Action through Innovation: Private Sector Solutions to Recouping Stolen Pandemic Loan Funds (House Small Business Committee hearing, September 27, 2023)

Summary

The House Committee on Small Business held this hearing, Action Through Innovation: Private Sector Solutions to Recouping Stolen Pandemic Loan Funds, on September 27, 2023, with Chairman Roger Williams presiding. In his opening statement Williams said the OIG estimates that $200 billion in taxpayers' money went to bad actors, almost 20 percent of all pandemic lending, and that the OIG would have more than 100 years of casework if business went on as normal. The witnesses were Richard C. Breeden of Breeden Capital Management, JT Taylor of ID.me, Dean Zerbe of Alliantgroup and Linda Miller, a former deputy executive director of the PRAC.

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“Action through Innovation: Private Sector Solutions to Recouping Stolen Pandemic Loan Funds (House Small Business Committee hearing, September 27, 2023).” Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/action-through-innovation-private-sector-solutions-to-recouping-stolen-96be184177/, SHA-256 1ecc38cdd4a3f2b15bbf905519e64680d525e411d2182c7a5bae583313967321.

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

HEARING
BEFORE THE

COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION

HEARING HELD
SEPTEMBER 27, 2023

Small Business Committee Document Number 118–027
Available via the GPO Website: www.govinfo.gov

U.S. GOVERNMENT PUBLISHING OFFICE
53–334 WASHINGTON : 2024
HOUSE COMMITTEE ON SMALL BUSINESS
ROGER WILLIAMS, Texas, Chairman
BLAINE LUETKEMEYER, Missouri
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
BETH VAN DUYNE, Texas
MARIA SALAZAR, Florida
TRACEY MANN, Kansas
JAKE ELLZEY, Texas
MARC MOLINARO, New York
MARK ALFORD, Missouri
ELI CRANE, Arizona
AARON BEAN, Florida
WESLEY HUNT, Texas
NICK LALOTA, New York
NYDIA VELÁZQUEZ, New York, Ranking Member
JARED GOLDEN, Maine
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
GREG LANDSMAN, Ohio
MORGAN MCGARVEY, Kentucky
MARIE GLUESENKAMP PEREZ, Washington
HILLARY SCHOLTEN, Michigan
SHRI THANEDAR, Michigan
JUDY CHU, California
SHARICE DAVIDS, Kansas
CHRIS PAPPAS, New Hampshire

BEN JOHNSON, Majority Staff Director
MELISSA JUNG, Minority Staff Director

(II)
CONTENTS
OPENING STATEMENTS
Page
Hon. Roger Williams ................................................................................................ 1
Hon. Nydia Velázquez ............................................................................................. 2

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

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

(III)
ACTION THROUGH INNOVATION: PRIVATE
SECTOR SOLUTIONS TO RECOUPING STO-
LEN PANDEMIC FUNDS

WEDNESDAY, SEPTEMBER 27, 2023

HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 9:58 a.m., in Room
2360, Rayburn House Office Building, Hon. Roger Williams [chair-
man of the Committee] presiding.
Present: Representatives Williams, Stauber, Meuser, Salazar,
Molinaro, Alford, Bean, LaLota, Velázquez, Phillips, McGarvey,
Gluesenkamp Perez, Scholten, Chu, and Davids.
.
Chairman WILLIAMS. Good morning. Before we get started I
want to recognize our colleague from the great state of Missouri for
the prayer and the pledge.
Would you please stand?
Mr. ALFORD. Let’s go to God in prayer.
God, we are just so thankful to be here today on this Small Busi-
ness Committee. We ask a blessing on our Chair and our Ranking
Member that they will guide us and direct us as we question the
witnesses today and give us discernment and wisdom, God, that
you will help us with our votes to lead this great nation to greater
prosperity through small business, the fabric of America, God.
Through Jesus Christ I pray. Amen.
I pledge allegiance to the flag of the United States of America.
And to the Republic for which it stands, one nation under God, in-
divisible, with liberty and justice for all.
Chairman WILLIAMS. Good morning, everyone. And I now call
the Committee on Small Business to order.
Without objection, the Chair is authorized to declare a recess of
the Committee at any time.
I now recognize myself for my opening statement.
Welcome to today’s hearing where we will be looking at the unac-
ceptable amount of fraud that occurred during the COVID-19 pan-
demic and what could be done to recoup those stolen taxpayer dol-
lars.
During the pandemic, the SBA took an outsized role in helping
America’s economy. The PPP and the EIDL loan programs were in-
credibly important for our nation’s entrepreneurs and allowed
many businesses to keep their doors open throughout all the uncer-
tainty.
(1)
2

However, the after action reports show that these programs were
extremely susceptible to fraud. The OIG estimates that $200 billion
dollars in taxpayers’ money were given out to bad actors which ac-
counts for almost 20 percent of all pandemic lending. This is com-
pletely unacceptable and we must find ways to rectify these issues.
If we keep doing business as normal, the OIG says that they will
have more than 100 years of casework to go through in order to
properly investigate all the loans that have been tagged as fraudu-
lent. In the private sector, if there was an accounting hole of this
magnitude, the business owners would do all they could to get his
receivable back into the bank account. This Commitmtee is work-
ing to find creative solutions to do just that and recoup the stolen
pandemic funds for the taxpayers.
I am proud that in our last two markups, this Committee passed
four COVID fraud bills that must be done to recover those stolen
dollars. We cannot allow the American taxpayer to be on the hook
for 200 billion, and we must do a better job to maintain public
trust that this level of fraud was an isolated event.
I look forward to discussing with our witnesses’ innovative ideas
on how to catch fraud early and ensure hard-earned taxpayer dol-
lars are being used for their intended purpose. This could mean
greater use of data matching tools and proving interagency collabo-
ration or mandating more strict standards for identity verification
in any program that gives out taxpayer dollars.
Additionally, we must find a better way to recover stolen funds
on the back end. There will always be fraudsters and criminals
looking to take advantage of any government program that is giv-
ing our money but we must have the ability to catch these bad ac-
tors and bring them to justice so they will not be able to continue
defrauding the American people. Regardless of what solutions are
brought to the table, it is clear we cannot continue with business
as usual.
Too many times in government we hear that something can’t be
done or that isn’t how it was done in the past. Well, the private
sector does not think like this. They encounter a problem; they im-
mediately go to work and then they fix it.
I am excited to hear from our witnesses today on new ways we
can work to prevent and detect fraud moving forward. I thank all
our witnesses for being here, and I look forward to this discussion.
With that I will now yield to the distinguished Ranking Member
from New York, Ms. Velázquez.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman.
We are here today to discuss the SBA’s efforts in recovering
fraudulent loans and preventing future fraud. Over the past 3
years, this Committee has played an integral role in examining the
pandemic relief programs which helped millions of small businesses
stay afloat in unprecedented times. Approximately $1.2 trillion of
economic aid was dispersed through SBA’s pandemic relief pro-
grams over the course of the pandemic, with much of that origi-
nating in the first 9 months of the pandemic under the Trump ad-
ministration.
While there may be disagreement on the actual estimates of
fraud, it is clear we need to work together to protect the integrity
of SBA programs from bad actors. The SBA under the leadership
3

of Administrator Guzman has taken strong steps to root out fraud
in the pandemic relief programs and put strong controls in place
to prevent future fraud.
Earlier this year we heard testimony from Administrator
Guzman that SBA is doing just that. In 2022, SBA established a
Fraud Risk Management Board aligning its practices with GAO’s
oversight policies. A new role was also created-the SBA’s Special
Counsel for Enterprise Risk to advise the Administrator on fraud
and risk management activities. The agency continues to work col-
laboratively with the SBA Inspector General, the interagency
COVID-19 Fraud Enforcement Task Force, and the Department of
Justice to recover stolen funds.
With that said, we must be clear. The SBA is not an investiga-
tive agency, and it does not have a team of auditors, investigators
and attorneys, or state-of-the-art data analytics technology to root
out and prosecute fraud. That is the role of the Inspector General.
It is important that we understand the difference between the mis-
sions of the SBA and the Office of the Inspector General if we are
going to effectively develop policies to prevent and recover fraud.
To that end, the single, most important action we can take to
combat fraud is to fully fund the Inspector General’s budget re-
quest. Unfortunately, their budget for fiscal year 2024 was slashed
from 47.7 million to 32 million in the House Financial Services and
General Government Appropriations Bill. We are just days away
from a government shutdown which will limit the OIG’s and law
enforcement efforts to recover fraudulent funds. Put simply, this is
unacceptable. We must take our responsibilities seriously.
In the last Congress, I joined with Representative Luetkemeyer
to sponsor legislation to extend the statute of limitations for fraud
in PPP and EIDL to 10 years. These two bills which became law
sent a strong message that unscrupulous behavior would not be tol-
erated and that those who commit fraud will be held accountable
in the years to come—but it is all for not if we do not give the In-
spector General the resources it needs.
I look forward to hearing from our witnesses today, and I am cer-
tainly open to new, creative ideas provided we are committed to
fully funding the Office of the Inspector General and the law en-
forcement community.
Thank you, Mr. Chairman. I yield back.
Chairman WILLIAMS. Thank you very much.
And I will now introduce our witnesses.
The first witness here with us today is Mr. Richard Breeden. Mr.
Breeden is the Chairman of Breeden Capital Management, LLC, lo-
cated in Greenwich, Connecticut. Mr. Breeden founded Breeden
Capital Management in 2005 focused on taking concentrated in-
vestment stakes in mid-cap companies and supporting staffs to im-
prove shareholder value. In addition to serving as the Chairman of
Breeden Capital Management, he also serves as Chairman of the
Nominating and Governance Committee of the Board of Steris PLC
and is a trustee of the George H. W. Bush Presidential Library.
Prior to starting his company, Mr. Breeden served as the 24th
Chairman of the U.S. Securities and Exchange Commission, as well
as several positions under Presidents Reagan, Bush, and Clinton.
Mr. Breeden attended Stanford University where he received his
4

B.A. and went on to attend Harvard Law School where he earned
his J.D.
Mr. Breeden, thank you for being with us today, and we look for-
ward to the conversation that is ahead with you.
Our next witness with us today is Mr. JT Taylor. Mr. Taylor is
a senior director of Fraud Investigations and Operations at ID.me
located in McLean, Virginia. ID.me allow individuals to securely
verify their identity online, helping to prevent fraud and abuse.
Prior to his time at ID.me, Mr. Taylor worked for the U.S. Secret
Service as a special agent, as a supervisory intelligence operations
officer for the Office of the Director of National Intelligence, and as
an intelligence officer for the U.S. Navy. Mr. Taylor went to West
Virginia. They play TCU this Saturday. I did not know if you knew
that or not. Where he earned his bachelor of science in manage-
ment information systems, as well as Norwich University where he
earned his master of science, and Louisiana State University where
he earned his master of business administration.
Mr. Taylor, thank you for joining us today, and we look forward
to our conversation.
The next witness with us today is Mr. Dean Zerbe. Mr. Zerbe is
the national managing director of Alliantgroup located in Houston,
Texas. At Alliantgroup, Mr. Zerbe is responsible for monitoring tax-
related legislative activities here in Washington to keep clients and
staff informed and help direct Alliantgroup service offerings to en-
sure client needs are met. Prior to his time at Alliantgroup, Mr.
Zerbe was senior counsel and tax counsel to the Senate Committee
on Finance where he worked with the Chairman of the Finance
Committee, Senator Grassley on tax legislation. During this time
on the Finance Committee, he was involved with almost every
piece of tax legislation signed into law including the 2001 and 2003
tax reconciliation bills among others. Mr. Zerbe holds an LLM in
taxation from NYU and J.D. from George Mason University.
Mr. Zerbe, thank you for joining us today. We look forward to our
conversation that is ahead.
And I now recognize the Ranking Member from New York, Ms.
Velázquez, to briefly introduce our last witness appearing before us
today.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman.
Linda Miller served as the Deputy Director of the Pandemic Re-
sponse Recovery Committee. She is one of our country’s foremost
experts on preventing and detecting fraud. Prior to launching her
own consulting business, she was a Principal at Graham Thornton
where she led the firm’s fraud and financial crimes practice. She
was also the Assistant Director in the forensic audits and inves-
tigative service group at the Government Accountability Office. She
has a wealth of experience and has dedicated her career to helping
organizations identify and manage fraud.
Welcome, Ms. Miller, and I look forward to your testimony.
Thank you.
Chairman WILLIAMS. Thank you. And again, I appreciate all of
you being here today.
Real quickly, just as a reminder, before recognizing the witnesses
I would like to remind them that their oral testimony is restricted
to 5 minutes in length. And if you see the light turn red in front
5

of you it means your 5 minutes has concluded and you should wrap
up your testimony. If you go too long I will give it a little of this
(gavel tapping). You will hear that. Okay?
I now recognize Mr. Breeden for your 5 minute opening remarks.
STATEMENTS OF RICHARD BREEDEN, CHAIRMAN, BREEDEN
CAPITAL MANAGEMENT, LLC; JT TAYLOR, SENIOR DIREC-
TOR OF FRAUD INVESTIGATIONS AND OPERATIONS, ID.ME;
DEAN ZERBE, NATIONAL MANAGEMENT DIRECTOR,
ALLIANTGROUP; LINDA MILLER, CEO, AUDIENT GROUP, LLC

STATEMENT OF RICHARD C. BREEDEN
Mr. BREEDEN. Thank you very much, Chairman Williams,
Ranking Member Velázquez, Members of the Committee. I am hon-
ored to be here and appreciate your invitation.
For about 35 years, perhaps a little more, about half my life, I
have been involved in efforts to combat fraud, to help victims of
fraud overcome the ravages of the crimes committed against them,
and in many cases to try and recover money that has been stolen
from the public.
I have done that in a variety of settings in both the public sector
and the private sector. I worked in the White House under Presi-
dents Reagan and George H. W. Bush, 41, and during the time
working in the White House for 41 I was very actively involved.
One of the principal draftsmen of the legislation known as FARIA
that helped solve the savings and loan crisis, which has involved
a great deal of fraud and the legislation contained quite a few pro-
visions intended to help recover the monies that had been involved
in fraudulent loans.
I was Chairman of the SEC for just under 4 years, and every sin-
gle day involved fighting fraud. That is what the SEC does among
other things but it is a never ending struggle and in any market-
place there are people who will abuse the market. And the SEC,
for every day I was there, we were involved in antifraud efforts.
And for the last 20 years I have administered a series of funds
for victims of fraudulent activity. The last few years I have served
as head of the Madoff Victim Fund on behalf of the Justice Depart-
ment, and my firm works for both the Department of Justice and
the SEC in administering funds for victims. A big part of that work
is making sure to help make sure that the money in these funds
makes it to the intended victims is to make sure that we identify
and block false claims.
So your topic today is very important. It is near and dear to my
heart but it is important to taxpayers, to the SBA and its work and
to faith in our institutions. So it could not be more important.
About 11.4 million loans were made in the pandemic programs.
In our work over the last 35 years, I have never seen a program
with fraud incidents lower than roughly 30 percent. If government
puts up a billboard that says, ‘‘free money, apply here,’’ lots of peo-
ple will come. And unfortunately, not all of them are entitled to
participate.
So I think the estimates, we will never know the total amount
of fraud but the estimates even at the high end of 200 billion could
be conservative. That is just the world we live in. And I think it
6

is important as was mentioned to remember the time pressure that
we were under and the great, great good that these programs ac-
complished. And nothing in the later efforts should take away from
that.
The amount of fraud, the SBA has estimated 25 billion; GAO,
200 billion. It could be 400 billion. We will never know. There was
an ocean of fraud and now the question is how much of the im-
proper funds can we get back?
There are a lot of ideas. My written testimony lays out a number
of ideas as do the other witnesses. But I think overall the 100
years of fraud and 100 years’ worth of investigations that I cer-
tainly have no problem. When I was at the SEC, we were always
trying to make sure we had enough resources. And making sure
that OIG has enough resources is an important question.
But we do not have 100 years. And if we give them more re-
sources, and it takes 3 to 5 years to train somebody to know what
they are looking for, our time, and even on an extended statute of
limitations will run out. So the goal to me should not be let’s figure
out how to get 100 years to 93 years or 86 or 72l; it is how do we
accomplish the most we can possibly accomplish over the next 5
years.
To do that I would say we have to supplement the resources that
exist, whether at current levels or enhance levels, but find ways to
break up the caseload, bring other people onto the playing field,
and use the private sector to go after some of the bad actors.
I suggest in my testimony forming small groups, private sector
contractors. Medicare and Medicaid do something similar. The SEC
does it. The DOJ does it. Other agencies do it so I am not certainly
having something totally innovative but in this area I think it
could pay great dividends.
Most importantly is to have a mentality of an outrageous sense
of urgency here to get after this problem and get as much done as
possible. Thank you, sir.
Chairman WILLIAMS. Thank you.
And I now recognize Mr. Taylor for his opening remarks.
STATEMENT OF JT TAYLOR
Mr. TAYLOR. Thank you, Mr. Chairman.
Chairman Williams, Ranking Member Velázquez, and Members
of the Small Business Committee, I am honored to be here today.
My name is JT Taylor, and I serve as the senior director of fraud
at ID.me.
Before this role I dedicated a significant portion of my profes-
sional career to the U.S. intelligence community and the U.S. mili-
tary, serving in both as an intelligence operations officer. Later, I
served as a special agent with the United States Secret Service,
where I led a series of pivotal domestic and international fraud and
cybercrime investigations.
My tenure in intelligence operations and my investigative en-
deavors have granted me a comprehensive and nuanced perspective
on the challenges inherent to digital fraud and cyberthreats.
When the pandemic gripped our world, governmental bodies like
the Small Business Administration and the Department of Labor
stood on the frontlines swiftly allocating relief funds. However,
7

haste led to vulnerabilities in security and identify verification. The
SBA’s Office of Inspector General identified worry signs. Numerous
IP anomalies pointed towards foreign intrusions and coordinated
fraud attempts. The misuse of employer identification number was
rampant with multiple PPP loans under single EINs.
Furthermore, there was a starting discovery of businesses declar-
ing post-deadline establishment dates and recurring use of iden-
tical contact details across different applications.
The funding system supporting these initiatives are intrinsically
linked with the broader business ecosystem. Conventional practices
involve businesses contributing to benefit funds calibrated on their
workforce size.
But the massive, unexpected unemployment claims threaten this
balance. State debts have increased and there is now an impending
risk of businesses, particularly smaller ones, facing escalating per
employee taxes. This is a multi-dimensional problem with repercus-
sions for the entire U.S. economy.
The pandemic served as a double-edge sword. On one side is un-
veiled resilience and adaptability of our institutions. On the other
it exposed areas where we were woefully unprepared, chiefly in the
arena of cybersecurity and fraud detection.
In these challenging times, states sought robust, scalable solu-
tions. Twenty-seven states turned to ID.me which is not just an-
other tech company but a leading credential service provider. Inde-
pendently certified against rigorous standards set by the National
Institute of Standards of Technology, ID.me embodies the pinnacle
of digital identify verification.
Supporting a user base exceeding 113 million, the impact of
ID.me on fraud prevention has been profound. Partner states wit-
nessed transformative results. Fraud rates drastically diminished.
Authentic claims experienced seamless processing and financial
savings were substantial.
Beyond the monetary gains, the rejuvenation of public trust in
an era when faith in public institutions is fragile is invaluable. In
this digital era, standards like this curated by NIST are not op-
tional but foundational. Overlooking these guidelines as seen spo-
radically during the pandemic leads to compromising security.
In today’s digital world, data has emerged as a prime commodity.
Amid this landscape, data brokers who amass, refine, and fre-
quently monetize user information have risen in prominence. Al-
though they often work within current legal constraints, their vast
data repositories offer a Goldeneye for malicious entities.
The financial drain due to digital fraud during the pandemic
serves as a testament to the perils posed by easily accessible data.
There is an urgent need for our defense mechanisms to adapt con-
sidering this threat landscape. A comprehensive strategy that
merges the strengths of both the private and public sectors is im-
perative.
The Macomb School of Business from the University of Texas at
Austin revealed that a concerning 11 percent of PPP loans exhib-
ited suspicious traits. Notably, the top 12 lenders with the highest
rates of suspicious loans are all Fintech lenders. Given the dis-
parity between the statute of limitations for bank fraud and wire
8

fraud, it is imperative that Congress takes action to address the in-
consistency, particularly in the context of the PPP loans.
In addressing the multifaceted nature of fraud, a dual pronged
approach is essential. First, we bolstered the collaboration of data
sharing across agencies. By harnessing the capabilities of the Pan-
demic Analytic Center of Excellence and fostering deeper ties with-
in the private sector, we can integrate data matching earlier in the
benefit payment cycle.
Simultaneously, it is crucial to democratize data validation tools.
The Social Security Administration’s electronic consent based So-
cial Security Number verification tool, currently exclusive to finan-
cial institutions, should be extended to approve credential service
providers. Such an expansion would ensure equitable access bene-
fitting a broader demographic and further strengthening our anti-
fraud measures.
Agencies should adopt digital identity solutions such as those
perfected at ID.me with strict adherence to the NIST 800-63-3
guidelines. This ensures robust identity proofing minimizing fraud-
ulent access and upholding the integrity of public portals.
In our collective journey—and the challenges of the pandemic, it
is imperative that we absorb its lessons. Our trials and triumphs
underscore the essence of teamwork, innovation, and unwavering
commitment to establish identity verification protocols. Whether it
is the commendable work by organizations like ID.me or the dili-
gent oversight by entities like SBA OIG, we have seen the potency
of dedicated efforts. We are urged to build on this momentum, rein-
force our defenses, honing our strategies and equipping ourselves
better. The American people deserve benefit programs that pre-
vent, detect, and recoup fraudulent payments.
I thank the Committee for this platform, and I am happy to an-
swer any questions you may have.
Chairman WILLIAMS. Thank you very much.
And let me just say this. You are going to see people coming and
going. They are not leaving. We have got other hearings. They will
come, they will leave, and so forth, so if that is something you were
wondering about that will happen.
Next, I want to recognize Mr. Zerbe for his 5 minute opening re-
marks.

STATEMENT OF DEAN ZERBE
Mr. ZERBE. Thank you, Mr. Chairman. Thank you, Ranking
Member, for having me today at this important hearing about how
to recover funds that were put forward in the SBA COVID Relief
Program.
I am coming forward today to talk about a specific bipartisan so-
lution that has had bipartisan results over the years recovering bil-
lions of dollars in other government agency programs, namely basi-
cally rewarding and incentivizing whistleblowers to come forward
and lay out the details of fraud that they are seeing.
Just as a quick background on me, Mr. Chairman. You laid it but
specific to this you said I worked for Chairman Grassley on the
Senate Finance Committee. I wrote the IRS whistleblower law that
then served as the model for the SEC whistleblower law and the
9

CFTC and other government programs. And I now also practice as
an attorney in this area representing whistleblowers.
I would just say that the benefits of a whistleblower program are
pretty straightforward. First of all, you have to understand in
fraud, fraud is purposely being hidden. It is hidden in the nature
of it. If you want to get it, you have got to get insiders with in-
formed, knowledgeable detailed information. That is how you un-
cover fraud, and study after study has shown that. And we have
seen that, for instance, in the IRS programs. They did not know
beans about what was going on with offshore accounts until a whis-
tleblower came in and blew it all out for them. The whistleblowers
give you the keys to the kingdom in terms of what is going on. So
they are a proven way to do it.
I think in particular that it is useful for the SBA to consider this
because of the resource limitations and where they are going. The
idea of the whistleblower is that they are going to help the govern-
ment agency, whichever it is, better target and package and go
after the bad actors. In other words, when I am filing a whistle-
blower complaint, I can assure you it is with a bow on it and on
a T-ball in terms of what I am trying to do because I want to pro-
vide a narrative of what is going on. I want to provide all the docu-
ments. I want to provide everything from teeth to tail of what is
happening. Why? Because I want to get the agency to move so that
my client can get paid. So you are doing a lot of the lift for the
agency in terms of assisting them in terms of the work. You are
also doing a better job for the agency of helping them target the
bad actors. Even the best government agency has a difficult time
identifying, okay, who is really here? You have the whistleblower
coming in. They know who the bad actor is. They have got the
goods on them and they are much better at identifying, which actu-
ally is the positive of leaving the honest folks out there alone. So
you are better targeting resources as well, too, with that. So I think
with the SBA that is good.
I think another thing that is helpful here is in reading the SBA
IG’s reports, they clearly have a culture of embracing whistle-
blowers and that is terrific. Clearly, they are bringing folks in.
They are taking that. One of their biggest cases that they men-
tioned in the white paper was hundreds of millions of dollars from
one whistleblower. And what you are trying to do is build that out
and encourage more whistleblowers to come forth, particularly well
placed, knowledgeable, informed insider whistleblowers that are
coming forward. So I think you are benefitting from the fact that
the SBA already has got a welcome mat forward and you are trying
to expand beyond that in terms of it.
One thing I think will be music to ears—since the time from
being a staffer on the Senate side is CBO should score this. They
should score this as a revenue raiser. They have scored other
money. I am sorry, other whistleblower programs. The AML bill
that just passed scored $4 million. I think all these scores are low
by the way. For instance, my program, they scored it out at I think
a few hundred million dollars joint tax. It has brought in billions
of dollars since it came in. But they will score it and your staff will
work with them and I am sure get that there.
10

The other thing I want to mention is the deterrent ability of
whistleblowers. Look, when you are out there as a fraudster and
all you are thinking is, well, I have just got to get it by those folks
over at the agency, that is one calculation. If you have got a whis-
tleblower program they have got to say, okay, well, now I have got
to trust everybody else in this room. I have got to trust my banker,
my secretary. Any of them can dime me out. And so it changes dra-
matically the way the equations go of can I get away with it? It
also affects their behavior. What we find in tax is that they are
constricting who is involved. They try to limit what it is so it has
an impact on their behavior. It has a deterrent impact as well, too.
The last thing I would just note just on a highlight, my written
goes into it more, I think four hallmarks for a good whistleblower
program, one having a mandatory award program, not discre-
tionary. Have a floor and a ceiling based on the amount recovered
broadly defined. You want a dedicated payment so that the funds
are there. You are not having to go run to the approp boys to get
dollars for it. And these are standard by the way. What I am laying
out is what we have in all the whistleblower award programs.
Have an established office within OIG that wakes up thinking
about the whistleblowers and is putting out the welcome mat for
them. And then you have independent review.
The whistleblower, look, when you are getting very good whistle-
blowers I am getting not just, you know, Billy in the dark room.
I am getting the vice president of Tax coming forward. They are
putting their life at risk in terms of doing this. They need to have
confidence. It does not mean they are going to be guaranteed a pay-
ment but if their provided information is used and it ends up col-
lecting money, they are going to get a fair shake and that some-
body independently is going to look at that. It is not just to the
whim.
So I thank you, Mr. Chairman, having me here today. I appre-
ciate it very much.
Chairman WILLIAMS. Thank you very much.
And now we recognize Ms. Miller for her 5 minute opening re-
marks.
STATEMENT OF LINDA MILLER
Ms. MILLER. Thank you, Chairman Williams, and Ranking
Member, Ms. Velázquez, and Members of the Committee.
I sit here today as a former Olympic athlete, a former govern-
ment executive, a former partner at a large accounting firm, and
a small business owner. And I am bringing all of those perspectives
to my comments today.
I spent my career working to help the government fight fraud.
I led the development of the GAO framework for managing fraud
risks in federal programs, and worked with Congress to draft the
Fraud Reduction and Data Analytics Act of 2016.
When I was the partner at Grant Thornton, my team led the de-
velopment of the Treasury Antifraud Playbook. I sat on the task
force that developed the COSO Fraud Risk Management Guide
which governs the private sector. I serve on the Advisory Panel of
U.K. Public Sector Fraud Authority. And I sit as a Member of the
Identity Theft Resource Centers Biometric Working Group.
11

As soon as PPP and COVID EIDL programs were unveiled, those
of us in the fraud world saw this as a field day for fraud actors.
We did not have to think about it to see how much fraud was going
to happen in these programs.
An example, the COVID EIDL grant program was essentially
money that was known to not need to be repaid back. Anybody that
applied for that money got it without having to provide any eligi-
bility information. And you know, at that point the only thing
keeping somebody from stealing that money was their own moral
compass. And that is not exactly a good fraud control.
At that time, the fear and desperation of America’s small busi-
ness was such that the decision to get this money out with few, if
any controls to verify the eligibility of the information provided by
borrowers was widely accepted. Speed was the goal.
From celebrities stealing PPP loans and buying luxury cars to
adversarial nation state actors executing coordinated and elaborate
schemes, there were staggering levels of fraud in these programs.
The finger of blame can be pointed in several different directions
and it has been over the last 3 years. SBA had not seriously consid-
ered fraud risks prior to the pandemic and it was unprepared for
the breadth and the sophistication of the adversary.
Congress created program rules and time pressure that made it
nearly impossible for the SBA to verify the eligibility of applicants.
And unscrupulous lenders looked for ways to game the system and
pocket outrageous profits and fees.
Today, the work of clawing back the stolen pandemic loan funds
is left to the SBA OIG and its law enforcement partners. As the
deputy executive director of the PRAC, I worked closely with Mike
Ware, SBA’s Inspector General. IG Ware and his team have
worked tirelessly to investigate and prepare for prosecution thou-
sands of fraud cases and the work has only begun.
Thanks to this Committee, Congress has recently extended the
statute of limitations on pandemic fraud to 10 years. And given the
caseload, the IG is going to need at least that long to bring fraud
actors to justice.
For the past 3 years, the SBA Inspector General’s work has
yielded a 200 percent return on investment. But its backlog is enor-
mous and the office is stretched thin. This is not the time to cut
the Inspector General’s budget. Funding the IG at his requested
levels will ensure this exceptionally productive work can continue.
But the backlog is not just with investigators. Bringing fraud ac-
tors to justice requires prosecutors to try those cases. The U.S. at-
torneys are also stretched thin, and there is no shortage of high
quality cases to prosecute. Innovation in recouping pandemic loan
fraud must require more than simply putting good cases on the
U.S. attorneys’ desks.
Today’s hearing is also exploring the role of identity theft in pan-
demic loan programs, so it is important to note that identity theft
plays a role in loan fraud, but it was not the largest driver of fraud
in PPP or COVID EIDL. Front end identity verification technology,
including remote biometrics, is but one tool in SBA’s toolset and it
is by no means a panacea.
Fraud actors created shell companies, often using stolen informa-
tion to apply for loans. But this type of identity theft base fraud
12

is uncovered through conducting due diligence on the information
in those applications and SBA has done quite a bit more of this due
diligence to date. They now require tax transcripts of loan appli-
cants. They use vendor information to verify a bank account. And
they flag certain EIN prefixes, none of which was done at the start
of the pandemic.
Despite these improvements, SBA does have more work to do.
They have to continue to mature their preventative antifraud capa-
bilities. They must adopt a culture that is conducive to fraud risk
management and they have to collaborate with the OIG to ensure
that lessons learned are incorporated into their antifraud controls.
I was a rower in the 2000 Olympics, and as such I know a thing
about teamwork. My career has straddled the public and private
sectors for a reason. Because I believe that the government and the
private sector make a powerful team. The government relies on the
private sector innovation, and the private sector requires services
like main street saving loan programs that only the government
can provide.
I look forward to discussing the productive ways the private sec-
tor can assist the government in recovering loans and preventing
fraud going forward. Thank you.
Chairman WILLIAMS. Thank you very much. And good job on
the 5-minute rule. It is great.
I will now recognize myself for 5 minutes.
When I first heard about the 200 billion dollars in potential
fraud in the SBA pandemic lending programs, it made me think
about how a business owner would act in this situation. They
would have to decide whether they do all they can to collect the
$200 billion that is on their books as a receivable, or to write it off
as a loss. No private entity has the luxury of writing off such a
massive number, so I think it is our duty to be good stewards of
the taxpayers and find ways to give this money back which we
have already begun to talk about.
The SBA’s Inspector General told us that they currently have
over 100 years of casework if they are going to investigate all the
loans that have been flagged for fraud. This is obviously an impos-
sible task and there must be a better way to help them get this
money back.
So Mr. Zebre, during your time as senior counsel to the Senate
Finance Committee, you crafted legislation under Senator Grassley
to overhaul the IRS whistleblower program as you said and my
team and I are exploring the idea of creating a similar, self-sus-
taining program which will allow any citizen to collect a commis-
sion if they report COVID fraud that results in money returned to
the Treasury.
So the question is, do you think it would be possible to create
this type of program that would empower every day Americans to
report fraud? And what are some of the things we should be aware
of as we look to create this program?
Mr. ZERBE. I think that is an excellent question, Mr. Chairman.
I have seen it. A number of government agencies have created
these whistleblower award programs. And so I think very much
SBA is a good possibility in terms of also looking at creating a
whistleblower award program. You already have the Qui Tam
13

False Claims Act where they are bringing a few cases in right now
from attorneys from whistleblowers and that has had some success.
But I think having in parallel with that an in-house whistleblower
award program will very much be a way to, as you say, commission
to bring in the energy of the whistleblowers that are attorneys,
that are advisors, to help the SBA move forward. So yes, I think
it is a very good candidate for the SBA to look at doing. Absolutely.
Chairman WILLIAMS. Great. Thank you.
Mr. Breeden, you are currently working as special master for the
victims of Bernie Madoff’s Ponzi scheme. This requires you and
your team to go through massive data sets to find out what claims
are legitimate and which ones are fraudulent.
So the question is, can you speak on how massive financial recov-
ery is possible when there is such a large quantity of data to go
through?
Mr. BREEDEN. Yes, sir. It is definitely a challenge. In the
Madoff Victim Trust which I administer we have had about 70,000
claims covering $80 billion in claimed losses. We have approved
about 10 billion of that. So there is always a significant difference.
And some of it is legitimate, and some not between what gets origi-
nally claimed and what you end up approving after you have re-
viewed it very carefully.
We have had data documents, brokerage statements and so on
from victims going back 20 years. Millions of pages of documents
covering hundreds of thousands of transactions. And I love techno-
logical systems. Our company, our victim trust, we use systems to
scan things all the time. But the most effective tool is an experi-
enced person sitting looking at the analytics and deciding that
there is a problem that needs greater follow up. So big data can
do a lot of things but it is not going to haul crooks in to identify
and have someone go after them. So it is a mix of systems and
trained people.
And one of the problems we have today is starting now to bulk
up investigative resources in the SBA, for example, that is great
but it takes 3 to 5 years to mint somebody that really knows what
they are looking at. And so you have got to lag ineffectiveness. I
think it is still possible. We have done the Madoff work and identi-
fied thousands and thousands of improper loans, and some that
were referred for prosecution and that have generated recoveries
but that is not our principal role, with a relatively small group of
people. And that is why I think the combination of mini-SWAT
teams that are focused on recovering money and focused on reading
the, you know, out of 12 million loan files. All right. Suppose you
took the 100,000 largest loans and have people who know what
they are looking at read the files and look at where are the cases
that are best cases to prosecute?
Chairman WILLIAMS. Thank you. My time is up and I now rec-
ognize the Ranking Member for 5 minutes of questions.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman.
Ms. Miller, we have established that the Inspector General and
law enforcement are the lead organizations to investigate and re-
cover fraudulent monies. What is the most important action that
we can take to help recover stolen funds?
14

Ms. MILLER. Well, if we want to recover stolen funds, the action
needs to be focused at the IG because the IG and the law enforce-
ment partners of the IG are the only entities who have the author-
ity to do investigations and prepare cases for prosecution.
Ms. VELÁZQUEZ. In your opening statement, you mentioned the
fact that we passed the law to extend to 10 years to go after the
bad actors. Through the legislation we gave them, OIG, more time
but now they need the resources. If the OIG is not fully funded we
will not be able to capitalize on these two new laws; correct?
Ms. MILLER. Correct.
Ms. VELÁZQUEZ. Mr. Zerbe, IG Ware testified before our Com-
mittee that their HUD line produced 90,000 actionable leads that
will take more than 100 years to examine. The law enforcement
community has said they need more resources to investigate, pros-
ecute, and recover fraudulent monies.
How does your proposal meet the needs of the law enforcement
community and improve prosecutorial outcomes?
Mr. ZERBE. Thank you for that.
Just one quick note. When you are talking about Mr. Madoff, I
cannot help but note that it was a whistleblower, Mr. Markopolos,
that revealed Mr. Madoff. Just as an aside.
I think that is an excellent question. I think it is twofold. When
you are incentivizing whistleblowers, it is one thing to get a tip
that they may get at SBA that is of some use but these tips kind
of tend to be, hey, I saw a guy at a bar and he had a fancy car.
I mean, they are not that useful a lot of them. And when you are
incentivizing a whistleblower and encouraging, they are going to
come in with a full package. They are going to come with a lot
more detail, much more robust assistance in terms of what is going
on. So really helping the agency do its work. So helping them ex-
pand their work.
But to your point, too, and one thing to consider, maybe this is
a way to split the baby is that a number of the whistleblower
award programs do allow for a partial recovery of the funds for the
IG shop itself. In other words, HHS IG with the Qui Tam program.
They basically get reimbursement for their investigations. CFTC
similarly with their whistleblower program, they get to reimburse
their costs for their expenses for these whistleblower programs. So
it kind of aligns everyone’s behavior. So something maybe for the
Committee to think about of a way to finesse the issue. But that
would be now it is. Primarily, it is allowing the agency to work
more expeditiously, ma’am.
Ms. VELÁZQUEZ. Thank you.
Ms. Miller, in your view, would this proposal be a more cost-ef-
fective way to recover fraudulent funds as opposed to fully funding
the Office of Inspector General and the law enforcement commu-
nity?
Ms. MILLER. I mean, I would not say that we should do that
instead of fully funding the Office of Inspector General. I could not
speak to how much that is going to improve prosecutorial outcomes
but it is possible. It will cost money. You will have to create an of-
fice, and you will have to pay those people salaries. And so the
scoring could come back.
15

Ms. VELÁZQUEZ. Here we are at the brink of a government
shutdown over the budget; right?
Ms. MILLER. Right. Exactly.
Ms. VELÁZQUEZ. Okay. Mr. Taylor, privacy advocates have con-
cerns about the large amount of data ID.me collects to verify users’
identities—data like Social Security numbers, military records,
bank and credit card records, biometric data, and government docu-
ments. Does your company share this data with third parties?
Mr. TAYLOR. Thank you for the question, Ranking Member
Velázquez. I appreciate it.
Our privacy policy is one of the most robust in the industry. I
would counter that our privacy policy is actually even more strong-
er than the average grocery store that you visit on a daily basis.
We do not do any type of selling or trading of personal data. Addi-
tionally, from a standpoint——
Ms. VELÁZQUEZ. To be clear, you do not sell or share this data
with third parties?
Mr. TAYLOR. That is correct, ma’am.
Ms. VELÁZQUEZ. Okay.
Mr. TAYLOR. No selling or trading——
Ms. VELÁZQUEZ. Does ID.me benefit monetarily from the data
provided by American citizens?
Mr. TAYLOR. ID.me makes money via the actual identity
verification itself and successful transactions, meaning successful
identity verifications versus transaction based.
Ms. VELÁZQUEZ. Thank you.
Mr. Breeden, based on your experience overseeing the Madoff
Victim Fund, could you please share any lessons learned from your
experience that could help law enforcement recover from pandemic
fraud?
Mr. BREEDEN. Well, thank you.
In addition to Madoff I did WorldCom and Enron and British Pe-
troleum and a couple of JPMorgan cases. And so I have actually
reviewed, my staff and I, about 150 people all told over 20 years.
Have reviewed over 4 million claims to these victim funds.
Chairman WILLIAMS. Time is up.
Ms. VELÁZQUEZ. Thank you.
Chairman WILLIAMS. Time is up and we can put that in writ-
ing if need be. Okay.
I now recognize Representative Alford from Missouri for 5 min-
utes.
Mr. ALFORD. Thank you, Mr. Chairman and Ranking Member,
for holding this important, very important hearing today. And
thank you for our witnesses, all of you, for being here.
We are here for one reason and one reason only. In the words
of Jerry Maguire, ‘‘Show me the money.’’ This is taxpayer money
we are talking about here. Congress knew that this money had to
get out the door fast. We had an economic crisis from the pan-
demic. So the House and the Senate came together to do just that.
Some fraud was expected but not $400 billion worth of fraud on the
American taxpayers.
I am still disgusted that Administrator Guzman would not bother
to come down here and talk to us about her lower projects of fraud
16

and what she is doing about it to get that money back for the
American people.
That is why we introduced 3 weeks ago the CAB Act. We cannot
get inside the Small Business Administration to go visit Ms.
Guzman. We want to change that. The Congressional Access to Bu-
reaucratic Officers. According to the Inspector General’s report, 33
percent of all EIDL loans were estimated to be fraudulent. These
loans were administrated solely through the Small Business Ad-
ministration. And I know that Administrator Guzman released a
report contradicting that but let’s stick to the fraud, abuse, and
misuse expert, the IG.
This is in stark contrast to the PPP loans which are only 8 per-
cent estimated to be fraudulent. These were loans administrated
through lending partners, private businesses who could get it done
right.
The first step in solving any problem is recognizing that there is
one and addressing the issues. Clearly, there are problems. We are
here today to find answers.
Mr. Breeden, I want to start with you. You talked about in your
testimony a couple of quotes. Remember the good in this program
at the time that we had it, up to $400 billion as we are now recog-
nizing. You call it an ocean of fraud which I think is very apt. Does
the good outweigh the bad in this program?
Mr. BREEDEN. I do not know that I am qualified to answer
that. I think we were faced with a crisis the likes of which in my
lifetime I have never seen. It would have been nice to be tighter
in how we handled it. We did not. That is water over the dam from
my perspective. The question is how do we go after the money that
was taken improperly?
I have spent 20 years doing that for the SEC, for the Justice De-
partment, and you do not do it by writing reports. You do it by tak-
ing the largest transactions, going through them, putting knowl-
edgeable people reviewing it, and where you find problems, refer it,
get teams and prosecutors to go after it. And we have to remember
that iceberg of stolen money a few years from now will be an ice
cube. Time is of the essence.
Mr. ALFORD. Well, clearly we do not have the resources to do
this right now with the Inspector General’s office. You are pro-
posing the private sector fill in the gaps. Could this work with the
whistleblower program? Put everyone on commission and lets get
this $400 billion back.
Mr. BREEDEN. Yes, sir. I think you could. That is what I am
suggesting that other agencies supplement their internal sources
with people on the outside. I have for the last 10 years worked for
the Department of Justice. I am not a government employee but
under contract we work for them. Every day we try and find fraud
and refer it to prosecutors.
Mr. ALFORD. Are there any prosecutorial risks once we get to
court with these when the private sector is involved versus some-
one with the government?
Mr. BREEDEN. None whatsoever.
Mr. ALFORD. There you go.
17

What do we learn from this now? Really quickly, can you give me
one thing that we can improve on next time, God forbid we have
another emergency like this?
Mr. BREEDEN. A little slower. A better pace. Systems knowing
ahead of time you are going to have a lot of fraud and that you
have to go through the data as you make each and every loan. It
is way better for the taxpayers to stop the fraud before it happens
then to go after it later.
Mr. ALFORD. Thank you, sir.
Ms. Miller, quick question. You said you worked with the Inspec-
tor General on this. Have you met with the Inspector General?
Ms. MILLER. Yes. Many times.
Mr. ALFORD. Have you met with Administrator Guzman on this
topic?
Ms. MILLER. No.
Mr. ALFORD. Why not?
Ms. MILLER. I worked for the Pandemic Response Account-
ability Commitmtee, so Mike Ware, the IG is a Member of that
Committee. So I worked closely with him. I did not have a reason
to meet with——
Mr. ALFORD. If you happen to talk to her would you tell her we
would really like for her to come down here and explain the dif-
ferences between her number and the number of the IG and what
we are going to do to get this back? Would you do that for me?
Thank you very much.
Ms. MILLER. Yeah, I have some ideas about the differences, too,
I could share.
Mr. ALFORD. Well, thank you very much. I yield back.
Chairman WILLIAMS. Thank you. I now recognize Representa-
tive Davids from the great state of Kansas for 5 minutes.
Ms. DAVIDS. Thank you, Chairman. And thank you to you and
to the Ranking Member for holding this hearing today.
As several of our witnesses have already pointed out, combatting
waste, fraud, and abuse of government dollars should be something
that we are all interested in. The Small Business Administration’s
COVID-19 relief programs, like the Paycheck Protection Program
and the Economic Injury Disaster Loans certain saved countless
small businesses from closing. But unfortunately, American tax-
payers and many other small businesses were victimized by fraud-
ulent actors that stole those desperately needed funds, a total of
which is estimated to be over $200 billion. And to date the SBA
and Office of Inspector General have successfully recovered about
$30 billion in fraudulent COVID-19 funds.
But certainly, there is more work to be done. Given the
unprecedent scope of these pandemic programs, we have a lot
ahead of us. But I know we are currently responding to pandemic-
related fraud. But we also need to be prepared to properly mitigate
widespread fraud during future emergencies. And that means en-
suring that our government oversight resources are prepared in
utilizing the best practices that we have learned during the
COVID-19 pandemic. I do think that everyone here today shares a
common goal of protecting American taxpayer dollars and ensuring
that we are being fiscally responsible while doing that.
18

So before I dive into my question I do want to thank all of our
witnesses for sharing your perspectives, for your service, and mak-
ing sure that we have a better stewards of the taxpayers’ dollars.
So the first question, Ms. Miller, I would like to ask you. Given
the SBA OIG has shared this concept of 100 years’ worth of pan-
demic-related casework to properly review, review the cases, I am
curious how you—maybe you can share some of the insights you
have about how we can better prevent the fraud, waste, and abuse
going forward as we look at—not if, but when we face future emer-
gencies.
Ms. MILLER. Yes. And I think that is a really important point
because we are talking about recovering pandemic stolen funds
today, but it is water over the dam. And it is really important to
prepare agencies for the future. SBA had not implemented many,
if any, of the practices of the GAO framework for managing fraud
risk in federal programs which GAO issued in 2015. The comp-
troller general has made comments publicly in several hearings
about his disappointment that agencies did not take that document
more seriously and follow those practices.
And so going forward, SBA has begun to take some steps. They
have established a Fraud Risk Management Board, which is a
good, centralized entity that shows some commitment. But they
need to continue to build, and all agencies, especially SBA and any-
body that is administering a lot of direct funding to the public, pre-
ventative antifraud controls that use data. And that is really im-
portant. SBA has begun that work but there is much more work
for SBA to do in the future if they want to make sure that they
can be prepared for the next.
And I want to make a point about recovering funds. A lot of the
funds that were stolen were identity theft funds. Those were nation
state actors. We are not going to get those back from whistle-
blowers or anybody else. They are gone. We are not going to get
that money back, unfortunately.
Ms. DAVIDS. So one of the things that I did want to ask you
about as well as the suggestion of incentivizing whistleblowers. I
am curious in your view with the SBA OIG in their current capac-
ity housing some sort of whistleblower management office what,
really quickly, if you could tell me what your thoughts are on that.
Ms. MILLER. Yeah. I mean, they are going to have to add staff
to fund that office. And so, you know, given that the IG is already
stretched, you know, it could be. I am really not qualified to weigh
in on the cost benefit of it but it would definitely add resources,
and the SBA OIG has mentioned that he needs more resources
than he already has now. So that has to be considered.
Ms. DAVIDS. I am low on time.
Mr. ZERBE. If I could add to the conversation.
Ms. DAVIDS. Oh, yeah.
Mr. ZERBE. The only thing I would just say to that is I do not
know the details either but I would say it may be minimal because
they are already dealing with folks coming in with tips and re-
sources in the thousands. So I do not know if it is going to need
a big expansion. I am sorry.
Ms. DAVIDS. No, I appreciate that.
19

In the limited time I have left, I might follow up with all of you
with some of the additional questions I have but I do want to high-
light a couple of things, particular from the voices from the private
sector. One of the things that I have noticed is that some of our
systems of data management and vetting probably need to be up-
dated and upgraded. And that might also be something that the
private sector could be helpful with SBA on. From this Committee’s
perspective I might follow up questions on that as well. Thank you.
Chairman WILLIAMS. I now recognize Representative Bean
from the great state of Florida for 5 minutes.
Mr. BEAN. A very good morning to you, Mr. Chairman. And good
morning, Small Business Committee. I have been cheering over the
weekend so my voice is here but I got just enough to get through
5 minutes of questions. Panelists, it is very good to see you this
morning.
Here is the biggest thing. We do not agree on much but we do
agree that there is fraud. We all agree that there is fraud. Here
is the numbers. Here is the discrepancy of disagreement. Secretary
Guzman says there is only 36 billion in fraud; yet, Inspector Ware
says maybe there is 200 to 600 billion. Which is it?
Ms. Miller, do you want to start us off?
Ms. MILLER. Yeah, well, I think that it really depends on how
you define it. So the SBA believes that certain EIDL loans and cer-
tain PPP loans should not be considered fraudulent because, for ex-
ample, if an EIDL loan is in repayment the SBA believes that a
loan that is in repayment, it is illogical to consider that that loan
would be fraudulent. The SBA IG does not agree. So they do not
agree on the terms.
Mr. BEAN. Gotcha. But that number is bigger than 36 billion
you think?
Ms. MILLER. We do not know. I mean, I do think it is bigger
than 36 billion.
Mr. BEAN. Let me go to Mr. Breeden. You say that number is
bigger than 36 billion?
Mr. BREEDEN. Massively bigger.
Mr. BEAN. It is. I think that is the correct answer that it is big-
ger than 36 billion.
Mr. BREEDEN. In 35 years I have never seen a program with
less than 30 percent roughly false claims. So that puts you at a
much, much higher number.
Mr. BEAN. They come out. One of the hardest things that I have
had to deal with, I guess, and maybe you are familiar with it. And
it deals with Barbie. I do not know if you are familiar with Barbie.
You know about Malibu Barbie or Presidential Barbie, but we now
have Swindler Barbie. And I want to show you some of the actual
logins that our vendors accepted as real people. And you can see
behind me right now.
Mr. Taylor, are you familiar with this? Are you familiar with the
scam that was run?
Mr. TAYLOR. I am, sir. What you are looking at is a mess that
made it through Fintech platforms.
Mr. BEAN. I gotcha. Now, what can we do in the future so that
Barbie or Ken—he got in on this action, too, by the way—what can
we do to prevent Barbie and Ken from getting in on the fraud?
20

Mr. TAYLOR. At ID.me, we deal with Ness 1:00:43xx quite regu-
larly. We stop them in their tracks through something called Pres-
entation Attack Detection, sir. PAD.
Mr. BEAN. So there is software that we just did not employ or
did not use?
Mr. TAYLOR. That is correct, sir. Whenever we get somebody on
camera we ensure that they are a live person.
Mr. BEAN. Very good. Would it shock any of you, I just read an
article this morning that Tencent, a big Chinese company that is
a major investor in Womply, which is one of our vendors, we paid
them $2 billion to administer this fraud. Would that shock anybody
that we paid Beijing to make sure that this fraud happens?
Mr. Breeden, does that shock you?
Mr. BREEDEN. No, sir.
Mr. BEAN. Yeah. We call this Crazy Town for a reason a little
bit.
Here is just a toss up question I have. The frustrating thing is
there was talk of just letting smaller loan frauds go. Just saying,
you know what? We will just let that go. But I say no. I say no,
and I think everybody up here says no. I filed the ‘‘We Want Our
Money Back Act,’’ which says we want our money back and we are
not going to let it go. And so I have that bill. There are other bills
that say lets extend the statute of limitations to go after it. There
is another bill that says anybody that is suspected of fraud shall
be prohibited from any government program until it is worked out.
I think that is a great bill, too.
What else do we need to do? What else do we need to do to get
our money back?
Ms. Miller, jump in.
Ms. MILLER. Yeah, well, one thought is that you can offer am-
nesty to those people who pay back the money. Amnesty from pros-
ecution for those individuals that are willing to voluntarily give the
money back. I suspect there are a number of people who have the
money and they know that they got it erroneously. They got it
fraudulently. And if they thought they were protected from pros-
ecution they might give it back.
Mr. ZERBE. Can I—I am sorry. Go ahead.
Mr. BEAN. No, go ahead. Go.
Mr. ZERBE. I would add that the IRS is facing the same level
of fraud in the Employee Retention Credit Program. And the am-
nesty is something that they are basically putting out there to say
why don’t you come in and meet Jesus and get right. So that may
be something to consider as well.
Mr. BEAN. Ten-four. Thoughts, Mr. Breeden?
Mr. BREEDEN. Wanted dead or alive posters probably have a
long history in reward programs, whether you call them whistle-
blowers or something else are certainly part of the solution. But I
go back to if you have got a problem that you think you might have
had 3 or 4 million bad loans, you cannot wait 100 years. So put
together teams of people, parcel those out, and start looking.
Mr. BEAN. Thank you very much.
Mr. Chairman, I have run out of voice and I have run out of
time. I yield back.
Chairman WILLIAMS. Thank you very much.
21

I now recognize Representative Scholten from the great state of
Michigan for 5 minutes.
Ms. SCHOLTEN. Thank you so much, Mr. Chair. And thank you
to the witnesses for coming here to testify today about this truly
important topic.
I want to start by saying that the 1.2 trillion in aid that the SBA
has distributed over the course of the pandemic was truly essential,
a lifeline to so many businesses in keeping their doors open. And
in the context of this important discussion today I do not want to
lose sight of that. You know, I think that there is a lot of agree-
ment here today about the frustration over the inability to pinpoint
how much fraud there was because a lot of our constituents, many
of our constituents were struggling to make ends meet during the
pandemic, and their hard-earned tax dollars were going to fund
these programs.
Ms. Miller, in your testimony you state that the truth most likely
lies somewhere in the middle. I am a future-oriented, problem-solv-
ing individual. You recommend that Congress establish a well-
funded—more taxpayer dollars—centralized antifraud office. Can
you elaborate on how this would allow the federal government to
prepare for the next emergency and how we might be able to avoid
this type of situation in the future?
Ms. MILLER. Sure. Yeah, cross governmental, intergovern-
mental agency issues are notoriously difficult to solve because
every individual agency is focused on its mission and its budget.
And so getting them to coordinate their activities is always very
difficult. We knew this when I was at GAO. We talked about this
a lot.
This is an intergovernmental problem. It crosses all of govern-
ment, both federal, state, and local. You need a centralized entity
within the federal government that is not the Inspector General.
The IG’s job is to get the money back after it has been fraudulently
obtained. The agencies, like the SBA, are the ones that are respon-
sible for preventing the fraud to begin with. But each individual
agency, if working together, can do things like sharing data.
Like, for example, it may not be known that the ‘‘Do not pay,’’
the Treasury ‘‘Do not pay’’ portal currently today does not have ac-
cess to the Social Security Death Master File as we speak, 3-1/2
years after the pandemic. I mean, that is a problem of data sharing
and collaboration and creating data use agreements. The Pandemic
Analytic Center of Excellence has created over 95 data use agree-
ments between agencies. That is a model for what the government
should do but not in the IG community; in the management side
of the House.
Ms. SCHOLTEN. And as these recovered funds are coming back
in to the Treasury, how does the government track these funds?
Are there any transparency measures in place so that the public
can watch and know the efficacy of recovering these funds and
where they go?
Ms. MILLER. Yeah. The Treasury has an Office of Recovery Pro-
gram and they also have an Office of Payment Integrity. And both
of those offices coordinate the systems that provide that informa-
tion to the public. So really it is the Department of Treasury that
tracks that information.
22

Ms. SCHOLTEN. And how is that released to the public? Can we
find that online? On the Treasury’s Twitter account?
Ms. MILLER. Yeah.
Ms. SCHOLTEN. Is it a report?
Ms. MILLER. I think the Department of Treasury is actually
really working right now in its Office of Payment Integrity to im-
prove that transparency in the public-facing websites. And those
are happening as we speak. I think that in the next year to 2 years
we are going to see a lot of improvement in the information that
is shared to the public. The PRAC also has a pretty great website
that provides a lot of that transparency.
Ms. SCHOLTEN. Okay. I know I speak for many constituents
that proactive communication about this and connecting that infor-
mation to the public so that they can have confidence in this would
be, you know, would be key.
Ms. MILLER. Agreed.
Ms. SCHOLTEN. Additionally, you know, in my last minute, I
wonder if you might be able to pinpoint any steps that we might
be able to take not only in preventing fraud or cracking down on
it once it occurred but even putting steps in place to close the gaps
to keep it from happening in the first place, are there more point
to point contacts that we can ensure that the money is getting di-
rectly where it needs to go? You know, disseminating to local gov-
ernments or nonprofit organizations first. Any and all of the above.
Or if you have any insights as well.
Ms. MILLER. Yeah. I think that maintaining integrity of the
funding that is going to citizens, whether that is through federally
funded state administered programs, like SNAP or, you know,
some of these benefit programs that go through the states or di-
rectly to the citizens from a federal agency. The importance is to
identify quickly before the payment is made, and we have talked
about this a bit today, whether or not the individual who is apply-
ing for that benefit is who they say they are and they are entitled
to it. And that is going to require data. Data sharing. Data ana-
lytics. Advanced analytics that can use artificial intelligence and
other tools and it is very vital that agencies get those tools to be
able to prevent fraud, waste, abuse in the future.
Ms. SCHOLTEN. Thank you. I yield back.
Chairman WILLIAMS. The gentlelady yields back.
I now recognize Representative Meuser from the great state of
Pennsylvania for 5 minutes.
Mr. MEUSER. Thank you very much, Mr. Chairman. Certainly,
thank you to all of our witnesses here today.
A very important subject. Very troubling subject. I do not think
the American people or taxpayers really have an understanding of
the level of fraud that has just come out of a relatively small agen-
cy like the SBA. It certainly makes you think what levels of fraud
occur elsewhere. You know, CMS. You name it.
So we have a big problem with this $5 trillion company of ours
known as the United States federal government and the $6 trillion
of spending that takes place. So your ideas, your backgrounds, ex-
periences are very helpful to us.
So we had the EIDL, the PPP, and the ERTC. EIDL had a wildly
unacceptable level of fraud, almost insane what occurred there. So
23

the investigations need to take place. PPP was a lot less, particu-
larly on a percentage basis. PPP needed to be rushed. EIDL needed
to be rushed. So it is not necessarily about assigning blame or
which administration but a lot of times you have got to focus on
where the problem occurred in order to fix it.
ERTC, I do not have the data in front of me on what type of
fraud existed there. I do not think the Employee Retention Tax
Credit, which is pretty important and it is still going out in impor-
tant ways. And I agree with my colleagues on both sides of the
aisle that these were very important. I mean, we could have gone
into a depression if we shut down businesses and did not fund
them to keep their employees. I mean, we would have had serious
problems. But on the same note, the level of fraud.
So you know, they say that an acceptable level of fraudulent ac-
tivity could be 2 to 3, even 4 percent. You know, in my business,
and I probably had no business being in charge of our credit de-
partment, but we had AR at any given time at about $50, $60 mil-
lion and we did not write off bad debt. It was never higher than
1 percent. And we were not all that sophisticated. So the idea that
this occurs is crazy. So I think crazy.
Now, on the same note we have the IG coming in telling us that
there is, what was it? I forget his numbers right now, $240 billion
in fraud? And then the SBA administrator tells us it is, no, it is
$50 billion. I mean, well, that is a pretty wide spread of discrep-
ancy. So that is also highly troubling.
So back to Ms. Miller, your idea of the centralized antifraud.
Look, the credit card companies, the banks do it. Why can’t the
SBA do it?
Mr. Breeden, I will start with you and just go right down the
line. What should we be doing? Can we put you in charge perhaps?
Mr. BREEDEN. I am not sure I would.
Mr. MEUSER. It is worth the money by the way; right? With the
type of billions and billions that we are talking about.
Mr. BREEDEN. Certainly having someone in charge of going
after it, going after the monies that have been stolen is a great
idea. I do not know that it ought to be any one person as opposed
to a lot of people’s job. It is a task too big for any one person. I
am not sure creating a new bureaucracy in government is really
going to solve the problem. The ones that we have already have not
solved it. So we have to understand that if you are going to have
free markets, if you are going to have a capitalist economy there
is going to be fraud. If you have a socialist economy there will be
fraud, too. So we have to build antifraud protections into every-
thing we do and be aware that there have to be limits on how
many businesses we shut down, how fast we want to help people,
things like that if we do not want the fraud to get out of control.
But right now we have a problem of getting after the people before
the money is all gone.
Mr. MEUSER. All right. So collections enforcement.
And what about prevention, Mr. Taylor?
Mr. TAYLOR. Thank you, Congressman.
It is about identify verification at the front end before these
types of benefit programs go out. Implementing the IAL2 standard
24

issued out by NIST is the first step. And being the fact that that
is a government solution that should be a nonpartisan issue.
Mr. MEUSER. Absolutely.
Down the line? Thank you.
Mr. ZERBE. Congressman, I want to reemphasize something
that has kind of been lost. Let me make sure you all understand
a couple of facts about fraud.
The IRS does root canal audits on people. When they do root
canal audits they only find offshore accounts in 7 percent—legal
offshore accounts in 7 percent of those audits. The number one way
the IRS finds fraud in offshore accounts is whistleblowers. Study
after study shows the number one way that you find fraud is whis-
tleblowers. And with all due respect to just say, well, we are going
to depend on the SBA folks, they are doing good work, but if you
want to find fraud, the way the private sector finds fraud is they
have whistleblowers. The way the government is finding fraud is
through whistleblowers.
Mr. MEUSER. I yield back, Mr. Chairman.
Chairman WILLIAMS. The gentleman’s time is up.
I now recognize Representative Gluesenkamp Perez from the
great state of Washington for 5 minutes.
Ms. GLUESENKAMP PEREZ. Thank you, Mr. Chair.
Mr. Zerbe, I appreciate those sentiments.
You know, I think that people want to build a government. You
cannot legislate good behavior. Good behavior comes from the
heart. You can penalize bad behavior. You can incentivize good be-
havior. And I think we have really in the Committee hearing today
sort of beat to death this thing of we need to go after the bad guys.
And it is costing us to not do that.
But I really appreciated in your testimony, Congressman Breeder
that—Breeden, excuse me—that normal people, small business
owners not having the time and the capacity to understand the bu-
reaucracy of a government that is no longer operating at a human
scale. So you just walk into this pit and fall through a problem and
then there goes your livelihood. And so I really appreciated your
pointing out putting things in plain English. What are the eligi-
bility criteria? Can you read this if you have a reading disability?
Or you know, and who is doing that work?
So I wondered if you could speak to how that was built in.
Yes, sir. Thank you.
Ms. BREEDEN. Thank you, Congressman.
I think that is terribly important. One of the things that we focus
on as part of antifraud protections in every victim trust we do is
to make sure that the communication of eligibility standards is as
clear as you can make it. All Madoff Victim Trust. The plan was
not written by a bunch of lawyers and a bunch of boilerplate. It is
in frequently asked questions plain English because there are a lot
of people who might file a mistaken application or one that they
are not eligible for but they do not understand that. So take that
part of it off the equation.
Ms. GLUESENKAMP PEREZ. Right. And it is who is at the
table when these rules are being written. You do not have normal
people. You have a Congress built out of a bunch of frankly lawyers
25

and people who have grown up in it and not the people who might
be applying for these programs. And I think that is a real flaw.
Mr. BREEDEN. Yes. But the laws can be complicated. But when
you have a program that is going to make loans that has eligibility
standards that is where either an agency itself or in cases we do,
the private sector, you spend a lot of time trying to write very
clearly so people understand what is required and what is not al-
lowed. It does not mean people will not go ahead and violate it.
Ms. GLUESENKAMP PEREZ. Sure.
Mr. BREEDEN. There will be some.
Ms. GLUESENKAMP PEREZ. But we need to make it as easy
as possible for people to do the right thing.
Mr. BREEDEN. I completely agree.
Ms. GLUESENKAMP PEREZ. So thank you for that.
And you know, Ms. Miller, I also likewise appreciated your testi-
mony. We had Inspector General Ware come in and testify a few
months ago about the incredible work his office is doing to inves-
tigate these cases of potential fraud and recoup the stolen money.
At the same time he shared that his office had identified 90,000 ac-
tionable leads and that his office needs more resources to inves-
tigate these leads and the DOJ needs more funding for attorneys
to prosecute these fraudsters. Ninety thousand sure feels like a lot
to me. It feels like he has got a lot on his plate. And I am won-
dering, you know, we are staring down the face of a shutdown here,
so how is that going to affect the oversight in law enforcement com-
munities’ ability to crack down on fraud? And is the government
losing out on money that we could be recouping would you say?
Ms. MILLER. I mean, for sure. In short, he is going to lose the
time of all the people who could be doing those investigations when
the government shuts down.
Ms. GLUESENKAMP PEREZ. Yeah. Yeah.
Thank you so much to all of our witnesses for being here. And
thank you, Mr. Chair. I yield back.
Chairman WILLIAMS. All right. Next, I want to now recognize
Representative Stauber from the great state of Minnesota for his
5 minutes.
Mr. STAUBER. Thank you very much and to all the witnesses,
thanks for being here.
Ms. Miller, congratulations on being a Member of our Olympic
team. I was an aspiring Olympic athlete. I was not good enough
to make the Olympic hockey team but I gave it my best shot. I al-
ways wanted to be an Olympic athlete. That was a goal of mine.
I will say this, Mr. Taylor, Mr. Meuser just asked you what is
the biggest thing to stop fraud and your answer was identity
verification; correct?
Mr. TAYLOR. That is correct, Congressman.
Mr. STAUBER. Just changing gears here and then I am going
to get back to our subject. Would that be considered in the same
light for our national elections?
Mr. TAYLOR. Identify verification could go for any type of pro-
gram, Congressman.
Mr. STAUBER. Thank you.
Ms. Miller, with your experience, what do you think is the mone-
tary amount of fraud that someone should go to prison for?
26

Ms. MILLER. I do not have experience to make that decision.
Mr. STAUBER. Any idea? Any guess?
Ms. MILLER. No.
Mr. STAUBER. Would it be 50,000, 100,000?
The reason I am asking this is, this fraud was put on the Amer-
ican people. And there are people that did not get EIDL loans that
should have got it. And there are people that struggled to get PPP
loans in a faster timeframe and did not. And it was taxpayer
money that went out.
Does anybody have an idea? Any of the other three witnesses to
my question to Ms. Miller? What should be the amount somebody
should go to prison for, for stealing the taxpayers’ money? What is
it? Mr. Breeden?
Mr. BREEDEN. Sir, I think the threshold of what can be pros-
ecuted should be fairly low. The theory of broken windows in law
enforcement that just because somebody only broke one window, if
that happens across an entire city it can have a very bad effect. So
the level ought to be low. Then you have to have prosecutorial dis-
cretion where prosecutors have to look at it and say is this an egre-
gious fraud or is it not?
Mr. STAUBER. The broken windows theory as a former police of-
ficer I subscribe to that theory. Absolutely.
You know, in Minnesota we had Feeding our Future. It was a
nonprofit meant to feed people. There were over $250 million of
COVID-19 federal funds that were stolen. And these fraudsters
bought luxury cars, real estate, and other unlawful futures. The
Small Business Administration, I think, and our government, and
our Inspector General, we need to hold these people to task. If we
are talking about millions and millions of dollars, and Ms. Miller
mentioned earlier in her testimony that some of these identify theft
folks, we are not going to get the money back. To me, I understand,
I mean, the broad spectrum of the fraud. But we need to make a
statement as a country. This is taxpayer money. And I guess a cer-
tain percentage is expected but we have to go after it. We have to
go after it to make the statement. Nobody should steal the U.S.
taxpayers’ money. And they did it during a pandemic when our na-
tion was brought to her knees. That is just simply wrong. And so
the experience that you all have shared with us, there is so much
knowledge here.
Mr. Breeden, I think that you being in the private sector, you
had mentioned a couple minutes ago that you are not a government
employee and you are doing really good work. I do not necessarily
subscribe to another government group or another Committee. The
private sector here has shown the way. We just have to listen and
give you the authority and the ability and the staff to do what you
do best. Obviously, the SBA has failed here. There is no question
about it.
I want to thank you for your testimony and just your years of
experience. We need more of this. And this is a bipartisan issue
that we need to work on.
Mr. Chair, I yield back.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Representative LaLota from New York, the great
state of New York, for 5 minutes.
27

Mr. LALOTA. Thank you, Mr. Chairman. The great state of New
York, sir.
Chairman WILLIAMS. Got it.
Mr. LALOTA. Two hundred billion dollars. Two hundred billion
dollars. Lets put that in perspective.
If Congress had that $200 billion back we could give the average
taxpayer a $2,000 tax cut. Or we could defer conflict with China
by buying four new aircraft carriers, eight new submarines, and 27
new Navy destroyers. Or we could fully fund the state and local tax
deduction which a lot of my constituents would like. Two hundred
billion dollars. Approximately one in five COVID loans were poten-
tially fraudulent. Thank you, Chairman, for hosting this important
meeting and shining a spotlight on this important issue that my
constituents care a heck of a lot about. And for our witnesses for
being here to help inform our Committee on this issue.
Despite the widespread fraud, the SBA has downplayed the
fraud stolen from our fellow taxpayers and has given a free pass
to anyone who has stolen less than $100,000 by refusing to inves-
tigate those smaller loans. The SBA’s disregard for this issue is ex-
emplified by the administrator’s failure to testify before this Com-
mittee’s July hearing with the Inspector General. It is our job on
this Committee to fight waste, fraud, and abuse in the Small Busi-
ness Administration, and that job is made much more difficult
when the SBA administrator does not show up.
That leads me to my first question. Mr. Taylor, sir, in an effort
to expedite funds, the SBA did not check the ‘‘do not pay’’ lists be-
fore sending money out. Is that a normal procedure?
Mr. TAYLOR. The self-certification allowed by SBA at the begin-
ning of the pandemic was totally uncalled for and unprecedented.
Mr. LALOTA. And what is the effect on not doing that diligence?
Mr. TAYLOR. The massive fraud that we are seeing today.
Mr. LALOTA. Mr. Breeden, you have quite the impressive re-
sume, sir. I looked it up. Harvard Law, Chairman of the SEC, and
you are a native Long Islander most importantly. So that well
qualifies you to be on this panel.
My question, sir, is what effect does the SBA’s decision to not in-
vestigate those smaller loans have on future behavior?
Mr. BREEDEN. I think it is very deleterious, sir. It sends a mes-
sage that, okay, you can play around the edges and people just will
not bother. And I think the principle that if you steal from your
neighbors, you steal from your fellow citizens, that will always be
a matter worthy of government’s attention is the right message to
send.
Mr. LALOTA. It is a behavioral thing, right, that if folks know
there are consequences to their negative behavior they are less
likely to conduct that negative behavior; no?
Mr. BREEDEN. Yes, sir.
Mr. LALOTA. Mr. Taylor, back to you, sir. I know that we talked
a little bit about Barbie before. We are going to do it just shortly
once again.
How can the private sector help to identify, to do identify
verification better to help prevent fraud?
Mr. TAYLOR. Thank you, Congressman.
28

Getting back to the Presentation Attack Detection that I was
mentioning to the previous congressman about, that would have
stopped those types of attacks on those Fintech platforms.
The fraud that was experienced specifically around the PPP, the
top 12 lenders around that were all Fintech platforms. They would
have allowed something like that to go through. Currently, identity
verification, whenever you implement liveness detection at the
IAL2 that is approved by NIST, it stops that in its tracks. Addi-
tionally, SBA OIG, specifically IG Ware talked about it the last
time that he was here, talked about the overlapping of IP address-
es and suspicious IP address activity, if this was 5 years ago that
is an effective way to go about doing an investigation. It no longer
holds that value at the IP address level. You have a to get into the
big data that is associated with that IP address as well as the de-
vice intelligence associated with it.
Mr. LALOTA. So doing things like that obviously come at a cost;
right? That it takes more to invest in better technology, better
process. That comes at a cost. Would you assess that as positive
ROI, is the return on that investment positive for the taxpayers?
If we go through that diligence, raise the bar, do better identify
verification, do we have less fraud? And is the less fraud worth *
does it give us extra money to pay for those costs, sir?
Mr. TAYLOR. Yes, sir. As a matter of fact, everywhere that
ID.me has been implement across 27 states during the pandemic,
fraud rates went down. The pass rates went up. So it is a matter
of inclusivity in these programs. It is a matter of stopping the
fraud in its tracks. And also, the false positives associated with
misidentifying an individual, which you can do if you are just tar-
geting an IP address.
We are not allowed, at ID.me, we have a policy. We keep the
false positive rates very low. Well below 1 percent. The fraud rates,
the same thing. The fact that we are talking about programs that
have 18-21 percent in the fraud rate is unheard of in the private
sector.
So with that being said, I would be very cautious that any type
of program that is concentrated only on the IP address. Addition-
ally, in Puerto Rico, we took the pass rates from 23 percent up to
78 percent at a cheaper cost.
Mr. LALOTA. Thank you very much. My time is expired. Thank
you, Chairman.
Chairman WILLIAMS. The gentleman yields.
I now recognize Representative Salazar from the great state of
Florida for her 5 minutes.
Ms. SALAZAR. Thank you, Mr. Chairman. The great state of
Florida indeed. And thank you for coming to explain to us your
knowledge and everything, all the steps that you have taken.
Mr. Taylor, I hear that in the state of Florida you are able to es-
tablish a very good technique that we could replicate in the rest of
the country. Could you please explain for my constituents what did
we do right in Florida versus other states?
Mr. TAYLOR. Thank you, Congressman.
The relationship with Florida has been an absolutely fantastic
one.
Ms. SALAZAR. Okay.
29

Mr. TAYLOR. We have implemented the IAL2 policy there that
I spoke about previously. So the fact that when you have identify
verification gating a lot of the public benefit programs there——
Ms. SALAZAR. And how does that work in particular so I can
understand. I do not have a criminal mind so I am not sure what
people think. Shat do you need to do in order to defraud the gov-
ernment? So why the facial identification is important?
Mr. TAYLOR. Less about the facial recognition side and more
about the actual Liveness detection. The fact that a person is a real
individual. The mask that made it through and the Barbie Swin-
dler. Those do not make it through ID.me in the State of Florida.
Because we have that Liveness detection built into the platform.
Additionally, we have unsupervised sites. So if a person cannot
get through, let’s say that there is a language barrier, we support
over 200 languages on that side. So the person can come through,
talk to a trusted referee. And we are talking about wait times that
are less than 5 minutes to get onto those platforms.
Lastly, I would turn your attention to Hurricane Ian last year.
The devasting impacts with that, obviously in the billions dollars
and loss. We have a thread intelligent cell that lives out on the
Dark Web that looks for fraudsters going after these types of ben-
efit programs. We actively go out and look for the bad guys going
after these public benefits, and we did that in the state of Florida.
So much so that whenever Hurricane Ian occurred, we had the in-
person terminals that the IME has, and the people were able to
verify their identity, get their FEMA funds right there in the spot
instead of having to wait in line to go to a state office or something
like that.
Ms. SALAZAR. So the facial identification could be the answer
for the federal government to stop future fraud across the board or
across the nation. Would you consider——
Mr. TAYLOR. It is one part of an entire fraud suite of tools that
we would recommend.
Ms. SALAZAR. Explain to my constituents why after the pan-
demic we had so much fraud. I would imagine that people were
claiming that they could not find work or that they did not have
a job. Explain to me the scenario after COVID.
Mr. TAYLOR. During the first 9 months of the pandemic you had
self-certification of these benefit programs. Combine that with the
speed at which they were decimated, you are talking about an un-
precedented amount of capital that went out into the economy.
That incentivized a lot of nation state actors, as well as your tradi-
tional domestic fraudster to go after these benefit programs.
Ms. SALAZAR. Okay.
Mr. TAYLOR. Your constituents have not only suffered from the
standpoint of losing your identity, possibly for tax purposes or fil-
ing for unemployment but also they may have inadvertently had
their identity used in a credit scheme that would target a small
business.
Ms. SALAZAR. Okay. So we know that the SBA, there is a dis-
pute of the amount of money that went to the wrong hands through
the PPP program. Do we have a figure of how much money went
to the wrong hands? Or how many millions of dollars were lost
after the pandemic for claims from people that did not deserve or
30

were not the right beneficiaries of these monies for unemployment
benefits?
Mr. TAYLOR. Thank you, Congressman. I would agree with IG
Ware that the likely fraud is somewhere in that realm of $650 bil-
lion. The fraud number right now that he is planning on going and
prosecuting at 200 billion.
Ms. SALAZAR. Two hundred billion dollars. And this money that
we are talking about is included in that figure of 200 billion?
Mr. TAYLOR. That is correct, Congressman.
Ms. SALAZAR. Okay. Thank you. I yield back.
Chairman WILLIAMS. Next, I now recognize Representative
Phillips from the great state of Minnesota for 5 minutes.
Mr. PHILLIPS. Thank you, Mr. Chairman. Thank you for hold-
ing this hearing, and to all of you for being with us.
Let me just start by saying I share every one of my colleagues’
disgust by the scale of fraud that took place during the pandemic,
and we have got to do everything we can to investigate and most
importantly recoup billions of dollars that were literally stolen from
American taxpayers. Stolen during what I consider a tragic mo-
ment in our history.
The good news in my estimation is that we have got a clear road-
map, and that is to give the SBA Inspector General the resources
that his office needs to go after these fraudsters.
I come from a business background myself, like the Chairman,
where return on investment is the name of the game. The IG’s of-
fice has requested $47 million in discretionary funding for its oper-
ations in fiscal year 2024. Unfortunately, the House Appropriations
Committee underfunded that request by about $15 million. Yet,
over the past 2 years, OIG’s efforts have yielded over $9 billion in
financial accomplishments, recoveries, fines, and forfeitures. Con-
sidering these numbers, an extra $15 million in my estimation
seems like a heck of a good return on investment to me. Inspector
General Hannibal Ware has proven that his office delivers results
for taxpayers and Congress simply needs to give him the tools to
do his job.
So I would welcome suggestions from our witnesses today. And
we ought to consider them fairly, but we cannot lose sight of the
fact that the number one thing we can do to recoup fraud is to fund
the Inspector General’s office fully.
Let me just start with you, Mr. Zerbe. I really appreciate the bi-
partisan tone in your testimony. I think you are right, that elimi-
nating fraud, waste, and abuse of the SBA is a bipartisan exercise.
Must be bipartisan. In the same way that small business relief
was. I am intrigued by your proposal to establish a whistleblower
program at the SBA. It has proven successful at other agencies, of
course. But one of my concerns is that the IG currently lacks re-
sources to actually investigate what I think are about 90,000 ac-
tionable leads that it has already identified.
So what do you make of this concern?
Mr. ZERBE. Thank you for that, Congressman.
I think a couple of thoughts for you. One is that I agree they
have got kind of a fire hydrant drinking moment right here but I
still think that the whistleblowers will be able to: (a) better target
the most important fraud cases, and also just so you understand,
31

when you are submitting, particularly when you have an award
program, it is not just a tip and things like that. The whistleblower
and his attorney, they are providing a whole package for the agen-
cy. I mean, we are putting in the documents, the material, a view
of the law, a narrative. We want it on a T-ball for them to be able
to just do it. So it is making the agency much more time efficient
and effective in terms of what they are doing.
One thing, too, to consider and you might think about as you are
looking at legislation in this area, it is not uncommon for the whis-
tleblower award programs and the Qui Tam programs in other
agencies to allow for a reimbursement of the costs the agency has
with their investigation as well, too. In other words, yes, we recov-
ered these funds, and yes, you know, we are going to reward the
whistleblower. But we are also going to reimburse the SBA for its
costs as well, too. So it may be something to consider to address
the concern you have got about limited agency resources to say,
great, we are going to in a sense incentivize not only the private
sector to come forward and assist the SBA through the whistle-
blowers but we are also going to incentivize the SBA to embrace
those whistleblowers and work with them because then they will
basically be able to have their costs met. So that may be a way to
address your concerns, Congressman.
Mr. PHILLIPS. And based on that absurdly high number, 90,000
leads, are there alternatives concerning the resources, levers, tools
we have available to us? In your estimation, are there other mecha-
nisms we should be considering to reduce that workload and ensure
that every one of those leads is investigated?
Mr. ZERBE. Well, I think that is where it is going to help not
to repeat. But I think having seen a lot of these kind of tips, par-
ticularly more from my IRS work, a lot of them tend to be pretty
thread bare. I mean, just, well, you know, Jimmy has got a fancy
car and you guys should go look at him. I think, you know, when
you are getting the whistleblower you are getting an insider in-
formed and you are getting the big fish. So the SBA——
Mr. PHILLIPS. Okay. So quality, not quantity?
Mr. ZERBE. Yeah. And the IG white paper highlighted one. They
had one whistleblower who came forward and it was over $600 mil-
lion that they had identified thanks to this one whistleblower. So
you are right. It is able to get the big fish and the worst actors,
if you will, and target them better on that. Yes, Congressman.
Mr. PHILLIPS. Okay. I appreciate it. I have only got about 20
seconds left.
I just want to refer to a letter that I plan to send to both the
House and Senate Appropriations Committees requesting that they
fulfill the OIG’s full request of $47 million in discretionary funding
because holding these bad actors accountable should be bipartisan
goals, and I surely invite my colleagues on both sides of the aisle
to join me in that endeavor.
With that, Mr. Chair, I yield back with exactly 1 second left.
Chairman WILLIAMS. Great job.
I would like to thank our witnesses today for their testimony and
for appearing before us.
32

Without objection, Members have 5 legislative days to submit ad-
ditional materials and written questions for the witnesses to the
Chair which will be forwarded to the witnesses.
I ask the witnesses to please respond promptly.
So if there is no further business, without objection the Com-
mittee is adjourned.
Thank you all very much.
[Whereupon, at 11:35 a.m., the committee was adjourned.]
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