done is we’ve created at the PRAC our own
task force to bring together—law enforcement task force, to bring
together the law enforcement community within the IG community
to partner with the Secret Service, the FBI, others in Federal law
enforcement, so that we can share the expertise we each have in
these areas.
We each bring unique abilities to these efforts. The SBA IG
agents, for example, have tremendous expertise in PPP, EIDL, and
related program fraud issues. The Labor IG has that with regard
to unemployment insurance. And it’s critical that we do that.
We are having IG offices—my own office has had agents volun-
teer and contribute to this effort, and we’ve had a great partner-
ship with the Department and been a critical part, I think, of their
task force as well as we’ve brought them these cases.
We are all committed to making sure that we use every single
available tool to not only hold individuals and entities accountable
for fraud and wrongdoing, but to ensure we are recovering every
single penny for the taxpayers. That’s our responsibility and our
goal.
Mrs. MALONEY. Thank you.
Finally, there’s bipartisan legislation now being considered by
the House that would extend the statute of limitations on the Pay-
check Protection Program and Economic Injury Disaster Loan pro-
gram fraud for 10 years.

21
My final question, Mr. Chambers: Mr. Chambers, would it be
helpful for Congress to extend the statute of limitations on pan-
demic relief fraud so that DOJ can hold all those who committed
fraud accountable?
Mr. CHAMBERS. Thank you for the question, Congresswoman. Not
only would it be helpful, it is near essential. With the amount of
relief that was provided and the amount of potential fraud, there
is an incredible volume of cases in the hopper and an incredible
volume of cases yet to come.
As you all know, cases, particularly the ones that are more com-
plex, take time. And with the greater volume, that means less time
per case. To the extent that Congress can help to get the statute
of limitations extended, it would be appropriate and, again, not
only helpful, but essential.
Mrs. MALONEY. Well, I just want to say that Congress needs to
help law enforcement and ensure that law enforcement has strong
tools to prosecute pandemic fraud, so that small business owners
and working families in the U.S. can get crucial relief without be-
coming victims of fraud. I want to thank all the panelists and the
chairman and ranking member.
I yield back. Thank you.
Chairman CLYBURN. Thank you very much.
The chair now recognizes Mr. Foster for five minutes.
Mr. FOSTER. Thank you, Mr. Chair, and thank you to our wit-
nesses.
I’ve been struck in all of your testimony how central identity
fraud and particularly online identify fraud is to the money that
the taxpayers lost on this.
Am I correct that the large-scale criminal gangs are essentially
operating 100 percent using online identify fraud? Is that an essen-
tial part of these large-scale things? They’re not having people
show up in person at an office and collecting things. Mr. Dotson.
Mr. DOTSON. Congressman Foster, yes, that’s a great question.
Yes, for the majority of the cases that we investigate, that’s what
we see. You know, it was basically an online application and the
use of other people’s identity. Particularly, I would say, in the un-
employment area, unemployment insurance fraud, we saw a lot of
identity theft.
Mr. FOSTER. And in terms of something where someone has to
show up in person, I believe that we have a good tool to prevent
identity fraud there in the form of the REAL ID-compliant ID card,
which I think will be required, for example, to get on airplanes
next May, something like that. So, that that will be—you know, for
non-online identity fraud, that will be a really pretty solid tool for
citizens to—are there—do you pretty much concur that that’s going
to make it much more difficult to present multiple fake identities
in an in-person environment?
Mr. DOTSON. Yes, sir. Any time someone has to present real iden-
tification, it’s going to eliminate a lot of fraud.
Mr. FOSTER. OK. Then, so, we’re left pretty much with the online
aspect. And there’s a very powerful tool that’s now actually being
rolled out in a number of states, these so-called Mobile IDs, some-
times digital driver’s licenses, that essentially associate a REAL
ID-compliant driver’s license or ID with a cell phone.

22
And a modern cell phone has the ability to identity itself as a
single traceable device, so that you can use it to assert your iden-
tity online and prove that you are who you say you are, that you
own not only a REAL ID-compliant driver’s license, but one that
is associated with the cell phone that it was registered with. And
then so what that allows you to do is to pretty much prove you are
who you say you are.
Now, if we had such a system in place where that was the stand-
ard for applying for any kind of Federal benefit, you know, get out
your cell phone, convince your cell phone that—you know, log into
your cell phone, let your cell phone prove it’s the one associated
with the digital—with the REAL ID-compliant driver’s license,
would that largely have short-circuited all of the fraud that we’ve
seen with identity fraud?
Mr. DOTSON. It would definitely have limited some, but I will
say—you know, any time you put in an extra level of identification,
it’s going to benefit the program. It’s going to eliminate some fraud.
By far, it will not eliminate all of the fraud. Our, you know—our
complex criminals are ever-evolving, just like we are, investiga-
tions, trying to circumvent different parameters that are set, par-
ticularly in identification and their identity online.
So, there will always be an issue there that we’ll be fighting just
because it is online. But yes, sir, in short, it would help eliminate
some fraud.
Mr. FOSTER. And there seems to be a difference between the sort
of fraud that the SBA was seeing where these were like real people
with fake businesses versus—or were these largely fake people that
didn’t exist or you’re stealing someone else’s ID?
Mr. WARE. All of the above. So, we had quite a bit with busi-
nesses that existed but didn’t have the number of employees that
they said they had, businesses that started way after the date that
you were eligible to be started but still got through. And then we
saw some that were just fake altogether, and tons of identity theft
as well within the SBA’s programs.
Mr. FOSTER. And that’s why looking at, for example, tax data is
the way to find out the business doesn’t really exist.
Mr. WARE. That’s one of the ways, but that was something that
was not done in this instance.
Mr. FOSTER. Were there legal impediments or just it was too
much volume of things to approve?
Mr. WARE. There were legal impediments. The Act, in essence,
said that they couldn’t do that.
Mr. FOSTER. OK. If you could get us a little more detail on that
for the record, I would be very interested, because that sounded
like we were shooting ourselves in the foot in terms of eliminating
that kind of fraud.
I’d like to also point out that there is an Act that I am spon-
soring called the Improving Digital Identity Act of 2021. It’s co-
sponsored by myself, Ranking Member Katko of the House Home-
land Security Committee, Congressmen Langevin and Loudermilk.
And what this does is it encourages the government, all agencies
to get together and come up with a standardized way of proving
you are who you say you are when you’re applying for a Federal
benefit or other purpose, with I believe the idea in most people’s

23
mind that that would be the NIST standard for mobile ID associ-
ated with a REAL ID-compliant ID.
And so I’d be interested in your reaction. You can respond for the
record to see if that would be a useful step forward here, because
I’ll be asking that again for the record.
And my time is up, and I will yield back.
Chairman CLYBURN. Thank you very much, Mr. Foster.
The chair now recognizes Ms. Malliotakis for five minutes.
Ms. MALLIOTAKIS. Thank you, Mr. Chairman.
Thank you all for your testimony today and for being here. I
think it is a very important topic that should have been probably
done before issuing another $1.9 trillion in the COVID package last
year.
I wanted to followup on some of the questions that were raised
regarding the estimated 400 billion that was believed to have been
stolen from the 900 billion COVID unemployment relief program.
NBC had reported that at least half of that money was taken by
international fraudsters. You alluded to some of the investigations
that have been taking place.
How much of that funding has the United States been able to re-
cover for the taxpayers?
Mr. DOTSON. Well, ma’am, again, as far as numbers, you know,
I know we’ve recovered about $1.26 billion, that there’s a slight
amount there that it’s international, but the majority of that is do-
mestic.
We continue to investigate those cases that involve transnational
organized groups and the funds they stole, and we will followup.
And anything we can recover, we will recover. Obviously, when it
leaves the United States and goes international, it makes our job
tougher to recover funds.
Ms. MALLIOTAKIS. The 1.26, that is—what is the latest estimate
that has been stolen? Is it still $400 billion or is it more than that
overall, not just internationally, domestically as well?
Mr. DOTSON. Well, I just have to say, as many of us have stated,
we have no idea the actual fraud amount. We know it’s substantial.
We just—those analyses are still ongoing, and I think we hope to
have those numbers.
Ms. MALLIOTAKIS. Now, there’s been minimal efforts to review
state eligibility determinations, which were the most common
cause of the unemployment fraud.
Do you have any recommendations for how the Federal Govern-
ment can better ensure that these funds are used appropriately?
Would it be feasible for the Federal Government to audit funds
that we give to states or municipalities let’s say of a million or
more to try to ensure that their process is appropriate to ensure
that the funds are going for their intended purpose?
Mr. HOROWITZ. Certainly, Congresswoman, the oversight effort of
following Federal funds is something that we all do as Inspectors
General. It’s something that’s very important to do.
And I know from talking with the IG at the Labor Department
how much of a challenge it’s been because of the decentralized na-
ture of the unemployment insurance system that has been set up,
created by Congress and through administrative actions over long
periods of time.

24
And the importance of reforming those, I think, is something
that’s very worthwhile and significant that we’ve seen here the
need to do.
Ms. MALLIOTAKIS. I want to thank you all for the work that you
do, because I think it’s incredibly important that we get to the bot-
tom, and also learn from the process, how do we fix it? Because too
much money is being wasted when people are truly in need of it
or programs are truly in need of it.
New York, California, Illinois, it was reported that there were
among—there were 12 states that used COVID relief money that
was supposed to be used to reopen schools and that it somehow
shifted to equity, implicit bias training, critical race theory.
What are—are you aware of that, No. 1? No. 2, any other egre-
gious examples of how funds were used by municipalities or states
not for their intended purpose?
Mr. HOROWITZ. I have seen the reports on that, but I’ll just say,
this is an area, where I mentioned earlier, data gaps and data chal-
lenges exist for us. We’re still waiting for a fair amount of data.
This has been going on since 2020, over two-plus years.
Agencies need to do a better job of getting data to the public. The
public has a right to know where the money went. We’ve issued re-
ports in 2020 and 2021 about those gaps, about information being
listed. Thousands of grants, for example, going out where we can’t
make heads or tails, let alone the public, of who were the end—
where did that money ultimately go? And that’s something that I
think needs to be looked at as well.
Ms. MALLIOTAKIS. And when you say agencies, Federal agencies,
state agencies, or both?
Mr. HOROWITZ. Federal agencies I’m now talking about. And this
has been a long-time issue. Comptroller General Gene Dodaro has
testified about this many, many times I know. We’ve talked about
as well, the importance of data and data accuracy. Congress made
an important step forward with the DATA Act several years ago,
but there’s certainly more work to be done.
Ms. MALLIOTAKIS. Well, again, thank you for your work. I think
we need to make sure that you guys have the resources to do your
job to make sure that taxpayers’ money is protected and used for
their intended purpose.
Thank you, Mr. Chairman.
Chairman CLYBURN. Thank you.
The chair now recognizes Mr. Raskin for five minutes.
Mr. RASKIN. Mr. Chairman, thank you very much.
Which one of you talked about the conflict or the tension between
speed and accuracy? You did, Mr. Horowitz. And I get that, and I
remember clearly that when we were doing, you know, the EIDL
program or doing PPP our constituents were desperate to get the
money, legitimately desperate. But then, as you suggest, we’ve got
criminals waiting in the wings to rip off the program.
So, when we did this and we created it under the Trump admin-
istration, what controls and regulations were put into place to
make sure that transnational criminals and other thieves weren’t
ripping off the taxpayers?
Mr. HOROWITZ. So, the problem at the outset was that, you know,
for example, the PPP program, about $400 billion went out in two

25
weeks out of an $800-billion program, relying essentially only on
self-certification. And so, we had 57,000 PPP loans be approved for
entities/individuals who were on the Treasury Department’s and
other agencies’ Do Not Pay List. No one checked.
So, what I’ve said is, you need—I understand completely the
need for speed. No one is suggesting in the IG community, the
oversight community, you wait weeks or months. I just think there
were several steps that could have been taken that easily match
some existing data, basic checks that could have prevented some of
the fraud.
Because, you know, all the data shows that if you put a road-
block in front of a fraudster in the first instance, they usually won’t
come back and try another door. Now, that may not be true for
some of the more sophisticated actors, but the goal is to stop as
much of the fraud as possible.
Mr. RASKIN. Right. I mean, I just find it outrageous. I under-
stand that there was huge need and so on, but the failure to insti-
tute the most simple mechanisms of accuracy to check where the
money is going is just indefensible.
And, you know, we don’t want to act with speed in getting money
to the wrong people, to criminals. And I certainly have a lot of con-
stituents who were legitimately in line to get it who never got it.
And then to hear that there are other people who are getting it
who are just ripping off the system is just—to me, it’s appalling.
Well, Mr.—yes.
Mr. HOROWITZ. I was just going to say can I add also——
Mr. RASKIN. Yes.
Mr. HOROWITZ [continuing]. what people don’t tend to focus on is
identity theft, not only how it rips off the program and it depletes
the program from helping people it was intended for, but we’ve now
heard of instances where the people who were intended bene-
ficiaries, when they tried to show up for the benefit, couldn’t get
it.
Mr. RASKIN. Oh, I had a bunch of constituents like that.
Mr. HOROWITZ. They thought they were the fraudsters.
Mr. RASKIN. I had a number of constituents who said, I applied
and they said I’d already gotten—I’d already gotten my money.
So, you know, the greatest country on earth can do better than
this in distributing a huge amount of money. I hope, Mr. Horowitz,
that we’ve learned our lessons for the next crisis. There’s going to
be another crisis in the history of the United States, so I hope
we’ve learned our lesson and we’re going to institute some real
mechanisms of control.
Mr. Ware, I understand your office got $25 million in the Amer-
ican Rescue Plan to combat waste and misdirection, fraud and cor-
ruption in the process. How are you using that money to inves-
tigate fraud, and to improve the underlying SBA program?
Mr. WARE. Well, thank you very much for the question. At the
onset, setting up these controls exactly like you are talking about,
we were the first in the oversight committee to—I mean commu-
nity to put out a report on pandemic-related fraud and issues that
were happening. We had three reports out before the first loan
went through the door asking for these controls to be raised.

26
We were first in the Nation to make an arrest on PPP fraud. We
staffed up our office utilizing that money. To date, we have, what,
over 300—over 300 arrests, close to 400, as a matter of fact—con-
victions and—that we have taken a part on. We joined every single
task force. We’ve returned over $1 billion in funds and helped SBA
to recover another $3.1 billion, and that number is growing.
Mr. RASKIN. Well, that’s great to hear. And it’s obviously a
shrewd investment and payoff for us to do it.
Mr. Horowitz, are there additional resources that are needed to
identify and combat fraud in the pandemic relief programs, know-
ing that we’re going to get a lot more money back if we do the job
right?
Mr. HOROWITZ. Congressman, there absolutely are. I think one of
the things that has been frustrating, frankly, through the various
appropriation processes that I know for—not for the PRAC specifi-
cally but for the IG members, like IG Ware’s office, the Labor IG
office, other IGs, has been the lack of followup funding and the fact
that the emergency funding, which was obviously not an annual
appropriation, required the IGs to make now decisions on do we cut
back on employees right as—I can tell you the fraud numbers and
the investigative work is growing.
The recoveries, by any measure, if you want to look at return on
investment, any measure of return on investment will show that
taxpayers benefit by multiples, 14, 15, even more than that per-
cent—times the money invested in IG work.
I just hope the Congress in their—in looking at the appropriation
process considers not for our office, the PRAC, but for the IGs that
are doing this work, for the law enforcement agencies that are
doing this work, that effort.
And for the PRAC, I’ll just make one observation, which is we’ve
set up this data analytics effort at the PRAC. We’re identifying
fraud. Analytics work is the only way you can figure this out with
$5 trillion in money going out the door.
During the Recovery Act in 2009, Congress created the Oversight
Board then. It created a data analytics platform. It sunset in 2015.
The administration, Congress, and the Treasury Department,
which ultimately got that data analytics platform, decided not to
keep it.
To your point, five years later, here we were with no analytics
platform in the IG community and we had to start from scratch.
Congress appropriated in the American Rescue Plan $40 million to
us to startup what had sunset in 2015.
And you are exactly right, we will have more earthquakes, hurri-
canes, fires, other, unfortunately, disasters, hopefully no more
pandemics. But as we all know, all of those happen. We need those
tools. We’re talking to the—on the Senate side, after the last hear-
ing we had there in March, they’ve followed up with us about ex-
tending this analytics platform. We’re engaged in those discussions.
Gene Dodaro the Comptroller General, is very supportive of that.
And that’s something I think is also very important.
Mr. RASKIN. Thank you, Mr. Chairman. Thank you. I yield back.
Chairman CLYBURN. Thank you very much.
Now, we were noticed that there would be time for a second
round of questions, and we are going to allow that at this time.

27
Now, as we go to a second round, the chair is going to recognize
himself for a second round. I am particularly interested in the last
issue raised by Mr. Raskin, not just for any future pandemics, but
I come from a part of the country where we’ve experienced similar
fraudulent activity relating to hurricanes and the kind of disaster
relief that has gone out, not just to do—for the families involved,
but the people who—the fly by-night organizations that step up
and all of a sudden they’re big-time contractors and they’re getting
all kinds of money.
Now, I seem to recall—in fact, in the report that we’re releasing
today, we are dealing with this issue where the SBA Office of the
Inspector General, as you just noted, said that the SBA failed to
use sufficient controls to prevent PPP fraud, and quoting from your
report, lowered the guardrails in the EIDL program, significantly
increasing fraud vulnerabilities. I mean, after you all identified
there’s a problem here, the guardrails were lowered and increased
vulnerabilities.
Now, that doesn’t sound like anybody is trying to prevent fraud
and abuse and protecting the additional money that’s going to
come. That sounds like somebody is trying to make it easier for
these criminals to get at the money in the first place.
And when you order people to put the money out, when there are
red flags saying this looked like a crook, and you had no ability to
stop it, I want you to speak to that, Mr. Ware.
Mr. WARE. Thanks. Initially, like Mr. Horowitz spoke about,
there was a huge struggle between the need for speed versus the
need for control. I’m at the table screaming for the need for control
after identifying that we have major issues. Each one of the flags
that I raised were met with, but there could be a reason for that.
So, I raise another flag. There could be a reason for that. Another
flag.
And then I said, aha, but all these flags come together in one cir-
cle. So, it’s just not one instance with an illogical Social Security
number, or that the bank account was changed at the end or an
illogical email or hundreds if not thousands of loans from the same
IP address.
Again, the need for speed, thinking that these flags and them not
having sufficient resources to clear the flags would be a hindrance
for speed, that was the issue that the agency was faced with up
front, initially. Beginning in December of that year, of 2020, finally
came to the realization that we have a large enough problem that
the controls have to be raised once again.
Chairman CLYBURN. It’s one thing to have a need for speed. It’s
something else to use the need for speed as a subterfuge for getting
money out of the door to people known to be criminals, or felt to
be criminals. Lowering the guardrails has got nothing to do with
speed. That sounds more like convenience.
With that, I’ll yield five minutes to Ms. Malliotakis, if you would
like to.
Ms. MALLIOTAKIS. Just to followup on the questions, I know I
talked a lot about the international fraudsters. Domestically, can
you talk a little bit about some of the cases that—where there have
been arrests that you can speak about, and what is the responsi-
bility of the states in these cases? Because, again, the UI criteria

28
was usually established by the state, right? So, they bear some re-
sponsibility here. And are you getting cooperation from local au-
thorities?
Mr. CHAMBERS. Congresswoman, thank you for that question. As
you point out, the UI programs are, in the first instance, adminis-
tered by the State Workforce Agencies. They, during the pandemic,
took the first role in distributing funds.
As part of our work to combat that fraud, we have relied on the
State Workforce Agencies to provide the data that applicants gave
them when they applied for unemployment insurance. And that’s
the data that’s going to lead to prosecutions, and, eventually, con-
victions.
I’m happy to say that we have data from all 50 states at this
point, the data is coming in, as well as from all territories. There’s
a lot more to receive, but we have had cooperation from all 50
states.
In terms of what the states can do—and Congressman Foster
raised this a moment ago—standardization of the data would be in-
credibly helpful for the purpose of our work in identifying where
fraud has occurred.
It’s a large thing to ask. Many of these State Workforce Agencies
may, you know, not have had occasion to have to collaborate or
work together. But we’ve seen with this pandemic, when the Fed-
eral Government is giving money through these State Workforce
Agencies, we need to have a way to analyze that data without
wasting months or years cleaning it up. So, one thing I think that
would be very helpful is standardization of data for those applying
for unemployment benefits.
Chairman CLYBURN. Thank you very much.
The chair now recognizes Mrs. Maloney for five minutes, or Mr.
Foster for five——
Mrs. MALONEY. Hi. Thank you, Mr. Chairman.
Chairman CLYBURN. OK.
Mrs. MALONEY. Mr. Chairman.
Chairman CLYBURN. Yes.
Mrs. MALONEY. In 2020, Congress took bold action to provide un-
precedented relief to Americans struggling because of this terrible
pandemic. Yet, due to the failures of the Trump administration,
fraud prevented many vulnerable Americans from receiving the
much-needed aid that they justly deserved. Your select committee’s
report clearly shows that the Trump administration failed to imple-
ment basic fraud controls in the COVID–19 Epidemic Impact Dis-
aster Loan program, or EIDL. These failures had devastating ef-
fects for many Americans in need who were seeking this vital aid.
So, my question to you, Mr. Ware, is what were the most con-
cerning deficiencies that enabled fraud in the early administration
of the EIDL program?
Mr. WARE. Well, one of the most concerning—the most con-
cerning thing was self-certification was the route that was taken.
So, you just had to say that you had a business, so you had X
amount of employees, and you could get money. That was the most
concerning thing, and the thing that we sounded the alarm on very
early, that this can’t be the way.

29
Mrs. MALONEY. I’ve got to say I was very concerned by the un-
precedented amount of fraud, because programs such as the Pay-
check Protection Act and the EIDL program ran out of funds so
quickly. They ran out really early. One of them ran out in one day.
Individuals and small businesses and communities of color were
disproportionately unable to receive any relief or the relief that
they needed.
So, Mr. Horowitz, could you speak about the harms to commu-
nities of color when fraud consumed the resources of these vital re-
lief programs? You know, the fraudsters were ready to pounce and
the regular people were still filling out the forms while they stole
the money from the system. So, could you please respond?
Mr. HOROWITZ. Yes, Congresswoman. It’s a very important point,
something we’ve written about and have held hearings on. And
people can go to our website and see the hearings we’ve held about
these issues, about how underserved communities and individuals
who had challenges applying through the internet.
So, we saw underserved communities that were economically im-
pacted not be able to get benefits that were intended for them.
We’ve seen the same, by the way, with rural communities that
didn’t have good internet service or strong internet service be chal-
lenged in applying for programs that you had to apply through the
internet. We were in the middle of a pandemic, of course.
We’ve seen challenges for elderly applicants in navigating
through the internet application process. And so we’ve identified a
lot of different issues that came up through these processes that
need to be addressed.
I mean, what—at bottom line, what we saw in multiple agencies,
they were woefully unprepared to be able to deal with this kind—
these kind of programs in a way that they should have been able
to deal with at a basic level. They could have been more sophisti-
cated. You could continue to increase their ability to deal with it.
But even at the most basic level, so many agencies we found were
unprepared to deal with these challenges.
Mrs. MALONEY. Thank you.
Mr. Ware, in your opinion, could SBA have taken additional
steps to prioritize underserved small businesses and communities
of color during the early rollout of the PPP?
Mr. WARE. In my opinion, yes. And the report that we put out
probably like two weeks into the program, in essence, laid out how
they could do that. At the onset, SBA wasn’t even able to tell that
it went there. So, we had them change the way that they were
doing the NIST codes that would provide for demographic informa-
tion. There would have been no way for them to know whether
they were served or not served initially.
Mrs. MALONEY. Well, I want to thank all the panelists. My time
has expired. And I thank you for doing all that you are doing to
try to make sure the pandemic funds get to the people who really
need it and that it is distributed fairly and honestly and equitably.
I thank you.
And I yield back to the chairman and thank you for this very im-
portant hearing.
Chairman CLYBURN. Thank you very much.
The chair now recognizes Mr. Foster for five minutes.

30
Mr. FOSTER. Thank you, Mr. Chair.
Mr. Chambers, you mentioned data standardization as an impor-
tant priority toward making the system work better next time.
Does this occur, for example, in lists of bad actors, where you
might have different state and Federal agencies accumulating lists
of wrongdoers, and then it just is very labor-intensive to find out
that this person applying for something is, in fact, on someone’s list
of bad actors, or is that pretty well-organized at this point?
Mr. CHAMBERS. Congressman, it’s even more basic than that. The
standardization that I’m speaking of is things as basic as Social Se-
curity numbers, addresses, phone numbers, email addresses col-
lected in a similar fashion, maintained in a similar fashion. So
that, for example, when we get state work force data from four or
five different states, we can quickly compare and analyze those
things to look for red flags.
Mr. FOSTER. Essentially, a unique identifier for the human
beings that you’re trying to figure out who’s who, you have a data
base index for the wonks and all of you.
Mr. CHAMBERS. Precisely.
Mr. FOSTER. Yes. And so that is, I think, the motivation behind
getting—doing a good job of a secure digital ID, where you take the
data that exists in a REAL ID-compliant driver’s license or a pass-
port if you want one and put it in—you know, in people’s cell
phones so that there is no question that that is the person and
their cell phone, but then use that effectively as the unique identi-
fier. So, you can walk into anything in person or online and prove
you are a single legally traceable person.
And, you know, it’s my feeling that when we talked about return
on investment, there isn’t really a higher return on investment
that our government can make than making such a streamlined
way of being able to prove you are who you say you are.
I am very encouraged that the work that NIST has been doing
for the last decade is now—you know, it exists in every one of your
cell phones. The latest couple releases of IOS and Android have im-
plemented the NIST standards, so that it will actually—and they’re
being—internationally, they’re also being adopted by the ISO.
So, that there is technologically the possibility of being able to
assert your digital identity online and in person in a very stream-
lined way. And, you know, I think that’s a natural job for govern-
ment, that we put a tremendous amount of work into getting the
data behind the REAL ID-compliant IDs, and that just taking the
additional step of putting that on people’s cell phone and allowing
that to be the standard for, you know, basically applying for Fed-
eral benefits.
Mr. Horowitz, when we talk about return on investment, are
there estimates of the total losses for government from identity
fraud? Does anyone take it upon themselves to just look through
all the agencies, all the programs, and say, Here’s how much
money we could save by—with a high-quality ID system in this
country?
Mr. HOROWITZ. It’s a great question, Congressman. I’m not aware
of an executive branch-wide effort to do that. And I think that’s one
of the frustrations we have as—in the oversight community, is this
sort of siloed approach, with agencies focusing on their individual

31
issues and their individual standards as opposed to across the exec-
utive branch and the issues that arise.
And one of my concerns in this space is the perfect being the
enemy of the good. Starting doing some basics at the outset. Every-
body wants to find the perfect solution. What’s the right approach?
This is not going to happen overnight that that’s going to get fixed.
The fact that, you know, as we’ve found in the PPP program, a
single telephone number was used in connection with 1,400 PPP
applications. One Social Security number was used in 29 states to
get UI benefits.
Mr. FOSTER. But if they had been required to, OK, fine, you ap-
plied, get out your cell phone, prove you are who you say you are,
and use that single identifier. And the fact that you can’t clone a
modern cell phone, because they have the Secure Enclave and key
generation, all that inside it. They’re like—basically like one of
these security dongles. And so you could use that to make sure
that—if you have a unique ID that you are demanding every time
you apply for any Federal benefit, it seems like you could have just
stopped that in its tracks.
And the return on investment from getting that—you know, the
mobile IDs that are being implemented in individual states, to get
that implemented nationally and used universally by the Federal
Government would just be a huge cost savings.
And it’s also my hope that if we actually—when we get legisla-
tion for this, that it will actually have a huge positive pay-for in
the Congressional Budget Office sense, which is always an inter-
esting question, that where you can actually save a lot more tax-
payer money from a small investment. And we wrestle with that
all the time.
I just want to thank you again for all the work you’re doing. It’s
really important that everyone sees our government is working as
well as it can be under—even under stressful situations.
So thank you, and I yield back.
Chairman CLYBURN. Thank you, Mr. Foster. The chair now rec-
ognizes Mr. Raskin for five minutes.
Mr. RASKIN. Thank you, Mr. Chairman.
I want to start just by thanking you for your resolute determina-
tion to ferret out the corruption and the fraud which undermined
the programs that we voted for our people. So, thank you for that.
And I also want to salute President Biden for making an invest-
ment and for asking for more funds to be invested in the
anticorruption, antifraud efforts across the agencies.
Let’s see. Mr. Dotson, the SBA’s Office of Inspector General and
SBA and the Secret Service got together to go after fraud and re-
covered I think from our report it was reported more than $1 bil-
lion that had been stolen from the EIDL program.
Can you tell us, first of all, how you did that? And then second,
is it mainly organized criminals, like organized gangs or groups or
traditional organized crime here or abroad that you’re going after,
or is it lone ranger individuals?
Mr. DOTSON. Well, thank you for the question, Congressman. The
efforts put forth with the Secret Service and SBA OIG and our
partners here has been extraordinary. There’s no doubt there.

32
In working with them to identify fraud and also working with
the financial sector from early on, we were able to identify several
cases that involved what we looked to be as fraud. In following up
those cases, we were able to recover, like you said, over $1 billion
to date. And that’s just by sheer hard work of thousands of inves-
tigators and detectives, like I said, from our Cyber Fraud Task
Forces, not only out in the field actually following up cases, you
know, doing the typical investigations of interviewing people and
finding assets, but it also was, at a global scale, working with SBA
OIG and the financial institutions who were identifying those types
of fraud.
Early on, we saw this—as Mr. Ware said, we saw this kind of
happening real time, and we got out advisories through FinCEN
that identified the fraud indicators that financial institutions
should look for. And they did an outstanding job of trying to safe-
guard as much fraudulent funds as they could.
Mr. RASKIN. Thank you.
Mr. Ware, your office gave us data showing that, with the help
of the OIG, that banks and financial institutions had returned over
$8 billion in EIDL funds to the SBA.
Why did they return this money? Was that money that had been
illegitimately taken by the banks and the financial institutions, or
was it from fraudsters?
Mr. WARE. No. So, it’s for various reasons. Like, the people didn’t
collect, the people turned it back. They realized that—in many in-
stances, that we’re onto them. They left the money, didn’t come for
it. And we assisted SBA in getting that money back from the finan-
cial institutions. The number will be even bigger than that.
Mr. RASKIN. Gotcha. On this point about unemployment insur-
ance, I understand that the Biden administration is asking for
money to help the states modernize and upgrade their unemploy-
ment insurance systems, which would be of great benefit to the
people of Maryland. Hundreds of thousands of people just had a
nightmarish time trying to get the unemployment benefits that
they were due in Maryland. So, I do hope we’ll make some progress
on that.
Is your general response to all of these events, Mr. Horowitz,
that it would be better when we engage in programs like this that
we do it at the national level?
I mean, I know that the Social Security system, for example,
spends less than one percent of their money on bureaucracy, and
they seem to be extremely efficient and there’s very little fraud.
And yet we have programs like this that are thrown up overnight,
they’re just rife with fraud.
So, I mean, should we be doing this on the national level rather
than in a decentralized state-by-state way?
Mr. HOROWITZ. I certainly think what we’ve seen here is the
need to more centralize it. How far you go, whether it’s entirely
Federal, or there’s a better balance or a supported way that states
can upgrade their systems. But we’re now in the digital age, and
what we saw at the executive branch level and at the local level
is so many entities were not ready for a digital age problem that
arose, right? People could not show up to pick up their benefits.
They had to do it remotely. We weren’t allowing people to go out.
There were lockdowns. And people just weren’t ready.

33
If nothing else from this, it’s let’s step back, figure out how to
fund, support to create modernized systems that can talk to one
another, that can pick up these problems early on. This shouldn’t
happen. We shouldn’t have 29 states giving benefits to the same
Social Security number.
Mr. RASKIN. Right. And it just seems to me, Mr. Chairman, if
we’re at a national crisis and we are allocating national benefits,
we should have national programs with national safeguards and
controls, so we don’t have people hopscotching from state to state
to rip off the taxpayers in each state.
I yield back to you.
Chairman CLYBURN. Let me—thank you, Mr. Raskin. Thanks to
all of our witnesses here today.
I was thinking—as Mr. Raskin was asking this question about a
centralized process that seems to me up front would have pre-
vented a lot of all of this, I was thinking about how far we tend
to get away from this country’s motto: E pluribus unum, out of
many, one.
If that were the practice more often, I think that a lot of what
we’re trying to do here—people look to the Federal Government for
relief and assistance in this kind of instance. Yet, when we set out
to provide it, we tend to do whatever we can to lessen the efficiency
of the process.
We said with the subcommittee from the very beginning, that we
were going to ascribe three Es to whatever we were doing here. We
wanted to be efficient, effective, and equitable.
And it seems as if so much of what we’ve done to implement this
program is in violation of all of that. We have not been as efficient
as we could be, and, therefore, we have not been as effective as we
should be. And the equity that should have been in this process
was very, very lacking.
And so I want to thank all of you for what you’re doing and what
I know you’re going to do. I’m looking forward, Mr. Ware, to your
report that in 30 days—if it’s not going to be 30 days, I would let
the committee know, subcommittee know.
Mr. WARE. Thirty-ish.
Chairman CLYBURN. I’m sorry, 30-ish. I know a little bit about
the ‘‘ish.’’
It’s our responsibility, as yours, to ensure that these relief funds
are available to all eligible Americans and not stolen by criminals
and criminal enterprises. That’s the thing that’s getting me more
than anything else. I don’t excuse the run-of-the mill fraudster, but
there seems to be a pretty big widespread enterprise at work here
and I think that we’ve got to do more than we’re currently doing.
Now, I applaud the Biden administration for taking the steps
that it’s taken to protect these vital programs going forward. And
I want to thank you once again for being a significant part of that.
And, without objection, all members will have five legislative
days within which to submit additional written questions for the
witnesses to the chair, which will be forwarded to the witnesses for
their response.
With that, this meeting is adjourned.
[Whereupon, at 12:05 p.m., the committee was adjourned.]
Æ

File and source

File

CHRG-117hhrg47805.pdf

Size

205,331 bytes

SHA-256

5ab2295167f757086e47a6e27c9bb6defb3c3393e4e4f88fcff5b6648c47ab4f

Our copy

CHRG-117hhrg47805.pdf

Original

www.govinfo.gov