CHRG-118hhrg50896 (FEDERAL PANDEMIC SPENDING: A PRESCRIPTION FOR WASTE, FRAUD AND ABUSE)
Summary
Transcript of the hearing Federal Pandemic Spending: A Prescription for Waste, Fraud and Abuse, before the Committee on Oversight and Accountability, House of Representatives, on February 1, 2023 (Serial No. 118–1). Witnesses were The Honorable Gene L. Dodaro, Comptroller General of the United States; The Honorable Michael E. Horowitz, Chair, Pandemic Response Accountability Committee; Mr. David M. Smith of the U.S. Secret Service Office of Investigations; and Ms. Rebecca Dixon of the National Employment Law Project. The index of documents lists items submitted by members, including a PRAC report on state pandemic unemployment insurance programs and a Small Business Administration OIG report on Paycheck Protection Program eligibility for non-profit organizations. The committee adjourned at 3:52 p.m.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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FEDERAL PANDEMIC SPENDING:
A PRESCRIPTION FOR WASTE,
FRAUD AND ABUSE
HEARING
BEFORE THE
COMMITTEE ON
OVERSIGHT AND ACCOUNTABILITY
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
FEBRUARY 1, 2023
Serial No. 118–1
Printed for the use of the Committee on Oversight and Accountability
(
Available on: govinfo.gov,
oversight.house.gov or
docs.house.gov
U.S. GOVERNMENT PUBLISHING OFFICE
50–896 PDF WASHINGTON : 2023
COMMITTEE ON OVERSIGHT AND ACCOUNTABILITY
JAMES COMER, Kentucky, Chairman
JIM JORDAN, Ohio JAMIE RASKIN, Maryland, Ranking Minority
MIKE TURNER, Ohio Member
PAUL GOSAR, Arizona ELEANOR HOLMES NORTON, District of
VIRGINIA FOXX, North Carolina Columbia
GLENN GROTHMAN, Wisconsin STEPHEN F. LYNCH, Massachusetts
GARY PALMER, Alabama GERALD E. CONNOLLY, Virginia
CLAY HIGGINS, Louisiana RAJA KRISHNAMOORTHI, Illinois
PETE SESSIONS, Texas RO KHANNA, California
ANDY BIGGS, Arizona KWEISI MFUME, Maryland
NANCY MACE, South Carolina ALEXANDRIA OCASIO-CORTEZ, New York
JAKE LATURNER, Kansas KATIE PORTER, California
PAT FALLON, Texas CORI BUSH, Missouri
BYRON DONALDS, Florida SHONTEL BROWN, Ohio
KELLY ARMSTRONG, North Dakota JIMMY GOMEZ, California
SCOTT PERRY, Pennsylvania MELANIE STANSBURY, New Mexico
WILLIAM TIMMONS, South Carolina ROBERT GARCIA, California
TIM BURCHETT, Tennessee MAXWELL FROST, Florida
MARJORIE TAYLOR GREENE, Georgia BECCA BALINT, Vermont
LISA MCCLAIN, Michigan SUMMER LEE, Pennsylvania
LAUREN BOEBERT, Colorado GREG CASAR, Texas
RUSSELL FRY, South Carolina JASMINE CROCKETT, Texas
ANNA PAULINA LUNA, Florida DAN GOLDMAN, New York
CHUCK EDWARDS, North Carolina JARED MOSKOWITZ, Florida
NICK LANGWORTHY, New York
ERIC BURLISON, Missouri
MARK MARIN, Staff Director
JESSICA DONLON, Deputy Staff Director & General Counsel
DANIEL ASHWORTH, Deputy Chief Counsel for Oversight
RAJ BHARWANI, Senior Professional Staff Member
SARAH FEENEY, Professional Staff Member
MALLORY COGAR, Deputy Director of Operations and Chief Clerk
CONTACT NUMBER: 202-225-5074
JULIE TAGEN, Minority Staff Director
(II)
C O N T E N T S
Page
Hearing held on February 1, 2023 ......................................................................... 1
WITNESSES
The Honorable Gene L. Dodaro, Comptroller General of the United States,
Government Accountability Office
Oral Statement ................................................................................................. 6
The Honorable Michael E. Horowitz, Chair, Pandemic Response
Accountability Committee
Oral Statement ................................................................................................. 7
Mr. David M. Smith, Assistant Director, Office of Investigations, U.S. Secret
Service
Oral Statement ................................................................................................. 9
Ms. Rebecca Dixon, Executive Director, National Employment Law Project
Oral Statement ................................................................................................. 81
Opening statements and the prepared statements for the witnesses are avail-
able in the U.S. House of Representatives Repository at: docs.house.gov.
(III)
INDEX OF DOCUMENTS
* Memo, Implementation Guidance for Supplemental Funding Provided in
Response to COVID-19; submitted by Rep. Raskin.
* Report, PRAC, ‘‘State-Entitled Key Insights in State Pandemic
Unemployment Insurance Programs;’’ submitted by Rep. Ocasio-Cortez.
* Article, New York Times, ‘‘How Bar’s Quest to Find Flaws in the Russia
Inquiry Unraveled;’’ submitted by Rep. Goldman.
* Letter, Jan. 31, 2023, from Reps. Lieu and Goldman, to Inspector General
Barr Durham; submitted by Rep. Goldman.
* Graphic, COVID Funding; submitted by Rep. Luna.
* Letter, January 31, 2023, from Office of the Inspector General, Social
Security Administration, to Chairman Comer; submitted by Chairman
Comer.
* Letter, January 27, 2023, from Sen. Sen. Ernst, to Chairman Michael
Horowitz; submitted by Rep. Burlison.
* Article, Politico, ‘‘Biden Administration Reroutes Billions in Emergency
Stockpile, COVID Funds to Border Crunch;’’ submitted by Rep. Donalds.
* Report, Small Business Administration, OIG, ‘‘Paycheck Protection
Program Eligibility for Non-Profit Organizations;’’ submitted by Rep.
Brown.
* Statement for the Record; Ranking Member Connolly; submitted by
Ranking Member Connolly.
* Questions for the Record: to Mr. Dodaro; submitted by Chairman Comer.
* Questions for the Record: to Mr. Dodaro; submitted by Rep. Palmer.
* Questions for the Record: to Mr. Dodaro; submitted by Rep. Donalds.
* Questions for the Record: to Mr. Dodaro; submitted by Rep. Perry.
* Questions for the Record: to Mr. Michael Horowitz; submitted by Chair-
man Comer.
* Questions for the Record: to Mr. Michael Horowitz; submitted by Rep.
Palmer.
* Questions for the Record: to Mr. Michael Horowitz; submitted by Rep.
Perry.
* Questions for the Record: to Mr. Michael Horowitz; submitted by Luna.
* Questions for the Record: to Mr. Smith; submitted by Chairman Comer.
* Questions for the Record: to Mr. Smith; submitted by Rep. McClain.
* Questions for the Record: to Mr. Dodaro; submitted by Rep. Raskin.
* Questions for the Record: to Mr. David Smith; submitted by Rep. Raskin.
* Questions for the Record: to Mr. Michael Horowitz; submitted by Rep.
Raskin.
The documents listed are available at: docs.house.gov.
(IV)
FEDERAL PANDEMIC SPENDING:
A PRESCRIPTION FOR WASTE,
FRAUD AND ABUSE
Wednesday, February 1, 2023
HOUSE OF REPRESENTATIVES,
COMMITTEE ON OVERSIGHT AND ACCOUNTABILITY,
Washington, D.C.
The committee met, pursuant to notice, at 10:05 a.m., in room
2154, Rayburn House Office Building, Hon. James Comer (chair-
man of the committee) presiding.
Present: Representatives Comer, Gosar, Foxx, Grothman, Palm-
er, Higgins, Biggs, Mace, LaTurner, Fallon, Donalds, Sessions,
Armstrong, Perry, Timmons, Burchett, Greene, McClain, Boebert,
Fry, Luna, Edwards, Langworthy, Burlison, Raskin, Norton, Lynch,
Connolly, Krishnamoorthi, Khanna, Mfume, Ocasio-Cortez, Porter,
Bush, Brown, Gomez, Stansbury, Garcia, Frost, Balint, Lee, Casar,
Crockett, Goldman, and Moskowitz.
Chairman COMER. We will call this hearing to order, the first
hearing of the 118th Congress for the House Committee on Over-
sight and Accountability. Welcome.
As chairman, I intend to focus this committee’s attention and re-
sources on its core mission, to ensure our government is working
for the American people in an efficient manner, agencies guard tax-
payer funds from fraudsters and ineligible participants, and polit-
ical leadership be held accountable for bad consequences of their
policies.
Last Congress, Democrats strayed far from this mission. The
Biden Administration faced little to no scrutiny under unchecked
one-party Democrat rule in Washington. This committee conducted
almost no oversight of Federal Government agencies, programs, or
policies. The non-partisan Lugar Center gave Democrats an F in
oversight last Congress. Instead, this committee spent its time and
resources demonizing America’s oil and gas industry, investigating
an NFL football team, and examining pet flea and tick collars.
The American people have suffered from the lack of oversight
and accountability. Crises have continued and worsened. Our Na-
tion is facing the worst border crisis in American history. Fentanyl,
which is coming across the Southern border, is the leading cause
of death for many Americans. Americans are facing high energy
prices resulting from policies aimed at diminishing domestic energy
production, and the American people have struggled with con-
sequences of prolonged COVID closures and lockdowns, inflation,
(1)
2
and shortages of labor and goods. That is why this first hearing is
so important.
Today’s hearing is the first step in examining the massive waste,
fraud, and abuse in COVID relief programs. In March 2020, the
United States struggled to respond to growing threats presented by
COVID–19. With the economy on the brink of collapse, Congress
passed a series of bills intended to both fund the public health re-
sponse and keep the economy afloat. The largest of these measures
was the Bipartisan CARES Act. It created programs like the Pay-
check Protection Program, which saved jobs at small businesses
across the country. It rolled out pandemic unemployment insurance
to help American workers who were victims of business closures
and spiking unemployment. These programs brought relief to many
Americans, but with massive government spending comes oppor-
tunity for waste, fraud, and abuse.
Unfortunately, Democrats conducted little oversight of the over
$2 trillion spent under the CARES Act. They did the exact oppo-
site. They spent another $2 trillion, but this time with absolutely
no protections or guardrails to prevent waste. And worse, they
spent this money when there was no sign that it was actually need-
ed. This out-of-control spending led to 40-year high inflation, kept
people out of work longer, and harmed our economy. During the
markup for this legislation, many of us warned that without over-
sight mechanisms in place, taxpayer dollars were at risk of being
misused or lost to fraud, waste, or abuse.
Republican amendments would have put strings attached on
those dollars. They would have allowed for oversight, but Demo-
crats voted down every single amendment we offered. And what
happens if there is no oversight? Nothing good. We have seen re-
ports that between $163 billion to $400 billion in unemployment in-
surance benefits were paid out improperly. We have seen reports
that between $76 billion to more than $100 billion in Paycheck Pro-
tection Program and Economic Injury and Disaster Loan Programs
were lost to improper payments. We have seen reports that $266
billion in improper payments were made by Medicaid during the
pandemic. That is why we are having our first hearing of the new
Congress on waste, fraud, abuse in pandemic spending programs.
We will hold many more of these hearings on this important issue.
We owe it to the American people to get to the bottom of the
greatest theft of American taxpayer dollars in history. We must
identify where this money went, how much ended up in the hands
of fraudsters or ineligible participants, and what should be done to
ensure that it never happens again. This committee will evaluate
the hundreds of billions of dollars in grants and loans doled out for
nearly every agency in the Federal Government to ensure those
funds were appropriately used to respond to the pandemic and not
wasted on ineligible payees or unrelated matters.
We will investigate the $189 billion in elementary and secondary
school emergency relief funds, money meant to help reopen schools
and address learning loss. Instead, these funds were often used on
unrelated expenditures and even to push divisive ideologies onto
our students. We will work to ensure that the watchdogs in our of-
fices of Inspectors General and our law enforcement officers,
agents, and prosecutors have the tools they need to track down
3
fraudsters and recover illegally obtained COVID–19 taxpayer
funds.
This committee has for too long stood on the sidelines while tax-
payer dollars were wasted by bureaucrats, whose only priority is
getting money out the door. Today, we will hear from Inspector
General Michael Horowitz, GAO’s comptroller general, Gene
Dodaro, and assistant director, David Smith, with the Office of In-
vestigations at the Secret Service. Thank you all for being here to
testify about your efforts to conduct oversight of pandemic funding.
I now yield to Ranking Member Raskin for his opening state-
ment.
Mr. RASKIN. Mr. Chairman, thank you kindly. Our committee’s
purpose is to ensure that government is effectively delivering on its
promises to the American people. And as the new ranking member,
I am eager to work with you and the rest of the committee in car-
rying out this shared responsibility in a thorough, serious, non-
partisan, and even-handed way.
When I heard that our first hearing would spotlight pandemic re-
lief programs, I was pleased because I thought it would follow up
on everything the Democratic majority had been doing in the 117th
Congress since COVID–19 began. I was hopeful for an opportunity
to consider together how we can identify schemes of fraud and self-
enrichment, ripping off the taxpayers, and continue to strengthen
the structural efficiency of critical government programs that help
families and businesses across America meet the challenges of the
pandemic. Just as the political system and the campaign finance
system have recently been proven shockingly vulnerable to impost-
ers, hustlers, con men, big liars, outright fraudsters, and fakes,
some of the programs developed to respond to the COVID–19 pan-
demic have proven vulnerable to the relentless, deceitful, and
fraudulent designs of criminal predators when they, too, decide to
exploit the generosity of the American people. The traditional lan-
guage of waste, fraud, and abuse does not quite capture the con-
fidence games in organized criminal artifices and schemes that
have targeted and exploited relief programs built on the solidarity
and goodwill of the American people.
The House Select Subcommittee on the Coronavirus, which was
chaired in the last Congress by then Majority Whip Clyburn, and
which I served on, led the effort to identify and combat these crimi-
nal actors. The subcommittee conducted no fewer than seven hear-
ings focused on rooting out fraud in relief programs. I will never
forget how under Chairman Clyburn’s leadership, in our first week
or two of existence, the subcommittee recovered an improper $10
million Paycheck Protection Program loan. Less than three months
later, we helped secure the return of $109 million from a nursing
home chain that was not using the loan as Congress had specifi-
cally intended.
In March 2021, we exposed how the Trump administration’s
reckless mismanagement of small business relief programs and re-
fusal to implement basic anti-fraud controls led to nearly $84 bil-
lion in fraudulent loans. Just months later, we issued another re-
port highlighting how the Trump administration awarded $95.7
million in pandemic Food Box Program funds to three companies
that all raised severe red flags. Then again, in April 2022, we
4
showed how Trump White House officials overruled career Depart-
ment of Defense officials to approve a $700 million national secu-
rity loan to a single company in violation of legal requirements,
and so on. We used the spotlight and bully pulpit of a small sub-
committee to expose and reverse colossal frauds taking place
against the American people.
While I remain optimistic that this hearing can meaningfully ex-
plore ways to ensure the taxpayer dollars go where intended, I con-
fess I am troubled that some of our colleagues seem to want to
cherry pick facts and deploy distorted figures to attack the under-
lying legitimacy of the programs themselves, the programs that
were a lifeline and salvation for millions of businesses and families
across the country. Recall that while the former President denied,
trivialized, and dismissed the COVID–19 pandemic, it was Con-
gress which acted responsibly, and swiftly, and in bipartisan fash-
ion to create and supercharge programs that saved countless busi-
nesses and families from bankruptcy and ruin. These programs in-
cluded expanded unemployment insurance benefits and the PPP
Program, which empowered families and businesses to avoid eco-
nomic collapse. As a result of our actions, the COVID–19 economic
recession was the shortest on record.
The programs were by no means perfect. Antique government IT
systems, many running on obsolete software, collapsed and were
incapable of adapting to the scope of the crisis. States entered the
pandemic at a 50-year low for unemployment insurance system
funding, and UI claims burgeoned from 211,000 to 6.6 million, a
3,000 percent increase over a three-week period in March 2020.
People unsure of how they would pay their housing or medical bills
panicked as they waited hours on phone calls for customer service
representatives were reached, to endless busy signals in unemploy-
ment insurance purgatory. My home state of Maryland was no ex-
ception. In the one-year period from March 2020 until March 2021,
my district office received 1,400 anguished constituent requests for
help with unemployment. This is in contrast to one constituent re-
quest we received in all of 2019.
Congress asked agencies and states to do the near impossible,
and they did their very best. Expanded UI benefits kept an esti-
mated 5 million to 6 million people out of poverty in 2020 and 6.7
million people above the poverty line in 2021. The Center for Budg-
et and Policy Priorities estimates that expanded benefits may have
saved the lives of as many as 27,000 people in high-risk occupa-
tions who may have died from COVID had they not had access to
benefits.
Organized criminals and fraudsters took advantage of these cir-
cumstances by exploiting weaknesses in our IT systems. This prob-
lem was compounded by critical decisions made by the Trump ad-
ministration that hamstrung pandemic relief and anti-corruption
oversight from the very outset, crippling the government’s ability
to detect fraud. Despite specific legislative instruction from Con-
gress in our pandemic relief bills, the Trump administration regu-
larly told agencies to ignore data reporting requirements. But con-
gressional Democrats and the Biden Administration have worked
diligently from the start to recover funds stolen by organized crimi-
nal groups and other fraudsters, helped states modernize their IT
5
systems, and build new structural capacities to detect and prevent
fraud. Under President Biden’s leadership, departments and agen-
cies across the government moved swiftly to strengthen program
integrity and bolster efforts to prevent, detect, and pursue fraud,
which festered under the lackadaisical stewardship of the prior ad-
ministration.
In the days preceding this hearing, Republicans have claimed
that Democrats on this committee and in the Biden Administration
neglected to conduct meaningful oversight of these programs. The
record demonstrates these assertions are baseless. Democrats have
systematically ferreted out fraud, waste, and abuse in pandemic re-
lief, although we all can certainly be doing a much more effective
job, and that is what this hearing should be about. As the work of
the 118th Congress commences, I urge all of my colleagues across
the aisle and on our side to remember the crucial role this com-
mittee must play in eliminating fraudulent schemes by imposters
in order to protect the integrity of the programs that we adopt and
that America needs. With that, Mr. Chairman, I am happy to yield
back.
Chairman COMER. The ranking member yields back. It gives me
great pleasure to introduce our panel. I will go through and intro-
duce each member, and then we will turn it over to begin their
opening statements, but let me say this. This is a pretty quality
panel. I think if you wanted to have the perfect hearing to deter-
mine waste, fraud, and abuse in the Federal Government, I can’t
think of three better witnesses from three more appropriate agen-
cies to come before this committee. And I think you will see this
is going to begin a trend of having credible witnesses that are here
to talk about serious substantive issues, and I am very proud of
this witness panel today.
Our first witness today is Mr. Gene Dodaro, the eighth comp-
troller general of the United States and head of the U.S. Govern-
ment Accountability Office, or GAO. In a career spanning over 49
years at GAO, Mr. Dodaro has worn many hats and testified before
Congress dozens of times on important national issues, including
waste, fraud, abuse, and mismanagement in the Nation’s response
to the Coronavirus pandemic. Mr. Dodaro’s extensive experience at
the helm of an agency, often referred to as the congressional watch-
dog, is invaluable. We are glad to have you here for this very im-
portant oversight topic, and we look forward to your testimony.
Our second witness, no stranger to Congress, is Mr. Michael
Horowitz, who is the chair of the Pandemic Response Account-
ability Committee, or PRAC, and Inspector General of the Depart-
ment of Justice. Mr. Horowitz is testifying today in his role as
chair of PRAC, an entity created by the CARES Act to support
independent oversight of pandemic relief spending. The PRAC co-
ordinates cross-agency investigations by agency inspectors general,
enabling faster identification of fraud search across multiple pro-
grams. This is a very important role, Mr. Horowitz, and the com-
mittee looks forward to learning more about your and your col-
leagues’ efforts to detect fraud, waste, abuse, and mismanagement
of taxpayer dollars.
Our third witness is Mr. David Smith, assistant director Office
of Investigations at the U.S. Secret Service. As the 28th assistant
6
director for the Office of Investigations, Mr. Smith leads the Agen-
cy’s global investigative mission, comprising 161 offices and over
3,000 employees. Mr. Smith’s office also oversees the Secret Serv-
ice’s national pandemic fraud investigations and cross-agency co-
ordinated efforts, including investigations of foreign nationals steal-
ing COVID relief funds. I look forward to hearing about the Agen-
cy’s investigations into pandemic relief fraud and ongoing efforts to
counter such activities. Welcome, Mr. Smith.
We will begin with Mr. Dodaro, and I hope I pronounced that
right. I apologize if I didn’t.
STATEMENT OF GENE L. DODARO, COMPTROLLER GENERAL
OF THE UNITED STATES, UNITED STATES GOVERNMENT
ACCOUNTABILITY OFFICE
Mr. DODARO. It was excellent, Mr. Chairman. Very good. I appre-
ciate it. Thank you very much.
Good morning, Mr. Chairman, Ranking Member Raskin, mem-
bers of the committee. Very pleased to be here. I commend you, Mr.
Chairman, for holding this hearing, and I am very pleased to see
the attendance.
I would like to focus my comments this morning on four points
that I believe were the main causes of the widespread fraud that
has occurred and what could be done to deal with these issues.
First, agencies should have been much better prepared in order to
prevent fraud in the first place. We worked with the Congress back
in 2016 when the Congress passed the Fraud Reduction and Data
Analytics Act, which required agencies to implement GAO’s fraud
risk framework to help prevent fraud in the first place. Agencies
were slow to implement this legislation and, therefore, were not
prepared properly when the Coronavirus emergency occurred. This
needs greater attention and oversight, I believe, from this com-
mittee.
Second, the urgency in providing relief funds led to tradeoffs that
limited the ability to achieve accountability and transparency goals
of the legislation. These tradeoffs included allowing self-certifi-
cations and applications, limiting the amount of supporting docu-
mentation that applicants had to apply. These tradeoffs, along with
internal control weaknesses within the agencies, made these pro-
grams much more susceptible to fraud than otherwise would have
been the case. Now, Congress rectified some of these tradeoffs in
subsequent legislation. Agencies have begun to implement our rec-
ommendations, but there is much more that needs to be done to
deal with the remaining COVID programs to catch people who
have perpetrated fraud and bring them to justice. But unless we
make these changes, we are not better prepared for the future, for
future emergencies, which certainly will come with disaster assist-
ance, and relief, and other events that are unforeseen, but certainly
will come.
Third, advocating, and I have done this before, that there is a
permanent center for excellence and analytics in the inspector gen-
eral community. Now, this first one was created back in the Recov-
ery Act when we had the Great Recession, and that recovery oper-
ation center helped prevent fraud and enabled the IGs to work to-
7
gether because a lot of the fraudsters hit multiple programs as
well, and this brought in great data analytics experience. Unfortu-
nately, this center was terminated in 2015, and I recommended
that Treasury had the ability to pick up the center operations.
They declined on that. I recommended that Congress make it per-
manent at that point in time. I was not successful. I am at it again,
and I think it makes sense to have this to deal with.
Fraud occurs in regular Federal programs all the time, as well
as improper payments, which we talk about in our statement. If
you had this permanent capability, it would not only deal with reg-
ular fraud, but it would be ready and there when emergencies
occur, and you won’t waste time standing up. Every day wasted is
another day susceptible to fraud and improper payments. This
would help.
Fourth, the government has an underlying improper payment
problem. These are payments that shouldn’t have been made or
made in the wrong amounts, and I have testified before this com-
mittee many, many times on this problem over the years. It occurs
in a wide range of Federal programs. It is pervasive across the gov-
ernment. So, when you have that type of problem that we are not
dealing with on a regular basis, and you add additional spending,
billions, hundreds of billions, in this case, trillions of dollars, you
are going to have these types of problems in place. So, I have many
recommendations in my testimony that I think would help address
this issue, and I have put forth at least 10 legislative suggestions
for how Congress can act to make sure that this problem doesn’t
happen again at the magnitude in which we have seen in this par-
ticular case.
So, I am looking forward to answering questions today. I am also
looking forward to working with this committee to put solutions in
place that can guarantee when the Federal Government finds it
necessary in this case to provide funds for public health purposes
and the economic repercussions of disasters, that it is done in a
way that gets the funds to the people who need it and not allow
this type of fraudulent activity to plague our national programs.
Thank you very much, Mr. Chairman.
Chairman COMER. Thank you. Mr. Horowitz?
STATEMENT OF MICHAEL E. HOROWITZ, CHAIR, PANDEMIC
RESPONSE ACCOUNTABILITY COMMITTEE, AND INSPECTOR
GENERAL, U.S. DEPARTMENT OF JUSTICE
Mr. HOROWITZ. Thank you. Mr. Chairman, Ranking Member
Raskin, members of the committee, thank you for holding today’s
very important hearing.
This committee has consistently worked on a bipartisan basis
with the oversight community to advance program payment integ-
rity, government spending transparency, and the use of data ana-
lytics, all of which have helped us to fight fraud, waste, and abuse,
and ensure that government benefits go to those who need them
most. Yet, as our pandemic oversight work has demonstrated, far
more can and should be done to protect taxpayer money.
For example, earlier this week, we issued a fraud alert, finding
that over 69,000 questionable Social Security numbers were used
8
to obtain $5.4 billion in pandemic loans and grants. This alert re-
sulted from PRAC data scientists using our analytics platform to
assess over 33 million EIDL and PPP loan applications. From that
work, they developed a targeted subset of applications and asked
the Social Security Administration if the name, date of birth, and
Social Security numbers on those applications fully matched infor-
mation in SSA’s records. Over 69,000 didn’t. This type of advanced
data analytics work is transforming how we do oversight and would
not have been possible without this committee’s support for data
transparency and spending accountability.
Our fraud alert also demonstrates the need for additional meas-
ures to improve program integrity. In particular, agencies must
strike a better balance both in times of crises and in routine pro-
gram administration between the speed with which they issue ben-
efits and the need to assess applicant eligibility before payments
are sent out. For example, SBA’s central focus on getting PPP
loans issued as quickly as possible at the outset of the pandemic,
based solely on an applicant self-certification of eligibility, resulted
in substantial fraud as well as SBA issuing 57,000 loans worth $3.6
billion to entities that were already on the government’s Do Not
Pay list, a list SBA didn’t bother to cross check.
The Federal Government needs more robust cross-agency data
sharing agreements to improve program administration, reduce im-
proper payments and identity fraud, and better prepare before the
next crisis hits. For example, consent-based identity verification
systems can have a significant impact in reducing identity fraud,
as we detailed in our fraud alert. Similarly, authorizing agencies
to access SSA’s Master Death File index would help eliminate im-
proper payments to deceased individuals. These are just two of
many eligibility verification tools that agencies should be using.
Our oversight reports also highlight the need for agencies to be
more transparent about spending information and to address data
reporting gaps and data reporting weaknesses. The public has a
right to know how its money is being spent, and policymakers need
to be able to assess whether programs are effective. Moreover,
transparency results in greater accountability. As Justice Brandeis
famously stated, transparency is said to be the best of disinfect-
ants.
Through our oversight work, we are making progress. For the
past two years, we have met weekly with OMB leadership and the
American Rescue Plan implementation team. These meetings have
enabled the PRAC and IGs to timely share concerns with executive
branch leadership and ensure that impediments to our oversight
are being addressed promptly. We have also participated in more
than two dozen meetings on agency-specific pandemic relief pro-
grams prior to their implementation and before money went out
the door. In December 2021, OMB issued a memorandum high-
lighting the value of this model and institutionalizing it.
Finally, let me touch on three PRAC legislative priorities. First,
we hope Congress will take up legislation to make permanent the
PRAC’s data analytics platform. Taxpayers need that sophisticated
tool to continue to exist, and I appreciate the Comptroller General’s
continued support for that. Second, Congress should consider rais-
ing the jurisdictional amount in the Program Fraud Civil Remedies
9
Act from $150,000 to $1 million so IGs can more effectively pursue
smaller-dollar frauds. Finally, Congress should consider extending
from 5 to 10 years the statute of limitations for pandemic unem-
ployment insurance fraud as it did last year with PPP and EIDL
fraud.
The PRAC and the IG community is committed to using all of the
tools we have been provided—criminal, civil and administrative—
to pursue for the taxpayers every dollar that fraudsters stole from
pandemic programs. Thank you for your continued support for
those efforts, and I would be pleased to answer any questions the
committee may have.
Chairman COMER. Thank you, Mr. Horowitz. Mr. Smith?
STATEMENT OF DAVID SMITH, ASSISTANT DIRECTOR, OFFICE
OF INVESTIGATIONS, UNITED STATES SECRET SERVICE
Mr. SMITH. Good morning, Chairman Comer, Ranking Member
Raskin, and distinguished members of the committee. Thank you
for the opportunity to appear today and discuss the ongoing efforts
of the U.S. Secret Service to counter pandemic-related fraud. As
the chairman mentioned, I serve as the assistant director for the
Secret Service Office of Investigations, overseeing our 161 offices.
I also oversee our 42 cyber fraud task forces that are central to our
criminal investigations. I also direct our National Computer
Forensics Institute in Hoover, Alabama, which trains and equips
local law enforcement, as well as prosecutors and judges. I thank
you all for your recent support of our institute and reauthorizing
it.
For more than 150 years, the Secret Service has conducted crimi-
nal investigations to protect the American public and financial in-
frastructure from criminal exploitation. We continue to do so while
also fulfilling our protective duties. After 21 years in Federal law
enforcement, exploitation of government programs by criminals is
not new to me. I often say the pandemic didn’t create any new
criminals. It just provided more opportunities for them to exploit.
Countering pandemic-related fraud has been our investigative pri-
ority since March 2020. In less than three years, we have opened
thousands of investigations, recovered over $1 billion, arrested
nearly 500 criminals, yet there is more work to do. It is our duty
to detect and arrest criminals, seize their illicit assets, and disrupt
their networks. Our experience in combating pandemic-related
fraud reaffirms our investigative strategy. We continue to evolve
our application of technology and training to develop skilled inves-
tigators, who can in turn combat emerging criminal tactics.
We recognize the potential for fraud based on our experience fol-
lowing major disasters. Prior to the CARES Act enactment back in
March 2020, we reached out to some natural partners to include
the Offices of the Inspector General for the Small Business Admin-
istration, the Department of Labor, and the Council of the Inspec-
tor Generals on Integrity and Efficiency. We understood that many
key partners had limited resources, and the best way to address
the potential wave of fraud was to work together. We also worked
with our longstanding partners in fighting financial crimes at the
10
Department of Justice, including U.S. attorney’s offices around the
country, the Department of Treasury, FinCEN, and many others.
The Secret Service is seeing the full spectrum of pandemic-re-
lated fraud. This included N–95 mask schemes, ransomware at-
tacks targeting hospitals, the wide use of stolen identities, and in-
mates applying for benefits. Numerous cases also involved insiders
with access to personal data. Criminals were prepared to exploit
the pandemic, in part because for years they were selling identities
stolen from past data breaches. They were also fabricating identi-
ties using personal and financial data to real people combined with
false information. Our investigations also reveal that criminals
used shell companies and false employment information. These tac-
tics were repurposed for broad use during the pandemic.
In closing, I will share some observations from our pandemic-re-
lated fraud investigative experience. The prevalence of identity
theft and the volume of personal data assessable to criminals is un-
deniable. Continuing to improve identity verification standard for
government funding programs is important. Advanced collabora-
tion, as some of my colleagues mentioned earlier, between govern-
ment entities and the financial sector is essential for mitigating
fraud targeting government programs, especially during emer-
gencies. Ensuring law enforcement are at the table would be a
major step in curtailing fraud of this magnitude as well. Our cyber
fraud task forces are a proven model for such collaboration in these
task forces. Similarly, in our protective mission, we constantly com-
municate the importance of sharing information and planning for
contingencies.
Thank you again for the opportunity to testify today, and I am
honored to represent the dedicated men and women of the Secret
Service. I look forward to your questions.
Chairman COMER. Thank you, Mr. Smith. Before we get to the
questions, I am going to ask if you will stand and take the oath
here. Do you all—raise your right hands?
Do you all swear or affirm that the testimony you are about to
give is the truth, the whole truth, and nothing but the truth, so
help you God?
[A chorus of ayes.]
Chairman COMER. Let the record reflect the witnesses have all
answered in the affirmative, and we want to thank you.
Without objection, your written statements will be made part of
the record.
And before we move into the question portion, we have a lot of
new members, a lot of freshmen that have never served in any
committee in Congress, and I just wanted to make sure everyone
knows the rules here. We will rotate back and forth five minutes.
Please adhere to the five minutes. We are going to try to be strictly
by the book. The order is determined by myself and Ranking Mem-
ber Raskin. Please be respectful of everyone’s five minutes. I was
telling some of the freshmen that during the 2017 session, my first
full year in Congress, I was the very last person, dead last in se-
niority in the very far corner, and you appreciate when people don’t
go over their time. But this is your time to ask anything you want,
so please, to both sides, let’s be respectful of each member’s five
11
minutes. With that, I will begin questioning, and we will start with
Mr. Horowitz.
You mentioned the Do Not Pay list. Can you briefly tell us what
that is?
Mr. HOROWITZ. So, Treasury has set up a list of suspicious pay-
ees. It doesn’t mean they are not eligible. It doesn’t mean they can’t
get benefits. It means that they are on a list that requires, at a
minimum, secondary screening, secondary consideration, and eval-
uation.
Chairman COMER. Was this used by government agencies to pre-
vent fraud? So, this is a tool that I would assume would have been
eligible in their toolbox. Let’s say the Small Business Administra-
tion or some agency that was doling out a lot of money really
quickly, did they utilize the Do Not Pay list?
Mr. HOROWITZ. They did not, and the issue there is we have
heard over and over again, at the time, well, we needed to get the
money out right away. There was an emergency. No dispute about
that. We needed to get the money out right away. There was an
emergency. It gets back to what the Comptroller General said. He
needs to be ready for that. This list was sitting there. This was not
anything that would have taken much time. There needs to be
preparation.
Chairman COMER. So, let me get this straight. The Do Not Pay
list, I would assume that would be people that owe back taxes, peo-
ple that maybe owe child support?
Mr. HOROWITZ. There are a variety of reasons——
Chairman COMER. Convicted of fraud.
Mr. HOROWITZ. Indicative of potential fraud, indicative of individ-
uals who are in arrears in other payments. You can get on the list
for a variety of reasons.
Chairman COMER. So, how many people do we know received
money from the Federal Government that were on the Do Not Pay
list?
Mr. HOROWITZ. I don’t know across all programs. What I do know
is from the SBA’s PPP Program because almost $400 billion went
out in two weeks——
Chairman COMER. Right.
Mr. HOROWITZ [continuing]. In that program, of that amount,
$57,000, $3.6 billion shouldn’t have gone out right away. I am not
saying every one of those would have been denied, but at a min-
imum, there should have been secondary screening.
Chairman COMER. So, what would be involved? What would this
SBA had to have done, if we could go back in time, to ensure that
people on the Do Not Pay list were flagged at least for further re-
view?
Mr. HOROWITZ. Well, frankly, interacting with the Treasury De-
partment in advance to make sure that that screening was occur-
ring, that data matching was occurring.
Chairman COMER. Yes. Unbelievable. Mr. Dodaro, by the end of
2020, Congress had already passed five laws containing more than
$3 trillion in COVID relief funds. More than $1 trillion had been
flagged by GAO as at-risk for waste, fraud, abuse. Inspectors gen-
eral and law enforcement officials were already highlighting con-
cerns about COVID relief money flowing to criminals and other in-
12
eligible recipients instead of Americans in need, and the economy
was improving. Nevertheless, Democrats insisted on $1.9 trillion
more COVID relief spending through the American Rescue Plan
Act, ARPA, putting those funds at risk and theft and the economy
at risk of massive inflation and recession. So sir, did we lose funds
included in the American Rescue Plan to fraud, and were addi-
tional improper payments made at the ARP after the ARP was
passed?
Mr. DODARO. Yes. I mean, the improper payments estimate, for
example, for 2022 is the first year that the Paycheck Protection
Program and the Economic Injury Disaster Loan Program made
improper payment estimates. That was about $29 billion for PPP
and about $7 billion, over $6 billion for the EIDL program. We had
urged that those improper payments be made earlier in 2021, but
they didn’t make those estimates then.
Chairman COMER. Did you encourage Congress to do that?
Mr. DODARO. No, the agencies. And my recommendations to the
Agency——
Chairman COMER. What could Congress have done to have pre-
vented this?
Mr. DODARO. As one of my legislative recommendations from
GAO is that any new programs over $100 million—not billion—
$100 million, be designated immediately because of this past prob-
lem to be susceptible to improper payments and, therefore, make
an estimate in the very first year of the program. Right now, the
improper payments estimates only have to be made 2 or 3 years
after a program has already started. It is too late. It is too late.
And some of these temporary programs, they are all done. So Con-
gress can and should have that as a requirement to be put in place.
Chairman COMER. Well hopefully, that will be some kind of bi-
partisan legislative fix from this committee very soon. Mr. Horo-
witz, same question. I have got 40 seconds. What warning signs
were there, and what should have been done?
Mr. HOROWITZ. There were plenty of warning signs. Frankly, the
urgency and speed to get it out without any consideration of what
was already available to use, like Do Not Pay, as we did in our
fraud alert this week, had there been agreements in place, they
could have checked again. So, Security Administration, I think it
is very important that consent-based verification tools be put in
place for programs. What you need to know is whether the appli-
cant is eligible. You can’t just self-certify, and they were relying on
self-certification.
Chairman COMER. Wow. Thank you. I am sure we will have
many discussions moving forward, but my time has expired. I yield
to the distinguished ranking member, Mr. Raskin, for five minutes.
Mr. RASKIN. Mr. Chairman, thank you much. Mr. Horowitz, fol-
lowing up on that, when did the SBA start using the Do Not Pay
program to check the eligibility of applicants for PPP loans?
Mr. HOROWITZ. Following recommendations by SBA OIG, the
PRAC, and GAO. They started in 2021.
Mr. RASKIN. In January 2021, at the beginning of the Biden ad-
ministration.
13
Mr. HOROWITZ. They said they were, and actually I am not sure
who exactly started then. One of the issues has been getting them
to implement.
Mr. RASKIN. Yes.
Mr. HOROWITZ [continuing]. Statement, what they said, but they
did make efforts to start, and they did subsequently start doing
that.
Mr. RASKIN. Great. Well, when we passed the CARES Act in
2020 and we created the Pandemic Response Accountability Com-
mittee, which you lead, the CARES Act included specific language
directing the PRAC to create a user-friendly website——
Mr. HOROWITZ. Right.
Mr. RASKIN [continuing]. To give the American people an over-
view of how pandemic relief funds were being spent all the way
down to the project, community level. But guidance released on
April 10, 2020, by President Trump, made it nearly impossible to
effectively track pandemic relief funding past the first distribution.
And, Mr. Chairman, I would want to ask unanimous consent to in-
sert the administration’s April 10, 2020, guidance into the record.
Chairman COMER. Without objection.
Mr. RASKIN. So, Mr. Horowitz, how did this guidance affect the
PRAC’s ability to identify and prevent pandemic relief fraud?
Mr. HOROWITZ. So, in the CARES Act, Congress said that the
PRAC needed to launch a website within 30 days. We did. Go to
pandemicoversight.gov, you can see how the money has been spent.
You can get to your local zip code if you would like. We were chal-
lenged at the outset because OMB leadership decided to use what
was already existing, reporting tools in USAspending.gov, which we
did not believe was sufficient, GAO did not believe was sufficient,
and SBA, and others IGs didn’t believe was sufficient to meet the
requirements of the CARES Act.
The memorandum that went out that you mentioned put that in
place, and it limited our ability at the outset to get the data we
needed. For folks who followed our website from 2020 forward, you
will see gradual additions to the website. Indeed, SBA wouldn’t
give us the information. This was an SBA agency issue until Sep-
tember or October 2020. We couldn’t get much of any data from
them because they were litigating FOIA lawsuits.
Mr. RASKIN. Got you. So, do you think that that guidance met
the language and the spirit of the CARES Act requirements for
tracking pandemic relief spending all the way to the ground?
Mr. HOROWITZ. The public should know where money went. Con-
gress needs to know where money went. You can’t figure out
whether a policy worked, whether it has been defrauded, who is ac-
countable if you don’t know where the money went.
Mr. RASKIN. Mr. Dodaro, following the 2008 financial crisis,
President Obama signed the American Recovery and Reinvestment
Act to stimulate the economy and to get us out of the Great Reces-
sion. I think that was a $787 billion program if memory serves. Do
you think that that Trump administration 2020 guidance we are
talking about effectively incorporated lessons that were learned
from Obama’s successful implementation of the American Recovery
and Reinvestment Act?
14
Mr. DODARO. Not to the full extent that they should have been.
The Recovery Act reporting required reporting from recipients, and
the Recovery Act Board created that, so you had much more timely
reporting than what you had under the guidance that Mr. Horowitz
just talked about, which is using USAspending.gov. So, they could
have taken some of those lessons, I think, and so——
Mr. RASKIN. Got you. So Mr. Horowitz, then did you at all ex-
press your frustration with this undermining of the CARES Act de-
termination that the public have complete accountability and
transparency?
Mr. HOROWITZ. At the time, PRAC leadership was meeting with
OMB and expressing the need to have better reporting portals than
what existed with USAspending. There are many issues with
USAspending. IGs have written about those that need to be fixed.
GAO has written report after report about that. Those need to be
fixed. If you want to find the best information that is out there, it
is actually for the Coronavirus Relief Fund, which was the $150
billion in the CARES Act that went to the states. The reason that
is there, that information there is because the Treasury IG, work-
ing with the PRAC, created the Recipient Reporting Portal. We
couldn’t do that. It cost us money. They cost them money. We
couldn’t do that for, you know, trillions of dollars, but that is what
needs to be done.
Mr. RASKIN. Well, I am proud that we included those provisions
in the CARES Act precisely to ferret out fraud, to try to prevent
the waste and abuse. But it obviously requires leadership at the
Presidential level, at the very top, a commitment to making sure
that everything is accountable and transparent. Thank you, Mr.
Chairman. I yield back.
Chairman COMER. The chair recognizes Mr. Gosar for five min-
utes.
Mr. GOSAR. Thank you. Good seeing you, gentlemen. It is a
pleasure to see you this morning. You bring up mandated regular
reporting aspects, is a big key, and Congress has dictated a lot to
you, but Congress hasn’t done their fair share either. So, when you
look at the National Emergencies Act, there is a requirement that
the Congress meet every six months to have a detailed report in-
stead of a synopsizing all this all over a year or a year-and-a-half.
It would be better to have these numbers on a basis over six
months, having account of it. Would you agree with me, Mr. Horo-
witz?
Mr. HOROWITZ. Yes. I think more regular reporting would be
helpful, and part of that is getting the data information from agen-
cies to the public to Congress in a timely fashion, yes.
Mr. GOSAR. So, do you agree with that, Mr. Dodaro?
Mr. DODARO. Absolutely. Absolutely.
Mr. GOSAR. Part of the National Emergencies Act— that actually
Congress must, shall convene to look at these expenditures and to
have some rein over it. I think that part of our purview is the
power of the purse. So, if you are not having accountability to this
body, to this Congress, you are lacking in your jurisdiction of over-
sight. I guess, having said that, looking at what we have seen in
this gobbledygook of national emergencies— date back, that are
15
open to the 1970’s. I don’t know how you figure these numbers out.
I mean, it is crazy. I just don’t know how this works.
So my question is, to the American taxpayer, there are estimates
of $560 billion of fraud in the COVID–19 funds. Do you agree with
that, Mr. Dodaro?
Mr. DODARO. It will be a while before the full extent of fraud is
known.
Mr. GOSAR. Right.
Mr. DODARO. As I mentioned in my statement, you know, there
has been over 1,000 people have pled guilty or been convicted.
There are over 600 charges still pending against people. The SBA
IG has 536 active investigations right now. The Department of
Labor IG is opening up 100 new cases every week. So, this is going
to go on for a while. There are definitely indications of widespread
fraud, but it is impossible to estimate right now what the full ex-
tent will be. Time will have to unfold, and these investigations will
have to be undertaken because the definition of ‘‘fraud’’ is willful
misrepresentation to get something of value that is adjudicated
through a court or some other judicial process.
Mr. GOSAR. Would you agree that continued reporting would be
better, you know, a timely reporting to the jurisdictional committee
like this one or Transportation? In regards to the amount of fraud,
the number of fraud, what can Congress do to allocate, you know,
more streamlining in this process? Do you see a process that we
can go forward with that?
Mr. DODARO. Yes. I mean, there is a regular process for the in-
spector generals to report semiannually, but when you have ex-
traordinary circumstances like we have, there could be more fre-
quent reporting in those cases. But there are definitely benefits of
having more frequent interaction and oversight by Congress with
oversight bodies, the GAO and the Inspector Generals in this case,
the Secret Service, because some of these legislative solutions that
I have recommended could have been taken a lot earlier in the
process.
Mr. GOSAR. And so, if we are rewriting the National Emergencies
Act, would you be able to give us your inferences as to how to de-
tail the changes?
Mr. DODARO. I will be happy to look at the act and make sugges-
tions, yes.
Mr. GOSAR. OK. How about you, Mr. Horowitz? I mean, you al-
ways come up with great ideas.
Mr. HOROWITZ. Yes, absolutely. I would be happy to.
Mr. GOSAR. To Mr. Smith, do you see any aspects of—particu-
larly, from the Secret Service, where we can make some amends
within the National Emergency Act?
Mr. SMITH. Thank you for the question, sir. As I mentioned in
my opening, similar to our protective mission, which our brand is
largely associated with, one of the central tenets of our mission is
advance work. And, as some of the co-panelists spoke about earlier,
our cyber fraud task forces or our task force, incorporating private
sector, incorporating academia. And what we do is share informa-
tion on a continual basis, so we don’t wait until the President
shows up in a district to establish relationships. We do that prior
to that time. So similarly, in our investigative mission, we know
16
that it is important to maintain relationships with financial insti-
tutions, academia, in order to get in front of fraud and share ideas
because we have a constant cadence of interacting with bad guys
in the context of our jobs.
Mr. GOSAR. Thank you. I might run out of time. I yield back.
Chairman COMER. The chair recognizes Mr. Lynch for five min-
utes.
Mr. LYNCH. Thank you, Mr. Chairman, and the ranking member
for holding this hearing, and I want to thank our panelists for your
good work. I recognize you from previous hearings, and thank you
again.
This was a difficult challenge from the very beginning, and I just
want to take us back to the Trump administration’s initial re-
sponse. So, back in 2019 and 2020, Mr. Trump, on January 24,
2020, the day the second coronavirus virus case was confirmed in
the United States, President Trump tweeted and again reiterated
that, ‘‘China has been working very hard to contain the
coronavirus. It will all work out. I want to thank President Xi,’’ and
then went on to say that the coronavirus would be over by Easter.
Based on what we know now, did those statements by the Presi-
dent of the United States induce the sense of urgency that the
American people should have harbored with respect to this pan-
demic, Mr. Dodaro?
Mr. DODARO. I think that the actions that the Congress take
shows a sense of urgency in passing the CARES Act back in March
2020, on a bipartisan basis, and I think that sent the right signal
and a sense of urgency that needed to be addressed to those issues.
Mr. LYNCH. You are exceedingly diplomatic as always.
Mr. DODARO. That is why I am still here.
Mr. LYNCH. Mr. Horowitz and Mr. Smith, you want to take a
crack at that question?
Mr. HOROWITZ. Not particularly.
Mr. LYNCH. Well, let me just get down into the details a little
bit here, unless Mr. Smith, you would like to add? No. OK. I am
not sure of the division of labor within your agencies, but are any
of you familiar with the Yellow Corporation during your investiga-
tions? No?
Mr. DODARO. Sorry, which corporation?
Mr. LYNCH. Yellow Corporation. It was a trucking company ap-
parently with political connections to the Trump administration.
Are you familiar with that?
Mr. DODARO. I think that is the one that there was a loan given
to out of one of the programs, and I think we——
Mr. LYNCH. Correct. Let me refresh. Let me try to——
Mr. DODARO. We looked at that issue.
Mr. LYNCH. OK. Yes.
Mr. DODARO. We looked at that.
Mr. LYNCH. All right. Thank you. Let me try to refresh your
recollection. So, the Select Subcommittee report confirmed that a
$700 million loan to this trucking company that was politically con-
nected to the Trump administration was given this $700 million
loan, and Trump administration political appointees overruled De-
fense Department officials in that case to actually certify the com-
pany, as ‘‘critical to maintaining national security and, therefore,
17
eligible for the loan.’’ The company then went on to use the loan
for long-term capital investments in violation of the CARES Act re-
quirement. I was just curious. I know you are familiar with it. Do
you have anything else you could add to that fact pattern?
Mr. DODARO. I would be happy to provide our results for the
record. I can’t remember offhand, and I don’t want to misstate.
Mr. LYNCH. OK. All right. Well, we could take that at a later
time.
Mr. LYNCH. What are the lessons learned based on how the
Trump administration responded initially to the pandemic?
Mr. DODARO. No. 1, I think there should have been more pre-
paredness on the part of the agencies to prevent fraud. You know,
Congress passed legislation in 2016 based on GAO’s advice on how
to prevent fraud in the first place. Part of this is there is a cultural
problem. In most cases, the fraud issues, people think of the in-
spector generals and think of the Secret Service and GAO, but you
got to prevent it in the first place, but the agencies were slow to
implement it.
Mr. LYNCH. Yes.
Mr. DODARO. The OMB was supposed to create a working group
to develop this. We issued a report in 2019, said the working group
had never met, that it needed to take more actions, No. 1. No. 2,
I think the other lesson learned for the Congress is to be careful
about putting provisions in the legislation that make programs
more susceptible to fraud, allowing, for example, the self-certifi-
cations, not using tax credit transcripts, rather, so I think there is
legislation there as well. Third, the agencies that had not ad-
dressed improper payment problems, they know they have payment
problems, and not addressing open GAO and IG recommendations
make them less prepared. So, there are a lot of lessons and my leg-
islative solutions to these address some of these lessons learned.
Mr. LYNCH. Thank you, Mr. Chairman. My time has expired, and
I yield back.
Chairman COMER. The chair now recognizes Dr. Foxx for five
minutes.
Ms. FOXX. Thank you very much, Mr. Chairman, and I thank you
for holding the hearing. Well, I have no questions for Mr. Dodaro,
but I do want to thank him so much for the work he and his team
do on behalf of the American people in helping us figure out ways
to be more efficient and find the waste, fraud, and abuse, and I ap-
preciate your comments just now.
Since coming to Congress, I have fought for transparency and ac-
countability in Federal spending, and with trillions of dollars of
COVID aid spent over such a short period of time, it is imperative
we closely watch where and how that money was spent, and I
think you have given us some more ideas. It is likely something we
are going to have to track for a long time. But Mr. Horowitz, I have
questions for you. Can you speak to the need for the Pandemic Re-
sponse Accountability Committee, or PRAC is and its importance?
Mr. HOROWITZ. Thank you, Congresswoman. I think it was crit-
ical for Congress to set up the PRAC when the CARES Act was
passed. At the time, we were asked to oversee $2 trillion. It is now
$5 trillion of pandemic oversight. And what it did was it brought
the inspector general community together to coordinate oversight.
18
We created a data analytics platform to do the kind of work that
resulted in our fraud alert last week, and you gave us hiring au-
thority to bring on great data scientists, a great team that has en-
abled us to do this work. We got it up and running, and we moved
forward. And as a result, we have been able to coordinate more
closely with not only our IG partners, but with the GAO. And with
state and local auditors, we created a state Auditor-in-Residence
Program. We have two auditors from the state of Tennessee who
have come on board recently. First ever that has been done in the
IG community because we want to coordinate with our counter-
parts and our oversight partners at the state and local level. And
so, we have brought together people in a way that we have never
had before in the IG community.
Ms. FOXX. So in your work, how would you rate, with the PRAC,
the various COVID relief funding programs from most to least sus-
ceptible to improper payments?
Mr. HOROWITZ. Well, I think what you have seen so far is the
three of the biggest programs: the Paycheck Protection Program,
the Economic Injury Disaster Loan Program, and the Unemploy-
ment Insurance Program. Those three programs, which by the way,
account for just under $2 trillion of the spending, have shown to
be highly susceptible to fraud for different reasons. PPP——
Ms. FOXX. Can you give us the characteristics that cause that?
Mr. HOROWITZ. Yes. So, for PPP and EIDL, those were adminis-
tered at the Federal level. And the problem there was the desire
to simply get the money out as quickly as possible, without taking,
not an unreasonable amount of time, but an appropriate amount of
time to make sure that they were sending the money to the right
people. That was the problem, among others, with those two pro-
grams. On the unemployment insurance, the issue was different
because that is administered by the 50 states. The problem there
is the lack of coordination among them and with the Labor Depart-
ment, and the Labor IG has written extensively about that prob-
lem.
Ms. FOXX. So, we have some recommendations on what to do in
that area.
Mr. HOROWITZ. A number of recommendations.
Ms. FOXX. Good.
Mr. HOROWITZ. And I would be happy to send them up to you.
Ms. FOXX. Absolutely. Since the Labor Department is in the ju-
risdiction of the Education and Workforce Committee, I am anxious
to see those.
Ms. FOXX. So, you charged 47 defendants in a $250 million fraud
scheme involving a Minnesota nonprofit, Feeding Our Future, one
of the largest COVID aid-related frauds uncovered. What, if any,
indicators, were there of this sort of fraud, and could it have been
stopped earlier?
Mr. HOROWITZ. So, it is always hard to say whether something
could be stopped earlier. We want to obviously be careful in hind-
sight to say that. But had there been on these various programs,
a preclearing or a prereview of an applicant, first of all, whether
it was a legal entity. Did it really exist? Was the email address
coming from overseas? Was it from an IP address, I mean, coming
from overseas? As we just reported on, did names, date of birth,
19
and Social Security numbers match what is in SSA’s—Social Secu-
rity Administration’s—records? That is an easy check. Were they
on a Do Not Pay list? There were multiple steps that could have
been taken in many of these instances. They could have, at a min-
imum, paused, hit the pause button, take a second look to make
sure they are eligible.
Ms. FOXX. Mr. Chairman, I know my time is up, but I would like
to make one quick comment. I am really concerned about what Mr.
Horowitz said about the 2016 bill being passed on how to prevent
fraud, and the agencies were slow to implement. We have got to
get to the root of these kinds of things, and say to these agencies,
and fire people if they don’t do things they are supposed to do.
That is our biggest problem in the Federal Government. Nobody
can be held accountable. Thank you. I yield back.
Chairman COMER. Thank you. The chair recognizes Mr.
Krishnamoorthi.
Mr. KRISHNAMOORTHI. Thank you, Mr. Chairman. Mr. Smith, I
want to ask you about your ongoing investigations involving
transnational criminal actors defrauding our pandemic relief pro-
grams. It looks like in a statement that the Secret Service put out
in December, you talked about a group called APT 41. Are you fa-
miliar with that?
Mr. SMITH. Yes, sir.
Mr. KRISHNAMOORTHI. And it says in your statement, APT 41 is
a ‘‘Chinese state-sponsored cyberthreat group that is highly adept
at conducting espionage missions and financial crimes for personal
gain.’’ Are you familiar with that?
Mr. SMITH. I am familiar with the article, sir. Yes, sir.
Mr. KRISHNAMOORTHI. And apparently, according to this same
article, this group, the APT 41, Chinese state-sponsored cyber
gang, stole tens of millions of dollars in U.S. COVID Relief benefits,
including SBA loans, unemployment insurance funds, in over a
dozen states. Isn’t that right?
Mr. SMITH. That is what the article stated, yes, sir.
Mr. KRISHNAMOORTHI. Now, tell me, sir, since that article came
out, I got to believe that they have probably targeted a lot of states
beyond a dozen. Can you tell us how widespread the geographic
coverage was in terms of the number of states that they had tried
to target?
Mr. SMITH. So again, I am familiar with the article. Our national
pandemic fraud coordinator, who testified last summer, who I ap-
pointed to that position, was a supervisor in one of our field offices,
the spirit of what he was conveying was that it is unimaginable
that organized transnational criminal organized groups did not
look to exploit pandemic-related fraud no different than, you know,
an American would. There are some commonalities between some
of the thousands of bank accounts that we have seen used to move
illicitly gained pandemic fraud resources that were also being used
by some of those transnational criminal organized groups, to in-
clude the one you mentioned. It is also worth mentioning when we
do have cases that involve transnational criminal organized groups
or state-sponsored entities, we do——
Mr. KRISHNAMOORTHI. Let me stop you there. OK. We have now
established APT 41 is a Chinese state-sponsored cyber gang. Now,
20
let me just turn your attention to Russia. Have we identified any
Russian state-sponsored cyber gangs involved in pandemic fraud?
Mr. SMITH. A lot of the Russian underlying pandemic-related
fraud has to do with folks dealing in identity theft. So, for decades,
we have known forums wherein people that deal with——
Mr. KRISHNAMOORTHI. State sponsored, though. Are they state
sponsored?
Mr. SMITH. Sir, the Secret Service focuses on financial crimes.
Whether or not an entity is state sponsored or not is generally not
why we tend to focus on them. We follow money, and if that leads
us to a state-sponsored actor, we don’t stop the case, but we then
employ our partners at DOJ.
Mr. KRISHNAMOORTHI. And have you come across that link yet,
in other words, that required a referral to DOJ?
Mr. SMITH. That referral to DOJ is actually part of the task force
the DOJ started at the beginning of the pandemic. So, there are
cases wherein we have some linkages or commonalities between
cases we are working for financial crime reasons, and there may
be a state sponsor act that has some commonalities there.
Mr. KRISHNAMOORTHI. OK. So, now we have established that
there have been Chinese state-sponsored cyber gangs as well as
Russian state-sponsored linked to the state individuals who have
committed pandemic relief crimes?
Mr. SMITH. Sir, what I said was that there are commonalities be-
tween some of the accounts and other indicators we have seen.
That is what I said.
Mr. KRISHNAMOORTHI. OK. Now with regard to APT 41, in par-
ticular, in your statement—I am sorry, the U.S. Secret Service’s
statement.
Mr. SMITH. Yes, sir.
Mr. KRISHNAMOORTHI. It said it was ‘‘state-sponsored’’. Now,
have you been able to identify any evidence that the Chinese Com-
munist Party ordered or asked this particular cyber gang to commit
this fraud, or do we have evidence that they just merely looked the
other way and permitted them, knowing them to have committed
this fraud?
Mr. SMITH. Sir, I have no evidence as to what the Chinese Gov-
ernment ordered a transnational criminal organized entity to do.
Mr. KRISHNAMOORTHI. Are there any other cyber gangs, state
sponsored, either Chinese or Russian or any other state-sponsored
criminal gangs that have committed pandemic fraud?
Mr. SMITH. Sir, just last year, we disrupted a transnational
criminal organized group known as Black Axe. They are Nigerian
based. They are operating in South Africa, and they have a long-
standing history of committing a lot of different types of fraud, and
they use a lot of the pre-existing money mules. There is an exten-
sive money mule network that operates here in the states. Again,
even the transnational criminal organized groups overwhelmingly
used or leveraged an American or an American profile to facilitate
pandemic-related fraud. So, we did see that and we had an oper-
ation that disrupted that group just last year.
Mr. KRISHNAMOORTHI. Thank you.
Chairman COMER. The chair recognizes Mr. Grothman for five
minutes.
21
Mr. GROTHMAN. Sure. A few more questions, follow-up questions
for Mr. Smith. Could you give me a little more information as far
as a stereotype, as far as fraud being committed by people abroad,
or fraud being committed by immigrants?
Mr. SMITH. What was the last word, fraud being committed by
who, second part?
Mr. GROTHMAN. Immigrants. Immigrants. Immigrants.
Mr. SMITH. So, I am not going to get into stereotypes. We follow
money. We follow evidence. And at the end of the day, as I men-
tioned to the previous committee member, the majority of the cases
we have seen, even if there is a criminal looking to exploit pan-
demic-related fraud abroad, they use an American mule. We had
certain campaigns that are cyber fraud task forces communicated
to don’t be a money mule, whether witting or unwitting, because
what we saw was a lot of Americans being utilized to move money
abroad because the criminals didn’t know that overwhelmingly
what we were looking for were, you know, American bank accounts,
American identities to issue money to. So, they use that and lever-
age an extensive network of money mules that preside overwhelm-
ingly here in the United States to get that money into their hands.
Mr. GROTHMAN. Well, there would be an example. Is the mule in
America? Are they have contacts within the foreign nations? I
mean, are they immigrants from the foreign nations? Are you just
grabbing a random person off the street? I mean, could you com-
ment on these mules?
Mr. SMITH. So we have, you know, dozens of cases, hundreds of
cases where, you know, we would have a person in ‘‘fill in the
blank’’ state. One state comes to mind where there was a mule that
had literally funneled $12 million to some criminals that resided
abroad. And once we start following the money, once we start look-
ing at some of the commonalities and bank accounts, and we have
an opportunity to go interview a person——
Mr. GROTHMAN. Right. Could you tell me what those countries
were abroad, and could you tell me the background of the mules
here, where did they have connections to the country abroad?
Mr. SMITH. So, one of the cases, as I mentioned a second ago,
was out of South Africa, focused on some Nigerian individuals in
a group called Black Axe. That case I just mentioned with the $12
million was one of the cases where in a money mule sent money
to accounts that were operated by Black Axe. And I want to im-
press upon the group here, money mules are not a new concept.
Like, there is an extensive network.
Mr. GROTHMAN. Right. You are not answering my question.
Mr. SMITH. Sir.
Mr. GROTHMAN. Presumably, they got these mules somewhere,
OK? You mentioned Nigeria. You mentioned South Africa, where
the people who did the work in America connected in those coun-
tries in any way. Were they immigrants from those countries?
Were they just random people they find on the internet? Were the
immigrants from those countries?
Mr. SMITH. Not necessarily, sir.
Mr. GROTHMAN. I know not necessarily, but does it happen, and
how often does it happen?
22
Mr. SMITH. Overwhelmingly, in our experience, that does not
happen. Criminals just take advantage of folks looking to make a
quick buck, and the pandemic offered that opportunity with the
amount of resources that were made available.
Mr. GROTHMAN. OK. Now in general, Mr. Horowitz, I can think
of flaws in these programs that the fraud would be almost predict-
able. But can you tell us, in the future, what things we can do in
programs so the fraud is not committed so easily?
Mr. HOROWITZ. So, I think one of the easiest things to do that
wasn’t done is to prepare, as the Comptroller General said, by em-
ploying verification tools, identity verification tools. The amount of
identity theft was extraordinary here, and it needs to be addressed
because we are not only talking about when that occurs, theft from
a government program, theft from the taxpayers, but for anybody
who has been on the receiving end of having their identity stolen,
you understand how you are victimized in that way. And just in
the fraud alert, we indicated we now have 200,000 social security
numbers that were used that we need to follow up on to see if those
individuals’ identities were stolen.
Mr. GROTHMAN. So, in other words, the money is going to, it is
going to an account or something other than the person who is
committing the fraud?
Mr. HOROWITZ. Correct. So, what is happening is individuals are
claiming that they are the person whose name is on the applica-
tion, whose date of birth is on the application, and or whose social
security number is on the application. When we checked and went
to Social Security Administration to ask them to verify it, a check
they can do. We entered into that. They were doing large-scale
verification for us. They came back and said those don’t all match
for those 212,000 numbers, which means in some instances, it
could be a false positive. Somebody could have transposed their so-
cial security number down or their date of birth down, so there are
going to be some of those. But presumably, for most of them, those
are individuals who obtained, on the dark web through other
means, social security numbers that were previously stolen from in-
dividuals and had their identity stolen.
Mr. GROTHMAN. And then they wind up going to a bank account
that has this person’s name on it, but this person doesn’t even
know the bank account.
Chairman COMER. The gentleman’s time has expired, but we will
let you finish the question.
Mr. HOROWITZ. Yes, certainly there is an ability to go to the
bank, particularly if, as with the PPP Program, the Agency has
said you don’t need to do anything other than accept the person’s
verification that it is them. In other words, all that had to happen
in the PPP Program at the outset was you went to the lender, you
signed an application saying, no, I am really this person, and they
accepted it. No one can walk into a bank today and get a loan and
say, no, no, really, I am this person, give me the money, but that
is what was going on.
Chairman COMER. Chair recognizes Ms. Norton.
Ms. NORTON. Thank you, Mr. Chairman. Mr. Horowitz, this ques-
tion is for you. Democrats provided the Department of Labor in-
spector general $25 million in the American Rescue Plan to combat
23
fraud and corruption in the process. Also in the American Rescue
Plan, Democrats made critical investments in fraud prevention and
accountability, including providing more than $200 million in fund-
ing for watchdogs to investigate fraud, waste, and abuse as well as
$2 billion to support states’ modernization of unemployment insur-
ance systems to reduce fraud vulnerabilities. The Biden adminis-
tration has begun using these funds to support state efforts to
make unemployment insurance systems both more accessible to eli-
gible recipients and less susceptible to fraud. The American Rescue
Plan provided significant funding to the pandemic recovery ac-
countability committee as well. Yet my Republican colleagues voted
against these commonsense measures to reduce fraud.
When the American Rescue Plan became law, Mr. Horowitz, you
released the following statement, and here I am quoting you, ‘‘The
enactment of the American Rescue Plan adds to the important
independent oversight responsibilities of the PRAC and its member
inspector generals. We appreciate the ongoing support from Con-
gress and the administration of the PRAC in and its oversight mis-
sion.’’ Mr. Horowitz, how much funding did the PRAC receive in
the American Rescue Plan to perform the vital oversight functions?
Mr. HOROWITZ. In the ARP, in the American Rescue Plan, the
PRAC received $40 million of funding.
Ms. NORTON. Now, Mr. Horowitz and Mr. Dodaro, what other re-
sources and authorities do you need to continue your work?
Mr. HOROWITZ. So, as I mentioned in my written statement at
the outset, I think very important to continue the data analytics
platform that $40 million that was in the American Rescue Plan
covered our ability to start the data analytics platform we have in
2021. It is funded through 2025, but we sunset on September 30,
2025. We turn the key off at that point unless it is extended.
Congress invested $40 million to fund that over four-and-a-half
years. That is $15 million, $16 million we are spending right now.
Just the fraud alert alone this past week, we identified $5.4 billion
of potential fraud. That is 360 times the amount of money that we
spent this year, or spending this year, to run our data analytics
platform. In other words, it would take us 360 years of spending
at that number to add up to $5.4 billion, so that, I think, is very
critical.
Mr. DODARO. I would agree. I want to throw my support behind
the establishment of this platform, a data analytics platform. Right
now, it only applies to pandemic spending, and it is going to expire.
This happened back after the Recovery Act, as I mentioned in my
opening statement, and it was a very effective process then, but it
expired in 2015. Now, if it had been in place at the beginning when
the CARES Act was passed in 2020, I think we could have saved
a lot of money and prevented fraud or went after it earlier. But it
wasn’t established until the American Rescue Plan in 2021, so by
that point, hundreds of billions of dollars have been already spent.
So, I think this is a prudent investment on the part of the Federal
Government to have this capability in the IG community on an on-
going basis. It will more than pay for itself many times over.
Ms. NORTON. In addition to the funding, Democrats included
funding to the American Rescue Plan to provide grants to states to
engage their local community organizations that represent those el-
24
igible for benefits. The goal is to help states learn how to more ef-
fectively reach these traditionally underrepresented and under-
resourced communities. So, may I ask you, Mr. Horowitz and Mr.
Dodaro, will these types of investments in the community engage-
ment help you separate paperwork errors, other unintentional mis-
takes, and actual fraud?
Mr. DODARO. I think it is important to recognize, and we have
ongoing work. So, we are going to be looking at that issue to see
how effective Labor is working with the states and with those enti-
ties, so that is very important. Today, we focused a lot on the fraud
part of the Unemployment Insurance Program, but on the benefit
side, there was lack of timely benefits that were given to people.
We find also some disparities in terms of how different people, dif-
ferent races have been treated. So, there is a lot to be done in un-
employment insurance area to make sure there are timely pay-
ments made to the proper people in a balanced, equitable fashion,
whilst stopping fraud on the other area.
Now, we have added the Unemployment Insurance Program,
along with the PPP, and Economic Injury Disaster Loan Program
to the list of high-risk areas across Federal Government. The un-
employment insurance area is badly in need of transformation, not
only in dealing with these community organizations, but the IT
systems in the states are terribly antiquated and not capable of
executing this type of program in the future until they are modern-
ized.
Chairman COMER. Thank you. The chair recognizes Mr. Palmer.
Mr. PALMER. Thank you, Mr. Chairman, and I thank the wit-
nesses. To date, do we know the full amount of improper payments
of COVID funds, Mr. Dodaro?
Mr. DODARO. There are estimates that have been made on the
unemployment insurance area. In 2020, the estimate was improper
payments was $78 billion, up from about $9 billion in 2020. And
then there was another $18.9 billion of improper payments re-
ported by unemployment insurance program for 2022, and that was
a 22 percent error rate, and the year before was 18.9 percent error
rate. Prior to the pandemic, it was about nine percent, and the PPP
and EIDL areas combined is about $36 billion.
Mr. PALMER. We are talking $135 billion. I have done math in
my head.
Mr. DODARO. Yes.
Mr. PALMER. As you know I like to do.
Mr. DODARO. Yes, I do.
Mr. PALMER. It appears to me that some Federal agencies might
not have been as forthcoming with information as both you and Mr.
Horowitz would have needed. The Small Business Administration
potentially violated Federal law by failing to respond to the GAO’s
requests. Has that been the case that they have not responded to
your request?
Mr. DODARO. It was early on in the start of the programs. It has
gotten much better and I actually had to go back in 2020 and 2021.
I testified before the Coronavirus Select Committee, and I had
called the chair and ranking members of this Small Business Com-
mittees, both the authorizers and the appropriators, to get help. I
mean, we couldn’t get any information on SBA at all, and it wasn’t
25
until later, there was a lawsuit where they had to then disclose the
amounts of loans. Now it has gotten better.
Mr. PALMER. One of the problems is that the unemployment in-
surance programs authorized under the CARES Act were excluded
from the program’s total reported improper payments because they
were not in existence for more than 12 months, and these programs
represented about 70 percent of the unemployment payments in
2020. Should Congress consider legislation reform, the improper
payments reporting periods in order to more accurately track the
COVID relief funds in the future if we have to have this again?
Mr. DODARO. Yes, absolutely, and that is one of my legislative
recommendations.
Mr. PALMER. I would appreciate, and I have enjoyed working
with both you and Mr. Horowitz over the years on things like this,
if you would provide to me in writing your recommendations for
legislative fixes.
Mr. PALMER. I want to move to something else. It has been dis-
cussed about what actions Republicans took, and I just want to ask
you, if we had required two-factor identification for online applica-
tions or provided state unemployment agencies by fax/email or
other means, or transmission, a copy of the claimant’s state ID, if
we had utilized protocols to prohibit applications from foreign IP
addresses, if we denied claimants using virtual private network
identification, require individuals—I could go down this whole list
of things—would that have helped reduce the amount of fraud?
Mr. DODARO. Yes.
Mr. PALMER. Well, I just want to point out, Mr. Chairman, that
these are recommendations that were made by Republicans in the
House and Senate, including myself. I introduced a bill to do this
that were largely ignored. When we began to see the massive
amount of fraud as early as, I think, April/May 2020, Mr. Horowitz,
I think, and working with the Department of Labor, the Office of
Inspector General there, that billions of dollars had already gone
out, and we couldn’t get these guardrails back in, would that have
helped, Mr. Horowitz?
Mr. HOROWITZ. Absolutely, and the fraud did start right off the
bat. I mean, for the PPP Program sent out $400 billion in two
weeks.
Mr. PALMER. Let me ask one other question. What we have seen
toward in the last few months here is states using their COVID re-
lief funds for things like New Jersey, $50 million in state and local
fiscal recovery funds to bolster the state’s bid to host the 2026
World Cup. We saw the state of Washington sent out $128 million
in 1,000 payments to 120,000 illegal immigrants. We saw Colorado
Springs use $6.6 million to put an irrigation system at two local
golf courses, $5 million dollar state of Massachusetts pay off debts
incurred by Edward M. Kennedy Institute for the U.S. Senate in
Boston. Are any of those improper uses of funds? I mean, I know
we wanted to give them flexibility, but isn’t that a little bit out of
the box?
Mr. DODARO. Yes. Well, there are broad uses authorized in the
legislation for that money. We are looking at it right now, and so
we will try to identify those areas that may be out of bounds le-
gally. But it reminds me that the Recovery Act, when there was a
26
lot of questions about the use of the money, whether that was ap-
propriate or not, when it was really, you know, legally authorized
because the government gave great flexibility to the state and local
community to make decisions. The other issue you had to deal with
always at the state and local level was fungibility of the money.
Mr. PALMER. Well, they didn’t have that early on, and Mr. Chair-
man, I think this might be something we want to look into because
it is not just the fraud. It is the improper use of some of the funds.
And my time has expired. I always enjoy hearing from you guys.
I yield back.
Chairman COMER. Absolutely. The chair recognizes Ms. Ocasio-
Cortez.
Ms. OCASIO-CORTEZ. Thank you so much, Mr. Chairman. This
hearing is called Federal Pandemic Spending: A Prescription for
Waste, Fraud and Abuse, UI, unemployment assistance, the Pay-
check Protection Program, all of it. And in the wind-up to this
hearing, on January 13, I see that the chair sent several letters to
three states—Pennsylvania, California, and my home state of New
York—with serious allegations of widespread fraud and abuse. But
I am curious a little bit about how we got to these three states. Mr.
Dodaro, if you were auditing or investigating what went wrong in
states in the distribution of pandemic-related unemployment insur-
ance, how would you go about choosing which states to examine?
Mr. DODARO. Well, we would look at a number of factors. One
would be the amount of money that would go there. We would look
for geographic distribution of the programs. We would look for
other characteristics of state programs, a number of claims, for ex-
ample, that have been there. And so, we would take a nationwide
sample.
Ms. OCASIO-CORTEZ. And even, you know, in your experience,
looking at perhaps even something like a per capita approach, or
you know, in your expertise, if you had to estimate some of the top
candidate states, what do you think some of those states would be
and why, and, again, more on like a per capita level?
Mr. DODARO. Yes, I don’t have the per capita numbers in my
head, so I don’t want to venture a guess at this point. I would be
happy to provide something for the record.
Ms. OCASIO-CORTEZ. Overall, let’s say not from per capita. What
would be some of the top states that you would look at in terms
of your experience and oversight of these programs?
Mr. DODARO. Well, certainly California and New York are always
candidates to look at in those cases, but you have Michigan, you
have Florida, you have states in the South and the West. And so,
we would have a geographic distribution in order to make sure that
we covered the money. What we try to do in these cases is cover,
like right now we are looking at the State and Local Coronavirus
Relief Fund, and we have selected 18 states, and they account for
about 60 percent of the total amount of money.
Ms. OCASIO-CORTEZ. Thank you, Mr. Dodaro. I would like to sub-
mit to the record this report from the Pandemic Response Account-
ability Committee, ‘‘State-Entitled Key Insights in State Pandemic
Unemployment Insurance Programs.’’
Ms. OCASIO-CORTEZ. Now, Mr. Horowitz and Mr. Dodaro, can you
think of any methodology that would have brought the committee
27
to send those three letters specifically to just those three states? Is
there any methodology you can think of that would just result in
Pennsylvania, New York, and California being under investigation
by this committee?
Mr. DODARO. Well, I would defer to the committee. I don’t really
know what their objectives were in that case, and I don’t think——
Ms. OCASIO-CORTEZ. I understand. Now, I wanted to get into this
report, and according to this report to PRAC, for example, Arizona
paid $1.6 billion to individuals to—stolen identities to get unem-
ployment insurance benefits. Louisiana dispersed more than $1
million to individuals after the date of their death. And in Ken-
tucky, state employees applied for unemployment benefits while
still employed by the state, and were able to hack the state’s infor-
mation management system and remove holds on their own ac-
counts, and none of these states have been put under investigation
by this committee.
I find it very interesting because as was stated at the beginning,
the bipartisan nature of oversight is what gives it its power. And
what we are seeing are investigations into, and I believe that the
methodology for these three states is highly questionable. And I
ask for this committee, if we are going to perform oversight, then
let’s perform oversight. Congressional Democrats are ready to per-
form that oversight and help our constituents get the benefits they
need to pay their bills. And I think that there is no shortage of
members of this committee who are willing to stand up to their
own party when it is necessary, but I cannot for the life of me un-
derstand why the majority would send these three letters just to
these three states that leave us with no other conclusion that there
needs to be some rank partisanship in this investigation.
Committee Republicans, I ask you now, if we are going to start
off, let’s do it right. And with that, I yield my time.
Chairman COMER. Before I yield back, if Ms. Ocasio-Cortez is
willing, I would love to join in a joint investigation of the Kentucky
unemployment system and New York unemployment system if you
wanted to do that, a joint probe or whatever. I would love to work
with you on that or any of the 50 states because I believe it is a
problem in all 50 states, especially Kentucky. You are exactly right.
The chair recognizes Mr. Higgins for five minutes.
Mr. HIGGINS. Thank you, Mr. Chairman. We knew there would
be fraud because fraud is always connected to money. I supported
the CARES Act as a Nation’s initial response to the new virus. We
didn’t know what it was. The CARES Act was our effort to respond
and to help American families and American employees remain fi-
nancially stable while we endured the impact of this unknown
virus. So, here we are into year 4 of 2 weeks to flatten the curve,
and it very well falls upon this committee under Republican major-
ity to begin conducting meaningful oversight into the massive fraud
that was no doubt staged to take place when you start rolling out
programs with trillions of dollars.
Some estimates as high as $7 trillion, the total economic commit-
ment from the United States of America, American treasures, $7
trillion. That is $7,000 billion. It is $140 billion per sovereign state
is an average of 62 counties per state tested. That is over $2 billion
per county. I would argue that Americans across the country and
28
in local and state government would say they would have done
much better if every county could have received $2.2 billion in the
form of a block grant. Of course there was going to be massive
fraud with programs like this, but what we expected was not the
absence of fraud. What Americans expected is a presence of ac-
countability and criminal prosecution, and that accountability is
what this Republican-controlled Oversight Committee is going to
deliver.
We know that fraud is not born in the mechanisms of man.
Fraud is born in the heart of man. It is to be anticipated. The gen-
tleman referred to certain tradeoffs between urgency and processes
that were put in place as these trillions of dollars was set to be dis-
persed. Well, may I say that we anticipated this, but some of us,
in order for the most conservative of us to support a $2 trillion re-
sponse to this unknown virus, we insisted that this money be made
available through local banks and credit unions. And we pushed
the SBA product out through, my recollection is about 4,500 lend-
ing institutions that had never handled an SBA product before.
We wanted, and we insisted that regular Americans would be
able to communicate directly with the bankers they knew to access
this assistance. So, we knew it was ripe for fraud, but we expected
criminal investigations to take place, and we expected people to be
put in jail. Accountability for criminal acts generally begins with
a suspicion and a report at the local level of fraud, theft, forgery,
identity theft, et cetera. That leads to an investigation, should lead
to an arrest, should lead to prosecution, should lead to conviction
and incarceration. May I say America will be just fine had we wit-
nessed that kind of accountability, but it has to be pushed out of
congressional investigations. That hasn’t happened for the last
three years. It will happen now.
Director Smith, so specifically regarding investigations, that it is
understandable that the most massive cases will be prioritized,
millions and millions of dollars. But according to my research, the
vast amount of fraud that we have witnessed is primarily from
smaller cases, and I have been advised that they have gone ig-
nored. Can you speak to that, sir? What are we doing at the Fed-
eral level to assist local and state investigators to go after these
smaller cases?
Mr. SMITH. Sir, as I mentioned before, we follow money. We fol-
low evidence. And one of the things that I talked about in my open-
ing was the Secret Service training state and local law enforcement
professionals at our National Computer Forensics Institute. It is
the ultimate teach a man to fish, if you will. We train thousands
of state and local law enforcement professionals every year to be
able to investigate cases locally.
I was just down in the chairman’s home state last week in Ken-
tucky talking to some of our cyber fraud taskforce partners. And
they were actually briefing me on cases they were working at a
local level that were focused on elder abuse and some pandemic-
related fraud. So, we are a Federal law enforcement entity, but we
do have a responsibility to help train, equip, and resource our local
partners who help us in every aspect of our mission to be able to
build their capacity locally.
29
Mr. HIGGINS. Thank you for your response, Director. Mr. Chair-
man, I yield.
Chairman COMER. The chair now recognizes Ms. Porter for five
minutes.
Ms. PORTER. Good morning. I have questions about unemploy-
ment insurance. Mr. Dodaro, could you read this headline for the
room? Yes, could you turn your microphone on, sir?
Mr. DODARO. Sorry. I am sorry. ‘‘California’s EDD Unemploy-
ment System Disaster: Predictable Fiasco.’’
Ms. PORTER. Thank you. We are going to get everyone in on the
fun. Mr. Horowitz, could you please read this headline?
Mr. HOROWITZ. There is no way I can read this headline because
I didn’t bring my glasses with me.
Ms. PORTER. OK. I will read it for you: ‘‘EDD’s New Software
Has Thousands of Defects, Some Critical.’’ Mr. Smith, we will see,
is also an eye test in case you need to get a checkup. Can you read
that for me, Mr. Smith?
Mr. SMITH. It says, ‘‘The North Carolina Unemployment Agency
is a Broken System.’’
Ms. PORTER. A broken system. North Carolina Unemployment
Agency, a broken system. Mr. Horowitz, do these headlines seem
familiar? Do they seem representative of the problems with the un-
employment system during the pandemic?
Mr. HOROWITZ. They do.
Ms. PORTER. They do. Would it surprise you to know that all of
these new stories are from 2013 and 2014, long before COVID–19
was a problem?
Mr. HOROWITZ. Not at all. This has been an issue that GAO has
spoken about for decades maybe. I am not sure if it is that long,
but certainly we have as IGs as well. The unemployment insurance
system needs to be fixed.
Ms. PORTER. I could not agree more. So, let’s talk about that and
how we can fix it. What these headlines show, of course, is that,
as you said, state unemployment agencies have long had problems
getting help to people who need it and preventing our tax dollars
from ending up in the wrong hands. When the pandemic first
began, we needed to deliver relief quickly. But due to chronic
underinvestment in technology and systems at states that admin-
ister programs, we saw the same problems with waste, fraud, and
abuse that we have seen for decades under Democratic and Repub-
lican Presidents, in blue states and red states. Mr. Dodaro, I want
to talk about the GAO’s High Risk List. What is that?
Mr. DODARO. The High Risk List was originally created to iden-
tify, for the Congress and the Administration, areas across Federal
Government that we believe were highly susceptible to fraud,
waste, abuse, and mismanagement, or in need of broad-based
transformation as it evolved.
Ms. PORTER. Did GAO identify unemployment system, UI, as a
high-risk program?
Mr. DODARO. Yes.
Ms. PORTER. When?
Mr. DODARO. In 2022.
30
Ms. PORTER. June 2022. In June 2022, the year before unemploy-
ment was added to the high-risk list, do you know what the rate
was of overpayment for unemployment insurance?
Mr. DODARO. In 2021, it was 18.9 percent.
Ms. PORTER. Great. And according to the Department of Labor,
before that, before you put it on the high-risk list, it was about 15
percent. In 2019, it was about 9.5 percent. In 2018, it was 12.1 per-
cent. In fact, the overpayment rate has been over 10 percent for 14
of the last 18 years according to the Department of Labor’s OIG.
When GAO announced that the unemployment system had been
designated as high risk, you said, ‘‘GAO is concerned that many
longstanding problems may go unaddressed.’’ Do you remember
saying that?
Mr. DODARO. I believe so, yes.
Ms. PORTER. Is that a little bit of an understatement at this
point?
Mr. DODARO. Well, you know, for many of those years, it was
mostly state money that was collected. There really wasn’t big Fed-
eral investment in this until the pandemic broke, or perhaps ear-
lier in some other emergency situation, but I thought the time obvi-
ously was right.
Ms. PORTER. Yes. What the OIG has said is the UI program has
experienced some of the highest improper payment rates across the
Federal Government. So, my question is, why don’t we fix this?
Mr. DODARO. Well, I think it requires some leadership on the
part of the Congress and the Labor Department. You know, like a
lot of these programs where the Federal Government has relied on
the state and local governments, they give them a lot of discretion,
and when times are good, unemployment is low, you know, they
don’t get a lot of attention until these problems come up.
Ms. PORTER. Mr. Dodaro, here is how I think about this. When
someone has a dollar and they lose a dime of it, they think, shucks.
But when someone has $100 and they lose 10 bucks, they are like
little angry, and it just keeps going up, and now we are in the bil-
lions and trillions. So, I would love to have your continued pressure
on the Department of Labor to use all of the funding that Congress
provided in the American Rescue Plan to actually modernize UI be-
cause I am trying to add up where that $2 billion from the Amer-
ican Rescue Plan has gone, and it does not seem to have all been
deployed and spent to improve these programs.
Mr. DODARO. Yes. No, I agree. We are going to follow that $2 bil-
lion. Also, I was in the Senate testifying last March with Michael
Horowitz and the IG from the Labor Department. He mentioned
the money that was given to states after the Great Recession to re-
form the programs, and he mentioned some of that money went un-
used.
Ms. PORTER. No, it absolutely did. Mr. Chair, if you will indulge
me for just one minute. In California, after the American Recovery
Act, they were given a $2 million grant to EDD to prevent fraud,
and guess what? It worked. At the end of the grant program, Cali-
fornia quit using the Fraud Detection Program, penny wise and
pound-foolish because that exact Fraud Detection Program would
have prevented and saved tens of billions of dollars for Federal tax-
31
payers during this pandemic. So, I appreciate the chairman’s indul-
gence, and I yield back.
Chairman COMER. Mr. Palmer, you want to be recognized?
Mr. PALMER. Thank you, Mr. Chairman. I just want to affirm the
gentlelady from California. Mr. Dodaro and I have worked on this
for quite a while, and over half of the problems with improper pay-
ments are antiquated data systems at the state and Federal level,
administrative error, and failure to verify eligibility. So, I just want
to affirm what you just said, and I yield back.
Chairman COMER. The chair now recognizes Mr. Sessions for five
minutes.
Mr. SESSIONS. Mr. Chairman, thank you very much. Mr. Dodaro,
welcome. Mr. Horowitz, good to see you again. I would like to focus
my question to you while it is this general subject. We have had
conversations about ideas that went back and forth with the ad-
ministration. Is there anybody at work? Are they there? Are you
working with them? They are answering questions. Give me an
idea about people at work, at least for the last two years. What has
that been like?
Mr. HOROWITZ. Yes. You know, we are engaged with folks. The
Labor IG has been engaged with the Labor Department to try and
address longstanding problems. As the Congresswoman said, this is
not new. We have been engaged with OMB leadership and White
House leadership to try, along with the labor IG, to try and push
these issues forwards and get them addressed because the numbers
are staggering.
Mr. SESSIONS. Well, they are staggering. Then what is the
progress—have they have come back to you? You have had meet-
ings? What have they said?
Mr. HOROWITZ. We have made some progress. Just to give you
a sense of some of the basic issues, the Labor IG, because these
programs are managed by 54 entities, the 50 states and other terri-
tories, the Labor IG needed to send regularly subpoenas to the 50
states to get the data because that data isn’t housed at the Labor
Department.
Mr. SESSIONS. So, all 50 states denied information?
Mr. HOROWITZ. No, no, they didn’t, but to get it, you needed to
go to them and ask for it, and they needed legal process to be able
to send it. So, we now have it at the PRAC. We are looking at it.
Just to give you an example, you know, it was found because it is
this locally based system. One social security number we have
identified today, so far, was used in 29 states because the systems
don’t talk to each other. They are not managed at the Labor De-
partment, at the Federal level. They are managed at the state
level, and, frankly, it is not fair to blame the states for that. They
are not resourced to be able to fix and modernize their various sys-
tems. Some states have done more than others, but they are all,
I think, it is fair to say, if not all, most are struggling with this.
Mr. SESSIONS. But not a new issue.
Mr. HOROWITZ. Not a new issue at all, and GAO has probably
been at the forefront of that with the Labor IG speaking of this.
Mr. DODARO. Yes, I think, you know, part of the problem Con-
gressman Sessions is there is not sustained attention to these
issues over time. And these issues require multi-year efforts. And,
32
you know, we have been working with the agencies, but quite
frankly, where there are state-administered programs, Medicaid is
another one, for example, which has huge improper payments,
where it is administered at the state level. The Federal agencies
give a lot of discretion to the states, and, quite frankly, there is not
enough oversight on the part of the states.
Now, this is a particular issue in the unemployment insurance
program because in normal times, it is state money that is leveled
on employers that pay, and there are no Federal funds involved
until there is an issue where they need the money. And so, there
is not a good sense of direction as to how involved our country
wants the Federal Government to be involved in state-administered
systems. And so, you run into a federalism issue a bit with these
programs, and, quite frankly, I think it would benefit from congres-
sional oversight and direction as to what signals that you want to
send these——
Mr. SESSIONS. OK. Well, we agree with that. Mr. Dodaro, is there
still such a thing that we invented with you years ago, 1997, the
high risk series.
Mr. DODARO. It is still there.
Mr. SESSIONS. It is still there.
Mr. DODARO. And SBA, two programs are on emergency loans
are on the high-risk list along with the Unemployment Insurance
Program, and there are 37 areas. We are getting ready for our nor-
mal update at the beginning of each new Congress. So, we are
ready to unveil the update on the list soon.
Mr. SESSIONS. That would be great. One question. Is this infor-
mation on your website for the agency, or where do we find this
information?
Mr. DODARO. It is on our website. We have a whole special sec-
tion, a medallion. It is GAO.gov, on our homepage, there is a me-
dallion that says, ‘‘High Risk List.’’
Mr. SESSIONS. Great. I want to thank all three of you. The gen-
tleman, Mr. Smith, please know that the Secret Service is a valu-
able organization to us, but you should know that you have got em-
ployee problems that we have been trying to work on for years, and
I encourage your management to look at that about how they treat
their employees and how quickly they respond back to the needs
of those people. And I appreciate each of your time. Mr. Chairman,
I yield back.
Chairman COMER. Thank you. The chair now recognizes Mr.
Gomez for five minutes.
Mr. GOMEZ. Thank you, Mr. Chairman. This is the first hearing
of a two-year session, and I want to be very clear to the American
people what I believe that the majority, the Republicans in this
committee and in Congress will do over the next two years. They
will attempt to rewrite history. They will attempt to absolve them-
selves of any of the decisions they made over the last two years in
order to fit their own political narrative, everything from the pan-
demic response to January 6, to holding President Trump account-
able himself. We even had colleagues here that believe that some
of the January 6 insurrectionists were patriots and heroes. They
are not. They are traitors. That is what those are. Those insurrec-
tionists were traitors.
33
So, let’s focus on unemployment insurance. The chairman and
the majority of the Republicans voted 3 times in 2020 for UI ben-
efit extension. Three times, and that is a good thing because it put
money in the pockets of Americans who were struggling to make
rent, to pay food, just to get by. But after a month of voting to ex-
tend those benefits, one month later, they voted to slash and to
stop those unemployment benefits. What changed? Did they not
know about some of the concerns of that program at that time? No.
What changed is we had President Biden. My hunch is if it was
President Trump, they probably would have voted to extend those
benefits once again, but it wasn’t. And why are they cherry-picking
this program and not focusing on other programs?
So, now let’s talk about the Paycheck Protection Program. You
know, as members, we voted to put the money in the pockets of
constituents who needed it the most to keep their small businesses
afloat. We voted to put money in their pockets, not Members of
Congress. We have colleagues from Georgia who had $183,504 for-
given. Other Republican members had up to $4.3 million forgiven.
Why not focus on this program? That is because if they did, they
would have to answer these questions regarding their own busi-
nesses, their own loans, their own—and why were those forgiven
and not others.
So, if we want to talk about handouts, we want to talk about
fraud, you know, let’s talk about it. Let’s not cherry-pick programs.
Let’s pick all the programs that were in place during the pandemic,
and let’s talk about if we want to do oversight, let’s do it, but this
isn’t about oversight. It is about passing the buck and making one,
too, so don’t be fooled. The American people shouldn’t be fooled by
them trying to rewrite history and the role, and responsibility, and
the implementation of those programs. I believe they were a good
thing. You know, yes, no program is perfect, but it really did keep
afloat the American economy, the American worker, and made sure
that we didn’t fall into a deep, deep recession.
So with that, let’s focus on, Inspector General, on the PRAC esti-
mates. The PRAC estimates on the website say that we spent
roughly $653 billion in pandemic expanded unemployment. How-
ever, your website also points out less than a quarter of that could
potentially be improper, and less than that was fraud. Can you
speak to the fact that a substantial majority of funds did what they
were intended to do and keep Americans out of poverty and save
lives?
Mr. HOROWITZ. Certainly, Congressman. In all of the work we
have done in the oversight work, no one has suggested or in any
way sought to undermine the importance of these programs. We all
can recall what was going on in March 2020, April 2020, and the
need to assist and help people. The problem has been not that the
programs were well intentioned or valuable. The problem is we
have seen substantial amounts of that money not going to the peo-
ple who is intended to help because of the fraud.
We have also had hearings, and panels, and programs about the
scope of the identity fraud, such that, for example, we heard how
in the Unemployment Insurance Program, individuals who were in-
tended beneficiaries, sometimes when they went to get benefits
were denied because the state agency thought they were the
34
fraudster, not the person who came first who was the actual
fraudster. And so, they struggled to just get the benefits they were
entitled to. That is why these programs need to be fixed and ad-
dressed because Congress meant the money to go to the people who
really needed it, and that is where we should be putting our efforts.
Mr. GOMEZ. Thank you. With that, I yield back.
Chairman COMER. The chair now recognizes Mr. Biggs for five
minutes.
Mr. BIGGS. Thank you, Mr. Chairman. Thanks for all of you. I
am sorry, I have been in and out doing multiple hearings as we do.
It is good to see you again, Mr. Horowitz. Mr. Dodaro, it is good
to see you, and welcome, Mr. Smith. So I guess, I am going to try
to broad shoot this thing here. Is there any money not expended
in any of the COVID Relief packages that you are aware of?
Mr. DODARO. Yes, there is about, as of November 2022, there is
about $157 billion in unobligated funds.
Mr. BIGGS. OK. Unencumbered, unobligated, unspent?
Mr. DODARO. Right.
Mr. BIGGS. OK. Great. Thank you. And what is the total amount
that you estimate was spent through either fraud, improper pay-
ments, or waste in any of those programs? Go ahead, Mr. Horowitz.
Mr. HOROWITZ. So, Congressman, it is even at this point too
early to give any estimate that is reasonable. What I have said be-
fore and I will say again, it is clearly in the tens of billions of dol-
lars, but it wouldn’t surprise me if it exceeds ultimately more than
$100 billion, but we have so much work to do. It is why Congress
extended the statute of limitations last year to 10 years. We are
in year three, and that is why we need that extension on the unem-
ployment insurance side as well, so we are going to be counting
and figuring this out for years to come. We are going to go after
every penny we can. We are going to use every tool you give us,
but it is going to take time, and we are not there yet.
Mr. BIGGS. Yes, sure. And, Mr. Smith, I read that you had re-
turned through an analysis of, I think, 30,000 financial institu-
tions, something about $3 billion to unemployment insurance bene-
fits. Is that correct?
Mr. SMITH. Yes, sir.
Mr. BIGGS. OK. And I want to get to this because I think this
is interesting. During the last round of questioning, the assertion
was made that there was $653 billion overall in unemployment in-
surance that was disseminated through those programs, and that
the estimate was somewhere below 25 percent was improper pay-
ments, fraud or whatever. So, if that is the case though, I mean,
is that accurate? First of all, I want to just make sure. I don’t want
to be misstating something. That is what I understood the testi-
mony to be.
Mr. DODARO. Yes. The Department of Labor estimated for 2021,
improper payments of $78 billion, which is about 18.9 percent rate.
Mr. BIGGS. OK.
Mr. DODARO. And in 2022, it estimated $18.9 billion. That is a
22 percent improper payment rate. And so, those are the estimates
of the Department of Labor, and those estimates are for the regular
unemployment benefits. It is not for the pandemic unemployment
35
insurance fund. So, those aren’t complete estimates for all the Fed-
eral spending that was made during the period of time.
Mr. BIGGS. OK.
Mr. DODARO. The Labor Department is now trying to figure out
the Pandemic Unemployment Insurance Program. That is the one
that went to people who are self-employed or working part time or,
you know, that was the new program that was created. The other
Federal programs extended the benefits, were added to the benefit
during a period of time. Those programs are covered by the esti-
mates, but not the other one, the new one.
Mr. BIGGS. Doggone, I am more confused now than ever.
Mr. DODARO. Yes, but I just want to be clear on exactly what has
happened.
Mr. BIGGS. No, I appreciate that.
Mr. DODARO. Yes. Right.
Mr. BIGGS. And as we go forward, maybe we could get together
and just kind of suss out a little bit, you know, what that range
might look like in totality versus——
Mr. DODARO. Yes. You know, what we have done is we have esti-
mated on the unemployment insurance area. If you take the fraud
rate and extrapolated that at the low end, the low end of the esti-
mate is greater than $60 billion.
Mr. BIGGS. Sixty billion dollars. Yes, I saw that.
Mr. DODARO. Right, and now we are working to try to figure out
an estimate. Again, no one will know—I agree with Michael—until
all these investigations are underway. And I mentioned, the Labor
Department IG is opening up 100 new investigations every week,
and the PPP Program has over 500 investigations underway. So,
there will be investigations into fraud on this for a period of time,
but we are trying to give a sense of what we think the magnitude
would be.
Mr. BIGGS. Well, I look forward to continued discussion with you,
gentlemen. And I just have to, Mr. Chairman, my colleague from
New York earlier mentioned fraud occurring within the Unemploy-
ment Insurance Program in my home state of Arizona. What she
did not mention is that Arizona actually identified the problem,
partnered with a private sector company, and implemented an
identity verification system because it is kind of getting to what
you are talking about there, that a Biden administration official,
Treasury, called, ‘‘kind of a silver bullet,’’ and that ‘‘almost imme-
diately the fraud ring saw the game was up,’’ once the tools were
rolled out, and you had a 99 percent reduction in fraud once when
we implemented those measures in my state.
So, I would love to take a closer look at Arizona’s response, how
it worked, why it worked, and maybe we get there, at the Federal
level as well, Mr. Chairman. And so, I appreciate, again, you all
being here today, and thank you, Mr. Chairman. I yield back.
Chairman COMER. Very good. The chair recognizes the gen-
tleman from California, Mr. Garcia, for five minutes.
Mr. GARCIA. Thank you very much, Mr. Chairman, and I want
to thank you and the committee for having us. We look forward to,
of course, hearing from and having been heard from all of our wit-
nesses, so thank you very much.
36
Before joining Congress, I served as mayor of Long Beach, Cali-
fornia. It is a city of about half a million people, coastal commu-
nity. I was mayor during the entire time of the pandemic and the
emergency. I also happen to be very proud of the response that we
had as a community to this pandemic. President Biden called our
response locally in Long Beach a national model. The Governor of
California said it was the best response from a city in the state of
California. In fact, we were the first community to vaccinate 99
percent of our seniors. We were the first community to vaccinate
all of our public school teachers in our school system, and we were
the first city to reopen our public schools as a school system in the
state of California.
So, I lived the pandemic 24 hours a day, every single day since
it started. And I think it is important as we have this hearing and
others on this important topic because I know that the issue
around the pandemic, and our response will continue to be an im-
portant topic for the Congress. It is important to remember that
this emergency was a catastrophic loss of life event. We have lost
over a million Americans across this country. And just in Long
Beach alone, we have lost over 1,300 residents, friends, families,
and neighbors. Personally, I lost both my mom and my stepfather
to the pandemic. My mom was a healthcare worker, and so the loss
is real for a lot of us. We also saw our economy collapse. Jobs were
lost, businesses were closed, folks became unhoused, and families
and kids were greatly impacted, particularly around schooling and
their ability to learn every single day.
Now, there has been a lot of attacks by the Republicans on this
committee and across the House on the Biden administration and
our response on the work that is happening in our agencies. I think
it is really important to also note that we had a catastrophic emer-
gency and that the President, the Vice President, and all the folks
in our agencies did and are doing the best job that they can to
manage this emergency, so I want to thank the President for his
response. I want to thank his continuous work that is happening
right now in our recovery.
A lot of folks don’t realize that the CARES Act and the American
Rescue Plan saved lives. It saved small businesses. It saved cities.
It saved nonprofits. The money that was sent to us by the Federal
Government kept cities like Long Beach afloat and countless others
across the country. It allowed us to provide food for those that were
hungry. It allowed us to keep people in their homes with tenant
and rental assistance. It allowed us to open homeless shelters when
people were falling into homelessness. It allowed us to provide
small business grants to small businesses that needed to stay open,
to restaurants that were about to close. And so, I am grateful to
all of you that were involved in some type of oversight or imple-
mentation. I am grateful to the Federal Government for providing
support for our cities. And most importantly, the money from the
CARES Act and the American Rescue Plan provided opportunities
for us to test, to vaccinate, and to keep workers employed.
It is important to note that in any major crisis or emergency,
there are going to be mistakes. We were all moving fast and quick-
ly. We take them seriously and we learn from them. In California,
for example, we have already seized and recovered over a billion
37
dollars in fraud and abuse. I think it is important to know that
mistakes in emergencies are going to happen, but it is also to know
who should be held accountable for some of these concerns being
brought up by my Republican colleagues. And if Comptroller
Dodaro can just remind us who was actually President when the
pandemic started?
Mr. DODARO. President Trump.
Mr. GARCIA. Thank you for that because I remember as Mayor
how difficult it was to get any sort of support from the White
House. There was no PPE. We weren’t getting our masks on time.
We had to go procure tests ourselves. And so, I am sympathetic
that oftentimes in emergencies, things are going to be difficult. Us
as a city had to spend $20 million of our own money immediately
without knowing if we were getting reimbursed or having support
from FEMA, just to keep people alive on the ground. And to Assist-
ant Director Smith, which administration actually established the
COVID–19 Fraud Enforcement Task Force?
Mr. SMITH. Sir, we were protecting President Trump at the be-
ginning of the pandemic.
Mr. GARCIA. But then I believe President Biden actually put in
place an additional committee on fraud and abuse on the pandemic.
So, I say that because there is obviously going to be mistakes made
across administrations, but I am grateful to the Biden-Harris ad-
ministration today for actually trying to do as best they can to ad-
dress some of the abuses that are happening. I also think it is im-
portant to put the entire context of what we are talking about in
this idea that we have just experienced the single largest loss of
life event in the modern era of our country. So, I want to thank
the three of you for your service, and I want to thank the com-
mittee for bringing this up in this hearing. I yield back the rest of
my time.
Mr. PALMER.[Presiding.] Before I recognize the next member, Mr.
Dodaro, you said there were $137 billion in unobligated COVID
funds that——
Mr. DODARO. I believe it was $157 billion.
Mr. PALMER. A hundred and fifty seven billion?
Mr. DODARO. Yes.
Mr. PALMER. If you have a general estimate of the total amount
of unobligated funds in all agency accounts regardless of what they
were there for, do you have an idea of what is out there?
Mr. DODARO. Do you mean for all Federal spending?
Mr. PALMER. Yes, and unobligated funds.
Mr. DODARO. I don’t have any idea on that right now. I can find
out and provide it for the record.
Mr. PALMER. I would appreciate it if you would provide that.
Mr. DODARO. It is a big government.
Mr. PALMER. Yes.
Mr. PALMER. The chair now recognizes gentlelady from South
Carolina, Ms. Mace, for her questions.
Ms. MACE. Thank you, Mr. Chairman. I also want to thank the
ranking member for this hearing today. And the partisanship and
the politics of this hearing is absolute and complete B.S. Our coun-
try and the entire world faced a pandemic unlike anything our gen-
eration has ever faced, and some decisions were made that were
38
good and some decisions were made that I am sure we are going
to look back on 20 years from now and have a great heartburn over
like all of the fraud that has been committed.
You know, partisanship in politics has kept us from doing our job
on oversight. It keeps us from doing our job in Congress. It keeps
our Federal agencies from being able to be the best that they can
be. And any time that the Federal Government spends trillions of
dollars, we should ensure it is safekeeping regardless of who is in
power. COVID–19 is not the fault of this administration or the past
administration at all, but it is up to us. I mean, the spending and
the fraud has been a product of Republicans and Democrats for
generations and for decades. We have got to ensure that the safe-
keeping of this money is done better now than ever before.
There was guidance from Federal agencies on how to allocate
these funds. The guidance was vague and led to potential integrity
concerns and opportunities for bad actors seeking to take advan-
tage. And I know that at the time this was rushed, and there was
an urgency because of the worldwide emergency, but even with
these concerns, the money kept flowing. As the last two COVID Re-
lief spending bills added to the sum total of $1.15 trillion payments
to individuals, just over $1 trillion to unemployment, when we lit-
erally paid people to stay home. No wonder none of us should be
surprised it was hard to get people out of their homes and back to
work, and we had, you know, $779 billion for PPP loans. A total
of about $5 trillion was spent roughly on COVID relief.
As of today, there have been over 1,000 people convicted of fraud
relating to COVID–19 problems. Over 600 are currently facing
similar Federal charges, and it sounds like by the testimony today,
there might be thousands more charged in the years ahead. And
I appreciate everyone’s testimony today, coming here and being
forthright with our committee.
Today I am encouraged by our leadership on oversight, that we
will leave no stone unturned to uncover waste, fraud, and abuse
plaguing these programs. And the thing that I found, I think, most
interesting to me in the testimony today is the data issues that we
as a Federal Government have. You mentioned, Mr. Horowitz,
about having to subpoena 50 states for data, and it doesn’t matter
if we are dealing with immigration, or we are dealing with COVID
relief fraud, or we are dealing with background checks on bad guys
trying to buy guns. We have a real problem with data, data inte-
grations, our systems talking to one another, or legacy technology
that is being utilized. And if we don’t fix it soon, we are just going
to be overrun with it.
So, I appreciate some of the ideas that have been put forth, but
one of the things that has intrigued me and I think it probably in-
trigues a lot of people, and this is in the few moments that I have
left in the committee today, is the use of artificial intelligence in
some of this and trying to find the fraud. And of course, now we
all know about it, since ChatGPT, 5 million users, I mean, 1 mil-
lion users in the first five days and only growing exponentially, and
they are not the only ones. I mean, there is GitHub, and Copilot,
and a bunch of others.
But I would just—my questions today, and I will start with you,
Mr. Horowitz. Can you explain the type of work, you know, how is
39
AI being used? Is it advantageous? Is it speeding up the process?
How useful is it? Just some of your feedback with the use of AI and
detecting fraud.
Mr. HOROWITZ. Yes, and thank you, Congresswoman. It’s a very
important question you raise, and I think at the outset, people
need to be cautious about it. We have also read about some of the
cautions in using AI. I know IGs are doing oversight work in that
space. GAO is as well, but it can be very helpful. And in fact it is
just a further advancement at some level of the analytics that we
are using to try and find issues, and anomalies, and problems, and
things we should be following up on.
So, for example, we used a more primitive form of AI at the out-
set to try and help the SBA inspector general because they were
getting in one day 1,000 or more complaints, which was more than
they had gotten in the prior year in total. They needed to try and
figure out and triage those, what were the highest level most im-
portant ones. They came to the PRAC. We helped them triage that
by using a form of, if you will, AI, far more primitive than what
you mentioned. But those are the kinds of things we can do. It is
something that we have to do as governmentwide agencies need to
use it. Inspectors General need to use it. I know GAO uses it. It
is the future of oversight.
Ms. MACE. Thank you. And I have run out of time, but I look for-
ward to working with you all as the new subcommittee chairman
on Tech, Cyber and Government Innovation. It is going to be a
huge marker for us to determine waste, fraud, and abuse in the fu-
ture and I agree. Thank you for your time today.
Mr. PALMER. The chair now recognizes gentleman from Florida,
Mr. Frost, for five minutes for his questions.
Mr. FROST. Thank you, Mr. Chairman. I am glad that we are
starting this committee talking about waste, fraud, and abuse, and
how we can make government work better for the people. You
know, Mr. Chairman, the previous comments, I agree with the ini-
tial comment that we need to take the politics out of the discussion,
take the politics out of this, and the posturing and the hyperbole,
so that way we can work together, again, to modernize our govern-
ment and make it work for the people. And I hope this committee
will continue to look into other financial abuses such as wage theft
and corporate welfare as we continue over the next two years.
Assistant Director Smith, you know, we have heard a lot of hy-
perbole and political posturing from this committee today. I think
the way that we communicate and talk about an issue is extremely
important in finding the solution. You know, we have heard things
like the ‘‘greatest theft in our country’s history.’’ I am curious from
the point of view from law enforcement, does that type of hyperbole
when talking about crime work to exacerbate the issue?
Mr. SMITH. Sir, thank you for the question. I think it is incon-
sequential to the bad guys as a law enforcement professional. Bad
actors exploit situations, no matter what the political climate is, so
we focus on investigating violations of identity theft, fraud, wire
fraud and bank fraud.
Mr. FROST. OK. Thank you. Thank you, Mr. Dodaro. Is it Dodaro,
right? Yes, OK. All the GAO’s recommendations include increasing
the capacity and resources of the Federal Government to help deal
40
with the waste, fraud, and abuse. You know, oversight isn’t just
talking about an issue, you know. We have to solve it. And in the
spirit of solving it, can real improvements be made without addi-
tional resources and money to the government, to these depart-
ments and agencies, so that way they are set up for success to deal
with the issues?
Mr. DODARO. Yes, some of them can be made without additional
resources. Some need additional resources, such as the IG commu-
nity, to continue their investigations on fraud, but also to set up
this analytics center. And so, you know, it is really a mixture of
both.
Mr. FROST. Do you think that the amount of resources that were
allocated during the previous administration was sufficient enough
for what we are dealing with?
Mr. DODARO. I think there was adequate money given. I think
it was just a choice of decisions that were made. In some cases, you
know, I talked about limitations in the legislation itself. The agen-
cies made decisions that I think could have been different deci-
sions. They were given money to help administer the programs. I
think there could have been a little bit more flexibility that was
given.
I know Treasury has run into some problems recently because
they couldn’t redistribute the money among some of the programs,
particularly new programs, because until you start administering
them, you don’t know whether it is an adequate allocation or not.
Congress fixed that with the latest Consolidation Appropriation
Act. But I think by and large, the resources were there, it was just
some decisions that were unfortunate.
Mr. FROST. Got you. Thank you. Thank you. Mr. Horowitz, on
this committee, I have heard a lot of demonizing of Washington bu-
reaucrats, and bureaucrats are often scapegoated. And to be clear,
when we talk about bureaucrats, we are talking mainly about
working class people who have decided to serve their country by
working to power our government. Do you believe that one of the
central issues here is that agencies and departments were not set
up for success? And I am thinking specifically about the previous
administration, we got into this issue. Do you believe they were set
up for success to be able to dole out the amount of money that was
being given out?
Mr. HOROWITZ. You know, I think the problem at the outset of
the pandemic was, as the comptroller general has mentioned, the
lack of preparedness. Now, understanding this was a 100-year
event with the pandemic, but we have emergencies all the time. We
have earthquakes, floods, hurricanes, tornadoes, other disaster re-
lief. It happens regularly, not at the scale perhaps as this did, but
we don’t take the steps after an event like this or smaller emer-
gency events to fix what is needed. That was the problem.
Just to give you a sense of it, the SBA, Small Business Adminis-
tration, which administered the PPP and EIDL Program, the larg-
est amount of money they had ever given out in a loan program
prior to the pandemic was $30 billion. They were giving out $50
billion in a day when the pandemic hit. So when you say, were they
ready for success, well, if you go to an agency that has experience
giving out $30 billion over a year and you say, here is $800 billion,
41
get the money out the door, which was the initial PPP Program.
That is a recipe for a very challenging situation, no matter who is
running the agency.
Mr. FROST. Yes. No, no, thank you, Mr. Horowitz. Yes, and I
think the point here is, I agree, we need to prepare for the future
here, whether it is a pandemic or anything else. And I am looking
forward to working with my Republican colleagues on ensuring
that we give the adequate resources and know how to our agencies
and departments, so when this happens again, we are prepared for
it. Thank you. I yield back.
Mr. PALMER. The chair now recognizes the gentleman from Flor-
ida, Mr. Donalds, for five minutes for his questions.
Mr. DONALDS. Thank you, Mr. Chairman, and to the witnesses,
thank you for being here. It is actually great to have all the wit-
nesses here in person. It is a novel thing in the 118th Congress,
so really appreciate your attendance.
A couple of things has been stated through the hearing that, you
know, we want to make sure that oversight is being conducted, of
course. But I would like to remind a lot of my colleagues and a lot
of the freshmen who are here for the first time, there was no over-
sight over any of these dollars in the last Congress. I know that
because I sat on this committee, and there were no oversight hear-
ings about anything associated with pandemic spending, so I am
glad that we are tackling this now.
And it is critical because the other thing that is kind of in the
news cycle, especially today, tomorrow, will be with us for a couple
months, is we have hit our debt ceiling. We are out of money, folks,
$31.5 trillion. We don’t have new money. And so, if you are going
to take account of having to potentially raise the debt ceiling in the
United States of America, you have to take account of how the Fed-
eral Government goes through the process of spending its money,
whether through normal times or even through pandemic times.
Mr. Chairman, I want to submit for the record an article by Po-
litico. The title of the article is, ‘‘Biden Administration Reroutes
Billions in Emergency Stockpile, COVID Funds to the Border
Crunch.’’ That is the article.
Mr. DONALDS. The article states that the administration went
through a process of reappropriating, or moving around almost $2
billion from money supposed to go to the Strategic National Stock-
pile, and also funds intended to help study long COVID that was
at the National Institute of Health and rerouted to actually help
house migrants coming across the Southern border because of the
President’s reckless border policy. So Mr. Dodaro, are you aware of
this reshuffling of dollars from the pandemic emergency to the
southern border, in my view, failed strategy of the President?
Mr. DODARO. Yes.
Mr. DONALDS. And, Mr. Dodaro, when the President made this
rerouting, what were some of the uses of funds that it was used
for at the southern border?
Mr. DODARO. I don’t have that information right now. I am
aware the situation and what happened, but I don’t know, you
know, the details.
42
Mr. DONALDS. OK. Well, one of the things that I will request
from you and your office is could you provide the committee those
details?
Mr. DODARO. Sure.
Mr. DONALDS. Because it is going to be important for the Over-
sight Committee to understand that when money was shuffled from
pandemic response to border policy, which, by the way was just a
unilateral policy shift at the beginning of the Biden administration,
that could have put American citizens at risk during the pandemic.
And the reason why this is illustrative is because if we go down
the line of setting precedents on how funding is going to be used,
we should have an idea of what administrations have done in the
past. So, I think this is actually very critical information.
One other point, there is money that came through the American
Rescue Plan, the $1.9 trillion, ‘‘COVID bailout of the American
economy,’’ I say, quote/unquote because it really didn’t work, but a
bunch of that money is actually supposed to go to state and local
governments, including to school districts through ESSER funds.
Now, Mr. Dodaro, there is another tranche of this money that is
slated to go out. This goes to the previous question by Mr. Palmer,
about obligated funds, somewhere to the tune of half a trillion dol-
lars that is slated to go out, and the President has now said that
he is going to end the COVID emergency effective May 11. If the
COVID emergency ends effective May 11, what is going to happen
with these ESSER funds that are obligated, but have not yet been
transmitted?
Mr. DODARO. I will have our attorneys take a look at that to
make sure because we have appropriation law attorneys that pro-
vide assistance. But I think—I am not sure the funding is tied to
the national emergency declaration in terms of what is been appro-
priated already. And I know some of the funds are available for use
up to 2026, some up to 2030, so I don’t know if the termination of
the national emergency would trump what is already in the legisla-
tion in terms of how available those funds are made, but I will
have our attorneys take a look at it.
My guess would be that the appropriation would be the gov-
erning factor for the uses of those funds in the future, that they
would still be available, but I don’t know for sure. I will have a
double check on that. There are some funding things, particularly
in Medicaid, for example, that would have to be changed that are
tied to the national emergency declaration.
Mr. DONALDS. Agreed. Medicaid is one of those things that is tied
to the national emergency. I would just proffer for the committee
that if we are going to go down this road of having to find a way
to raise our debt ceiling, one of the things we should do is we
should end letting money go out the door that was tied to the pan-
demic. That is now essentially over. With that I yield back.
Mr. PALMER. The chair now recognizes the gentlelady from
Vermont, Ms. Balint, for five minutes for her questions.
Ms. BALINT. Thank you, Mr. Chair, and good afternoon, all.
Thank you for being here. I am sitting here as a new Member of
Congress, but I am also sitting here as a former leader of my state
senate in Vermont, and was on essentially our state’s frontlines in
dealing with the pandemic emergency much like my colleague, Mr.
43
Garcia. And I want to be clear that we all want to reduce improper
payments. I think that is clear. I don’t know some of my colleagues
on the Republican side, but I think we all can agree that that is
a goal because it is the people’s money.
What I want us to do, though, is bring us back to that moment
at the beginning of the pandemic. It is a moment that I remember
so clearly, thousands and thousands of Vermonters calling my of-
fice, calling the office of all of my colleagues, Republicans and
Democrats, to say, we are desperate. We are desperate. We can’t
pay our bills. We don’t have money for food. We can’t pay our rent-
al payments. And I cannot convey to you the loss of sleep or the
worry that we all had as state legislatures trying to protect our
people. And what I am concerned about this morning is I feel like
at the heart of this hearing, has been a false choice between ease
of access to government assistance when disasters strike. And as
Mr. Garcia said, we lost over 1.1 million Americans, and I am sure
like many of the people in this room, I know people who succumbed
to the pandemic. So, I believe it is a false choice between ease of
access to help alleviate fraud, and making sure people get the help
they need. This is about real people. It is about real families. It is
about desperate people needing assistance.
And so, the question I have for you this morning is, do you agree
with that assertion that government must either choose speed or
accuracy, because what I know is getting the money out quickly to
people desperately in need saved lives in every community in my
home state.
Mr. DODARO. I think you can do both if you are prepared, and
that is what I have said all along. I have acknowledged in all our
reports the important assistance delivered to needy Americans, but
there are definitely choices. I mean one of the things, the economic
impact statements where the money went directly to individuals,
there were some problems with that. The first round, $1.4 billion,
went to deceased individuals. We have gotten about half of that
back, one of which was my own mother who had passed away ear-
lier and my sister returned the money, though, so.
Ms. BALINT. Is that on the record, Mr. Dodaro?
Mr. DODARO. Yes.
Ms. BALINT. OK. Just checking.
Mr. DODARO. Yes. No, that is.
Ms. BALINT. I am joking.
Mr. DODARO. I have already said it when I testified in 2020 on
this.
Ms. BALINT. OK.
Mr. DODARO. But the programs that are administered through
third parties present problems, and if the agencies are prepared
and they are designed properly, you can get the money out quickly,
but you can also minimize the fraud. We are not saying you can
never eliminate it, but I think if the agencies are prepared, the pro-
grams are designed properly, people can get the aid they need as
soon as possible. What happened with the fraud, though, is because
some of these funds were limited——
Ms. BALINT. Can I, Mr. Dodaro, just because I am going to run
out of time. I appreciate it.
Mr. DODARO. Yes, sure.
44
Ms. BALINT. So, a follow-up question is, can you highlight for us
the ways in which we can design benefit systems with the recipient
in mind, making sure that we are combating improper use of funds,
but making sure it is meeting the needs of the people on the other
side, those real Americans who need the help?
Mr. DODARO. Right. Yes. Well, I think we need better identity
verification systems to know who the people are that are applying.
Mr. Horowitz talked about that. I have talked about that. We have
made recommendations about that. I think the agencies ought to
be better prepared to know how to prevent fraud from happening
in the first place. There are a lot of different ways that those
things could be done and be done properly.
Ms. BALINT. I appreciate that, and I am eager to partner with
anyone on this committee that wants to address these two things
simultaneously. And I just want to say, in this committee, we have
to keep the people back home in mind every single day. I yield
back.
Mr. PALMER. The chair now recognizes the gentleman from North
Dakota, Mr. Armstrong, for five minutes for his questions.
Mr. ARMSTRONG. Thank you, Mr. Chair. At this point in time, we
have all seen the headlines, ‘‘Paycheck Protection Program fraud,’’
‘‘Economic Injury Disaster Loan fraud,’’ ‘‘improper unemployment
payments.’’ And I would like to concur with my colleague from
Florida in that one of the common and unfortunate denominators
to these headlines is that when they held the majority, Oversight
Committee Democrats failed to hold a single hearing to protect
COVID relief programs from waste, fraud, and abuse.
But I think the most frightening result of this lack of oversight
is that foreign hackers, including those acting on behalf of foreign
countries, have tapped into these large funding mechanisms and
stolen dollars meant for struggling Americans. I understand that
the large scope and quick disbursement of COVID relief can result
in waste, fraud, and abuse, but it is unacceptable that our strategic
adversaries had such an easy means to infiltrate through cyber
means. Specifically, in December of last year, it was reported that
a hacking group which was talked about a little earlier as APT 41,
stole at least $20 million in U.S. COVID relief funds, including
both unemployment insurance dollars and Small Business Admin-
istration loans.
By the time the COVID relief funds became a target of oppor-
tunity, APT 41 had been in existence for about 10 years and had
become the workhorse of the cyber espionage activities for the Chi-
nese Communist Party. The hackers are believed to be connected
very closely to the government, and they allegedly act on orders di-
rectly from China’s Ministry of State Security. While there are
many bad actors targeting government programs, this is allegedly
the first strategic foe, a state-sponsored cyber threat of the U.S.
COVID benefit funds.
Assistant Director Smith, earlier you answered that the Secret
Service is unsure if APT 41 was directly ordered by the Chinese
government to target U.S. COVID relief funds. When do you think
the Secret Service expects to have resolution on if the hackers
acted on their own accord or by government direction?
45
Mr. SMITH. Sir, sometimes in the context of a criminal investiga-
tion, those answers never get reconciled. As I said before to your
colleague who asked me the question originally, we focus on finan-
cial crimes, and sometimes financial crimes leads you and the evi-
dence leads you to entities that may have other interests in mind.
Again, if that happens, we employ our partners at the Department
of Justice, who may also have some additional angles into how they
are looking at particular groups.
Mr. ARMSTRONG. And just generally speaking, whether they were
working directly for them or not, I mean, the Chinese Communist
Party knows of their existence, right?
Mr. SMITH. I cannot attest to what their knowledge is or not.
Mr. ARMSTRONG. Reports have stated that Secret Service recov-
ered nearly half of the $20 million stolen by the APT 41 hackers.
I am assuming you are continuing that investigation.
Mr. SMITH. Yes, sir.
Mr. ARMSTRONG. These are kind of unfair in that. Do you have
any timelines and like do you have anything you could share with
us, either publicly or sometime privately?
Mr. SMITH. That case is a large, very broad case out of our Den-
ver Field Office, and it will be unpacking that for some time, sir.
Mr. ARMSTRONG. Comptroller Dodaro, as I mentioned, hackers
have targeted the unemployment insurance funds of several states,
the extent of which is still unknown. What can we do outside of
tearing down those entire systems in all 50 states to provide states
with whatever safeguards the Federal Government can on unem-
ployment insurance programs, even without enhanced COVID ben-
efits from foreign actors?
Mr. DODARO. Well, I think the Labor Department, with some of
the funds that have been given available, has begun to set up iden-
tity verification methods, means to also check addresses, so those
efforts need to be continued to go down the road. But cybersecurity
is an issue that the Federal Government, governments at all levels
haven’t heeded. I put that on the high-risk list across the Federal
Government in 1997 and added critical infrastructure protection in
2003. This problem has been known for a while, and I think we
need to make sure we have more modern systems that can check.
The other problem is allowing data sharing. It took me years to get
Congress to allow the Social Security Administration or to require
them to give the Death Master File to the Treasury Department so
we could stop paying deceased individuals. That hasn’t even hap-
pened yet. It is not scheduled to happen until next year, and rec-
ommending that that be expedited.
So, there are a lot of things that could be done, but the systems
have to be modernized. There are too many legacy systems. Some
of the state systems go back to the 1970’s, and some of the Federal
Governments are decades old as well.
Mr. ARMSTRONG. Yes, in many states, that is the last IT upgrade
everybody does, I mean, regardless, all the way across. So, thank
you. I yield back.
Mr. PALMER. The chair recognizes Ms. Lee.
Ms. LEE. Thank you, Chairman, and thank you to the witnesses
for your testimony. It is still surreal to be in this room on the Over-
sight Committee.
46
In January 2023, our country has experienced multiple mass
shootings and a lynching at the hands of police. And yet here we
are, the very first hearing of the Oversight Committee, to criticize
critical unemployment benefits from a global pandemic. This isn’t
just politics for me. Before joining Congress, I, like many of my col-
leagues, served for years as a state legislator in Pennsylvania. Just
one year later, we crashed head on into this global pandemic that,
frankly, we were not remotely prepared to handle.
Every single day, I heard over and over and over the desperate
calls of folks unable to access food banks, people facing the risk of
homelessness, folks literally contemplating suicide, unable to eat or
work. Every call was a real Pennsylvanian, a real person whose lit-
eral lives relied on the same benefits my colleague see fit to criti-
cize this morning. When the benefits were ended in September
2021, there were 174,572 people receiving the pandemic emergency
UC and 387,932 people receiving the pandemic unemployment as-
sistance in the Pittsburgh Metro Area. The pandemic relief was lit-
erally the difference between life and death for my community and
communities all over the country, so focus on the people impacted.
I turn to you, Mr. Horowitz. Understanding $3.1 billion was se-
cured in the Consolidated Appropriations Act of 2023 to protect and
strengthen the federated UI system under the Department of Labor
Inspector General, can you tell us how these investments could be
used to improve the federated Unemployment Insurance system?
Mr. HOROWITZ. Absolutely. Thank you, Congresswoman. And,
you know, we held hearings about the value of the Unemployment
Insurance Program and other programs to help communities, as
you said, but also heard about the challenges that communities had
to get the money in the right place. First and foremost, the money
needs to be used to modernize IT systems. It is different state to
state. Some states have older systems than others. But it seems to
me that one of the first things that has to happen is the funding
needs to be used to modernize antiquated state systems.
Ms. LEE. Thank you. I can certainly attest to that. Ours was a
system that was entirely ill-equipped to handle this. By March
2020, I believe, almost a million Pennsylvanians found themselves
suddenly unemployed. With that in mind, I have the same question
for Mr. Dodaro. Again, how these investments could improve the
federated Unemployment Insurance system?
Mr. DODARO. I would echo the first comment that Mr. Horowitz
made that the IT modernization systems need to be put in place
in each state. Now each state has a different program. I mean,
their eligibility requirements are different. So, it has to be tailored
systems. Second, though, I think there ought to be more data shar-
ing agreements made on the part of the states to work together.
Mr. Horowitz gave an example before of a Social Security number,
one number that was used by 29 states. That shouldn’t be able to
happen with the use of modern technology. I also think that the
Labor Department ought to try to have states voluntarily imple-
ment fraud reduction programs. I mean, there was fraud rate of
about at least four percent in these unemployment programs before
the pandemic.
So, there has been fraud in these programs for a number of
years. And the requirement for the Federal agencies to implement
47
GAO’s fraud reduction framework is for Federal agencies, but it
doesn’t cascade down to the state level, which is something I think
Congress ought to consider. And the Labor Department is helping
them have fraud prevention programs. They have to make sure
that they are adequately staffed properly as well. The problem was
that, you know, we were at historic and low unemployment rates.
The states had reduced their staffing systems, had old IT systems,
not a prescription for success, and so I think they need to deal with
those issues.
Ms. LEE. Thank you, and thank you, Mr. Chairman. I yield back.
Chairman COMER.[Presiding.] Thank you. The chair now recog-
nizes Mr. Timmons for five minutes.
Mr. TIMMONS. Thank you, Mr. Chairman. Mr. Dodaro, I want to
begin by thanking you for your work with the Select Committee on
the Modernization of Congress. We were able to get signed into law
just in December the Improving Government for American Tax-
payers Act. We hope that we can get the executive branch to act
on your recommendations and probably save taxpayers billions and
billions of dollars, so I just want to begin by thanking you for that.
Mr. Horowitz, it seems that there is likely tens of billions of dol-
lars in PPP loan fraud that has yet to be uncovered. Is that fair?
Mr. HOROWITZ. There is likely tens of billions.
Mr. TIMMONS. Some estimates are as high as $100 billion, but we
can just agree on tens of billions?
Mr. HOROWITZ. Yes.
Mr. TIMMONS. That is fine. It seems to me that you have all of
the information necessary at your disposal to identify this fairly
rapidly. You look at the Q4. Well, you get the business tax ID num-
ber and you compare the Q4 withholdings for W2 employees versus
the amount of the PPP loan, and then the Q2 and Q3 of 2020
withholdings, and there should be an algorithm or some sort of a
proportionality between those different numbers. So, that should be
some sort of a report that you can run and then you can just start
arresting people. Is that not how this should happen?
Mr. HOROWITZ. There might be a little more sophistication to it,
perhaps, but let me just say, we don’t have access to that data.
Mr. TIMMONS. What do you need from Congress because it is lit-
erally a report. You should be able to run a report on those four
data points, and then you are going to get tens of thousands of
businesses that got PPP loans fraudulently, because if the metrics
don’t match up, then they lied, and they stole, and they need to go
to jail. So, what do you need?
Mr. HOROWITZ. A clear congressional action in legislation that
says that. It took the fraud alert we issued this week matching our
information, and all we did was send name, date of birth, and so-
cial to the Social Security Administration and said don’t send us
back your data. Just give us yes/no answers. Are these the real
names? It took us 10 months to do that.
Mr. TIMMONS. Again, we agree——
Mr. HOROWITZ. Yes.
Mr. TIMMONS [continuing]. That the Q4 withholdings of 2019 and
the Q2 and the Q3 withholdings of 2020, plus the amount of the
PPP loan, those numbers should have a proportional correlation
that we can all agree is fairly straightforward. It is going to be up
48
and down a little bit depending on how much your rent is, what
your utilities are, but those numbers should all match up. And if
there is a huge discrepancy, and whatever that correlation is, then
they probably stole, and it was fraudulent. Do you just need us to
force everybody to create that report?
Mr. HOROWITZ. What we need is access to data. It is what the
comptroller said about just the Death Master File Index.
Mr. TIMMONS. I don’t even think you need access to that. You
need that report run, and you need to have the list, and the dis-
crepancy, and the correlation of those four metrics, and then you
need to go and start putting people in jail.
Mr. HOROWITZ. We need the data analytics platform to continue,
and we need access to all of this data, and Congress has to legislate
that.
Mr. TIMMONS. Do you need access to the data, or do you just
need Treasury to run a report?
Mr. HOROWITZ. They won’t run the report unless it is clear. We
have access——
Mr. TIMMONS. We can make them run the report.
Mr. HOROWITZ. That is what we would need as well then. That’s
correct.
Mr. TIMMONS. I am sure that this is not a partisan issue. If peo-
ple stole tens of billions of dollars in COVID relief, possibly denying
benefits to people that actually needed it, those people need to be
held accountable. And the fact that here we are years later and we
still have not done something, that should literally be as simple as
running a report in a computer at the Treasury Department. I
mean, you need us to pass a law making them do that.
Mr. HOROWITZ. We need a law. We would love to get employer
identification number information to see if some of it actually ex-
ists.
Mr. TIMMONS. Why would Treasury not do this?
Mr. HOROWITZ. Because there are Federal laws, like Section 6103
of the Tax Code, that restricts sharing of tax information. And we
are not talking just for the public’s benefit, not individual income
tax returns that we are talking about, but 6103 is written broadly
for a variety of very good reasons to limit where that—that tax in-
formation.
Mr. TIMMONS. All right. Well, look, there are four pieces of data
that are attached to every business tax ID number, and this should
be easy. I will work on legislation with everyone that is willing,
and we will try to get you that information as quickly as possible.
Thank you. With that, I yield back.
Chairman COMER. The chair recognizes Mr. Casar for five min-
utes.
Mr. CASAR. Thank you, Chairman, and thank you, Ranking
Member. I am so glad that we are having this hearing. After years
in local government working 24/7 during the pandemic to save lives
and jobs in Texas, I have this opportunity to thank the Congress
for their work, bipartisan work on the CARES Act. And thank you
to congressional Democrats for the American Rescue Plan.
Congress should be proud of the way that those bills helped save
people’s homes, kept people in their jobs and kept people alive. I
want to be clear. No one in the country is more strongly against
49
fraud than my working-class constituents who needed those COVID
dollars to make sure their small businesses kept running, to make
sure they got PPE at work, to make sure they got vaccines, to
make sure their house wasn’t foreclosed on. Any dollar taken from
those programs by fraudsters is a dollar taken away from people
who needed support.
And similarly, we must be against fraudulent
mischaracterizations of COVID relief programs that ultimately aim
to reduce aid to people in need through these programs and other
programs. We can talk all day in D.C. about COVID programs
theoretically, but as a former city leader who put these programs
in place, I can tell you that thanks to the work of the Congress and
President Biden, local leaders in my community, one, saved peo-
ple’s homes; two, saved local economies; and three, saved lives.
So, before I ask my question, I just want to share some facts that
you may not have heard from Texas. One, we kept people from los-
ing their homes through protections against evictions and fore-
closures plus Federal housing relief dollars. The city of Austin re-
duced evictions in 2021 by 75 percent, keeping thousands of people
in their homes. Conservative estimates are that COVID housing
programs kept over a million Americans from losing their homes.
Two, we saved local economies. Because these programs and this
kind of funding, the city of San Antonio in my district was able to
support over 1,200 small family businesses, keeping them from
closing, provided 160,000 meals to residents in need, trained over
5,000 struggling workers, putting thousands of people to work. The
ARP kept 12 million people out of poverty, and pandemic relief pro-
grams according to CBO, kept GDP up eight percentage points.
And third, we saved lives. Thanks to the funding for vaccinations
and public health programs plus our COVID rules, the city of Aus-
tin had the lowest, along with Travis County, had the lowest
COVID–19 death rate amongst our major Texas cities. Every death
in our community was a tragedy, and if we had been able to
achieve that same rate across Texas, we would have 45,000 more
Texans who would have survived the pandemic. President Biden’s
vaccination strategy, along with local leaders’ efforts, have kept
nearly half a million people from being hospitalized.
I just want to be clear. You cannot fraud your way to these lower
COVID death numbers. You cannot cook the books and save this
number of people from losing their homes, or their jobs, or their
businesses. The hospital beds, the food lines, the morgues do not
lie. These COVID relief programs did powerful work, even while we
continue to work to root out any instance of fraud.
So, what I want to ask our panel here today is that we, of course,
need to focus on getting rid of fraud, but without telling these sto-
ries of success, we could weaponize accountability efforts to under-
mine these programs that you have said have helped struggling
Americans. So, in your time targeting fraud, can you give us exam-
ples of programs you have looked into that functioned well, served
the American people with urgency, and ensured that dollars actu-
ally got to the people that needed them the most?
Mr. HOROWITZ. I would say, Congressman, we haven’t heard sto-
ries from people that said these programs were a complete waste.
That is not what we have heard. We have heard success stories in
50
many of the programs. We have talked about PPP, and EIDL, and
the unemployment insurance. Restaurant revitalization program
helped restaurants. The various state and local funding vehicles
had a substantial impact. We actually visited six communities as
part of our oversight work and are working on a report on it to see
how they used COVID-related funds, what impact it had on those
communities. And so, we have gone to communities around the
country to get that information.
The challenge has been making sure that large percentages of
that money went to the people it was intended for and went to the
communities it was intended to help. So, I wouldn’t come here and
say we heard testimony that these programs were bad. What we
heard was these programs were helpful, and how do you fix the
fraud to make sure the money goes to the right place.
Mr. CASAR. Thank you for that. Yes, of course, you know, helping
folks out in a mile-long food line, those folks aren’t there commit-
ting fraud. But what we are trying to do here is make sure that
we are recovering dollars that weren’t getting to those folks.
Mr. DODARO. Yes. No, I agree with what Michael has said. But
I would also add, you know, Operation Warp Speed, I thought, was
a very effective program. We were able, working with the private
sector and government, to develop the vaccines in a record time.
Normally, it would take 10 to 15 years to develop a vaccine, but
Operation Warp Speed worked, I think, extraordinarily well. The
programs have provided funding to help support healthcare work-
ers, providers was very effective as well. But all of these programs
had some level of effectiveness, but it could have been even more
effective, is what we are saying. If all the money that was allocated
was used properly, we could have maybe saved more people, helped
more people out, and that is our goal.
Mr. CASAR. Thank you. I think it is our goal as well. I yield back.
Chairman COMER. The gentleman’s time has expired. The chair
recognizes Mrs. McClain for five minutes.
Mrs. MCCLAIN. Thank you, Mr. Chairman, and thank you all for
being here today. I appreciate it. A little bit of background is, I
come from the financial services background, and I really want to
focus on the waste, the fraud and abuse and really to represent the
American people.
In my background, if I were to defraud a client, probably two
things would happen. One, I would have to pay the money back,
and two, I probably do a little time for that, and rightly so. So, I
want to really focus on what are the consequences and what are
the penalties, and then what is the relationship, because if I under-
stand it correctly, it is your job, Mr. Smith, to kind of make a pre-
liminary case and then hand it over to the DOJ. Am I directionally
correct on my understanding?
Mr. SMITH. Yes, sir. Yes, ma’am. Yes, ma’am.
Mrs. MCCLAIN. So, in your testimony, you mentioned that the
Department has recovered over a billion dollars, which I think is
a good start. However, we still have $500 billion in potential fraud
out there that we have just identified, and who knows, there might
be more. So, I am curious as to how many pandemic fraud cases
your office has actually referred to the DOJ. Do you know that?
51
Mr. SMITH. So, to give you some background, we have opened
over 5,000 cases since March 2020. We obviously follow the evi-
dence, and once we feel like there is investigative merit, we take
those cases to the Department of Justice, U.S. attorney’s offices.
And those U.S. attorney’s offices look at those cases and the pros-
ecutorial merit of those, along with other Federal law enforcement
entities because it is not just the Secret Service——
Mrs. MCCLAIN. Sure.
Mr. SMITH [continuing]. But other Federal law enforcement enti-
ties who are bringing pandemic-related cases as well. They have to
de-conflict and prioritize.
Mrs. MCCLAIN. So, let’s stick with that theme because I am try-
ing to get some answers. So, you have over 5,000 cases. How many
of those have you referred to the DOJ, give or take?
Mr. SMITH. When we open the case, once we feel like there is
enough evidence to move forward from a prosecutorial judicial
standpoint, we present that case to the U.S. attorney’s office. I
don’t have the breakdown of how many were presented yet. I can
get that number back to you though.
Mrs. MCCLAIN. If you could, directionally, do you have an idea?
Mr. SMITH. When we open the case, the——
Mrs. MCCLAIN. Is it a 90 percent accept rate? Is it a 20 percent?
Mr. SMITH. Well, accept rate is actually different than presen-
tation rate because when we open a case, the intent is to eventu-
ally present it to the U.S. attorney’s office.
Mrs. MCCLAIN. Right. So, I am trying to make the correlation to
you commit a crime, there is a consequence. And what I am trying
to do for the American people to help justify for them their tax dol-
lars being misused on fraudulent basis, and I appreciate and ap-
plaud your efforts. I am trying to connect the dots on what is the
number. Directionally, you have no idea. Does the DOJ accept most
of the cases? Are most of the cases that you find accepted?
Mr. SMITH. I mentioned in a previous response, so as a Federal
law enforcement entity, we are, you know, by nature, trying to go
after the most egregious actors.
Mrs. MCCLAIN. Sure.
Mr. SMITH. That is why we train state and locals——
Mrs. MCCLAIN. Yes.
Mr. SMITH [continuing]. In our Computer Forensics Institute
down in Alabama to focus on a local level, but we are confident in
our colleagues at the DOJ. They take as many cases as they can,
and they work——
Mrs. MCCLAIN. So, with all due respect, you may be confident,
but I don’t know if the American people are confident with their
tax dollars. And I don’t mean any disrespect, but that is why I am
trying to ask these numbers is to get some answers for the Amer-
ican people. Let me rephrase it. How many of these cases are cur-
rently being prosecuted by the DOJ? Do you know that?
Mr. SMITH. I don’t know that overall number for the Department
of Justice. I do know that we have made nearly 500 arrests since
the beginning of the pandemic.
Mrs. MCCLAIN. OK. So, you have made 500 arrests. What has
the result of that been? So, I know you have recovered over a bil-
lion dollars, right? Any jail time?
52
Mr. SMITH. Yes, ma’am.
Mrs. MCCLAIN. Can you talk to that effect?
Mr. SMITH. I haven’t compiled the number of years or months
total from the 500 arrests. I haven’t done that, ma’am.
Mrs. MCCLAIN. OK, because I do think at the end of the day, just
like we treat our children, if there is a consequence to your action.
Mr. Dodaro, you talked earlier about deterrence. Well, part of the
deterrence process may be actually if we publicly show the Amer-
ican people that we are going after these criminals, these people
that are stealing American’s hard-earned moneys, and not only are
we recovering the money, but they are doing time and hard time,
that might help on the deterrence. So, when can I expect some re-
sults or a report?
Mr. SMITH. Ma’am, I will give you a timeframe on that when I
get back to the team, but we have been pursuing results since the
beginning of the pandemic and——
Mrs. MCCLAIN. But I would like an accurate accounting of the re-
sults, if at all possible, and just to help on a positive note saying,
listen, we are good stewards of your money. We are trying to get
your money back. So, with that, I know I am over time.
Chairman COMER. Right. The gentlelady’s time has expired, but
feel free to answer the question.
Mr. DODARO. Thank you very much, Mr. Chairman. So far, ac-
cording to the data that we have analyzed from the Department of
Justice, there have been over a thousand people who have pled
guilty or been convicted. There are over 600 charges pending
against another 600 people. There have been at least 779 people
who have been sentenced so far. This is on page 6 of my written
testimony. The number of people, it has gone from one year proba-
tion to 17 years in prison, so the sentences are significant. We have
a number of individual examples sprinkled throughout our testi-
mony. So, that is a broad accounting at this point. Michael prob-
ably has even a more precise accounting.
Mr. HOROWITZ. Yes, I was going to just build on that. You know,
there are the numbers. I agree with Mr. Dodaro. Everything is on
our public website. We post all of the cases that we are as an in-
spector general community involved in. I couldn’t agree with you
more. The public needs to know there are consequences. Crime
doesn’t pay. And what we are going to do as inspectors general, as
long as that clock is running, and Congress last year extended it
from 5 to 10 years in one group of cases—hopefully, we will do it
in others—we are going to keep going. It is going to go for seven
more years or more, but are going to hold everybody who we can
hold accountable, accountable. And as inspectors general, we don’t
care about dollar thresholds. We are going to go after the smallest
dollar to the biggest. Obviously, you prioritize. We have multiyear
sentences to date for some people. No one should think they got to
get-out-of-jail free card, but one of the things that can help, be-
cause we are not only talking about fraud, we are talking about im-
proper payments, right, and recovering money.
And so, that is where one of the things I mentioned earlier—the
Program Fraud Civil Remedies Act, it is an administrative way we
can get money back. It is not criminal, but the taxpayers know we
are getting the money back. Right now the threshold to use, it is
53
$150,000. We want to raise it to a million dollars so that we can
go after that.
Chairman COMER. Thank you. The chair recognizes Ms. Crockett.
Ms. CROCKETT. Thank you, Mr. Chair. I have changed my ques-
tion a little bit, so I am going to go to my roots. As a criminal de-
fense attorney, a lot of times I would voir dire a jury. And one of
the questions that I would ask is, is it better to convict an innocent
person or to let a guilty one go free? And oftentimes, the look that
I am seeing on Mr. Smith’s face is the look that I would get from
potential jurors because for them, it was an impossible question be-
cause neither one of them sounded like a good resolution. And I
bring this up because what we are talking about is government,
which happens to be less than perfect. We are also talking about
a once-in-a-lifetime pandemic.
And so, what I want to better understand is, I want us to be real.
I feel like in this hearing we have talked a lot as if we can erode
all bad guys, make criminals disappear. I believe in the opening re-
marks from Mr. Dodaro, he talked about the fact that, basically,
there are those that were sitting and ready to pounce, not nec-
essarily that the pandemic was producing some super criminal all
of a sudden, but these are fraudsters, many of them who had a
record.
When you talk about these sentences, one can presume that the
higher sentences went with people that most likely had been in
trouble at some point in time before in their lives, and so I want
to talk about realistically. Let me first begin by saying, I applaud
the efforts that all of you have made in your respective areas, to
make sure that we are doing our part. But I think that what we
are losing sight of is the fact that we save lives, and there were
people that were in desperate need. And when we talk about our
economy and the fact that we are still struggling to recover from
the pandemic, we minimized some of that. This was a mitigation
exercise that Congress had. And so, while it may not have been
perfect, because there wasn’t a playbook for the previous pandemic,
because I am guessing most of you all weren’t here a 100 years ago.
I am trying to find out, when you look at it overall, if we wanted
to be realistic about this imperfect system, if we were to throw out
percentages of fraud because I know that right now you don’t have
a crystal ball to know exactly how much fraud has occurred. But
when we look at, say, other programs that have been rolled out,
what is a good threshold for what we should anticipate as kind of
part of the business that we unfortunately may endure when we
are talking about such a large—government is big. And so, it is
definitely not perfect. There is a lot of people in it. What are we
talking about realistically, and how far off of that mark were we
when we look at these types of circumstances? And it doesn’t mat-
ter who answers.
Mr. HOROWITZ. Yes. Congresswoman, it is an excellent question,
and I don’t have any precise number I can tell you. I think for all
of us who have done this for a while, the lack of preparedness and
the management of the programs at the outset created a much
larger opportunity for fraud than should have happened. Whether
that should have been—as you noted, there is always going to be
fraud in programs where there are some bad people out there who
54
will, no matter how much you try, find their way to get the money
illegally. But I think most of us think that percentage of fraud
could have been much smaller.
Ms. CROCKETT. OK.
Mr. HOROWITZ. And whatever we are going to end up here, had
there been preparedness and action taken in advance.
Ms. CROCKETT. OK.
Mr. DODARO. Part of the framework that we work with Congress
to put in law back in 2016 requires a fraud risk assessment, a pro-
file, but also a tolerance level for risk. That would be said for every
individual program. So, you would make a conscious decision up
front of what you are willing to tolerate in order to have that trade-
off for speed, and getting delivery of services out there as fast as
possible to save lives, to help deal with economic consequences.
Right now, it is just whatever happens to us, as a government
happens to us, and we deal with the consequences. And I have
been in GAO over 49 years, so we have been a lot of disasters dur-
ing that period of time: Katrina, and the American Rescue Act,
during the Great Recession, the $700 billion to unfreeze the credit
markets during the global financial crisis. In this situation, there
is more fraud than we have seen in equivalent type of things over
the years, recognizing that this was the biggest American rescue in
our history. But had we been better prepared and actually imple-
mented requirements for managing fraud consciously up front, we
would reduce the amount of fraud and made better use of that
money to help really achieve the objectives of the legislation.
Ms. CROCKETT. Thank you.
Mr. SMITH. As I said in my opening remarks, I always think that
collaborating and sharing information on the front end will lead to
some mitigation of criminal behavior. But obviously, my experience
as a law enforcement professional says, you know, there is always
going to be some element of criminal activity afoot.
Ms. CROCKETT. Thank you so much.
Chairman COMER. The chair now recognizes Mrs. Boebert for five
minutes.
Mrs. BOEBERT. Thank you, Mr. Chairman, and thank you so
much to our witnesses who are here today. I appreciate your time
and your willingness to be here and speak with us, and answer
these very important questions. Now, I am going to get right to it.
Members of Congress have been told that American taxpayers
were defrauded a possible $560 billion as a result of the Federal
Government’s negligence in carrying out these Federal COVID re-
lief funding programs. And I am going to start with a rhetorical
question here, but does anyone know of an organization in Amer-
ica, or around the world, public or private, that has been scammed
out of $560 billion, and simply, is that OK? I certainly can’t think
of one, and I don’t think that it is OK either. So, after what was
the largest fleecing in American history, possibly world history, can
any one of the witnesses today give me the name of one adminis-
trator, one director, a supervisor that was fired, demoted, or put on
leave because they failed to keep hundreds of billions of dollars
from being stolen from the American taxpayers? And I will yield
very quickly to each of our witnesses for simple ‘‘yes’’ or ‘‘no,’’ and
I will start with you, Director Smith.
55
Mr. SMITH. No, ma’am. That is not my focus.
Mrs. BOEBERT. Thank you.
Mr. HOROWITZ. I don’t know that as I sit here. I could ask the
fellow IGs to see if they know of any actions that have been taken
from an administrative side.
Mrs. BOEBERT. Thank you.
Mr. DODARO. Yes, offhand, I do not.
Mrs. BOEBERT. Thank you. I didn’t think so, and that is pretty
insane. Five hundred and sixty billion dollars we are projecting,
and we have hundreds of billions of dollars lost, causing massive
inflation. Seventy percent of the money, according to the CEO of
LexisNexis Risk Solutions, ended up lining the pockets of crime in
countries like China, Nigeria, Russia, and not a single person in
charge of distributing that money has been held accountable.
So, here is how badly the American taxpayer was conned. The
United States Federal Government has reportedly been defrauded
of more money in the last two years than the entire 2022 tax rev-
enue of England, Italy, Mexico, Ireland, Greece, Israel, Canada, Po-
land, and Brazil combined. The American taxpayers have one ques-
tion: how the heck were these bureaucrats so dang incompetent,
that they were being scammed out of $35 million every hour for
nearly two years? Absolutely insane.
And what is equally concerning is the fact that, for years, Con-
gress has known the size and scope with which the American tax-
payer was defrauded, yet this committee refused to act until now.
Now, the Republicans hold the gavel and in a desperate attempt
to protect the Bidens, the Big Tech industry, the Democrat Party,
the mainstream media has tried to discredit this committee before
our work has even begun. There should be nothing more bipartisan
than ensuring American tax dollars aren’t stolen by fraudsters, but
sadly, it has taken a Republic-controlled Oversight and Account-
ability Committee to be willing to get to work on it.
So, here we are. The American people had their businesses shut
down. They lost their jobs, their livelihoods, their life’s work be-
cause of government mandates and shutdowns, and that same gov-
ernment spent trillions of dollars, lost hundreds of billions, and the
result is skyrocketing inflation and interest rates for the American
people. And our role is to ensure that we find out how this hap-
pened and make sure that it never happens again, and hold those
that stole money from the American people accountable.
And, Chair Horowitz, I would like to ask you, under the Biden
administration, we have seen the DOJ wage a full out attack
against the American people from accusing parents concerned
about their children’s education of being domestic terrorists, to
raiding the homes of pro-life activists, to pressuring private compa-
nies to censor conservatives. As Republicans have continued to
mention throughout this hearing, there is a clear difference be-
tween people who were issued improper payments versus
fraudsters who have stolen hundreds of billions of dollars collec-
tively from the American taxpayer with malicious intent. Now,
Chair Horowitz, what is the Department of Justice doing to ensure
that the Federal Government is targeting criminals and those who
knowingly took millions of dollars from the Federal Government to
fund criminal gangs in Russia, China, and Nigeria?
56
Mr. HOROWITZ. So, we have worked with the Department, inspec-
tors general, and the PRAC have worked with the Justice Depart-
ment on these investigative matters. They have set up a fraud task
force. We are a member of it with the Secret Service. We have
worked closely with law enforcement partners across the Federal
Government. It is going to take a substantial amount of time, ef-
fort, and resources because there are so many cases. We have that
partnership working right now. We are going to continue to refer
cases to them, and they are going to have to make assessments on
which cases to bring criminally. We are also working with them on
the prepayment signed on with the civil lawyers as well because,
again, we want to get the money back for the taxpayers.
Mrs. BOEBERT. Yes. Thank you, Mr. Chair. I yield back.
Chairman COMER. Thank you. The chair recognizes Mr. Goldman
for five minutes.
Mr. GOLDMAN. Thank you, Mr. Chairman, and thank you to our
witnesses for your service and being here today. After that effort
to blame the victim for fraud by bad actors, let’s first go back to
the undisputed premise that the money appropriated by Congress,
including by nearly all of my Republican colleagues on the other
side during the past 2 Congresses, was both life-saving and eco-
nomic saving, as we faced the worst pandemic in our history.
Now, as a prosecutor, I prosecuted rampant mortgage fraud that
resulted from the subprime mortgage crisis, and we know there
was significant fraud arising out of the TARP program following
the 2008 financial crash. But I was shocked to learn in preparing
for this hearing that many of the COVID benefits or at least some
of them were available based on a self-certification process. Am I
correct, Mr. Horowitz, that that means that individuals could re-
ceive COVID relief funds simply by certifying their eligibility with-
out any independent review?
Mr. HOROWITZ. That is correct.
Mr. GOLDMAN. Now, would you agree—Mr. Horowitz as also a
former Federal prosecutor and current IG of DOJ—that is self-cer-
tification process is a recipe for fraud?
Mr. HOROWITZ. Absolutely.
Mr. GOLDMAN. I read your opening statement closely, and I ap-
preciate very much your call for more resources for data and data
analysis, which, in my experience, is the most effective way of root-
ing out identity theft, unquestionably the biggest cause of COVID
fraud, as well as most other frauds. Mr. Horowitz, in your view,
has the Department of Justice received enough money to prosecute
fraud related to COVID relief funds to the very fullest extent?
Mr. HOROWITZ. I think that is going to be a question over time
because they are ramping up dramatically as we are, and as Secret
Service is, and others. They will need additional resources, particu-
larly this year and in the coming years, to deal with what I think
will be a continued, you know, a substantial number of cases.
Mr. GOLDMAN. So, you would certainly agree that the Depart-
ment would benefit from more funds for COVID relief fraud?
Mr. HOROWITZ. I believe they will need that this year and in the
years to come.
Mr. GOLDMAN. I want to ask you to switch your hats now back
to the inspector general for the Department of Justice, and I am
57
going to direct your attention to a recent New York Times article
entitled, ‘‘How Barr’s Quest to Find Flaws in the Russia Inquiry
Unraveled,’’ which is dated January 26, 2023. Did you read this
lengthy article last week, Mr. Horowitz?
Mr. HOROWITZ. I did read it.
Mr. GOLDMAN. OK. Mr. Chairman, I ask for unanimous consent
to introduce this article into the record.
Chairman COMER. Without objection, so ordered.
Mr. GOLDMAN. Now, this article is based on a month-long inves-
tigation by the Times exposing a tremendous amount of waste and
abuse, but no fraud by Special Counsel John Durham, who was as-
signed by former AG Bill Barr to investigate the origins of the Rus-
sia investigation under a false conspiracy theory. Mr. Horowitz, you
released a report on that exact topic, didn’t you?
Mr. HOROWITZ. We released our report about the handling of
Crossfire Hurricane and the FISA matter in December 2019.
Mr. GOLDMAN. And Crossfire Hurricane, just to be clear, became
the Special Counsel Mueller’s investigation, right?
Mr. HOROWITZ. What has been referred to colloquially as the
‘‘Russia investigation.’’
Mr. GOLDMAN. Right, and you concluded that the initiation of a
full Russia investigation by the FBI was legitimate and supported
by the evidence. Is that correct?
Mr. HOROWITZ. I would want to go back and find the exact words
I used in that report, but we did not find evidence of inappropriate
decision-making in that regard. But again, I would want to use the
precise language I used in that report. It is public. It is on our
website.
Mr. GOLDMAN. OK. And you referred one case to Special Counsel
Durham, correct?
Mr. HOROWITZ. That is correct, and attorney, Mr. Clinesmith,
who we found had altered a document.
Mr. GOLDMAN. And he pled guilty, and other than that case, do
you know how many cases Mr. Durham charged?
Mr. HOROWITZ. As to what is public, I have no idea if there is
anything under seal. I am assuming not, but I don’t know the an-
swer to that. There are two public cases beyond that.
Mr. GOLDMAN. And how many convictions did he get?
Mr. HOROWITZ. Other than the Clinesmith case, the other cases
were—the juries has found the individuals not guilty.
Mr. GOLDMAN. Mr. Horowitz, last night, Congressman Ted Lieu
and I sent you a letter requesting that you conduct an investigation
into Special Counsel Durham’s investigation to see if Mr. Barr or
Mr. Durham violated any department policies, regulations, or law.
Have you reviewed this letter yet?
Mr. HOROWITZ. I was not aware that you had sent that until you
just showed it to me, but I certainly will read it and review it.
Mr. GOLDMAN. Mr. Chair, I would ask for unanimous consent to
offer into the record, and could I just add——
Chairman COMER. Without objection. The gentleman’s time has
expired.
Mr. GOLDMAN. Mr. Horowitz, can you just commit to right
now——
58
Chairman COMER. Gentleman’s time has expired. We appreciate
the questions on COVID and appreciate the passion for investiga-
tions. We will get to that in the next few weeks, but thank you for
the questions. The chair now recognizes Mr. Fry for five minutes.
Mr. FRY. First, Mr. Chairman, thank you for holding this hearing
today. Thank you to the witnesses for being here. I am going to
highlight an example of COVID fraud in my very own district. Just
last year, two members of a Myrtle Beach family were sentenced
in Federal prison and a third to probation for their roles in a
scheme to defraud the government out of more than $500,000
through a series of fake tax returns and stealing stimulus checks
sent to other Americans under the CARES Act. While many people
are struggling to make ends meet during the pandemic, these
criminals went on a shopping spree with money stolen from the
American people. You know, while I am a Member of Congress, I
am also a resident of that district. This is in my very own commu-
nity, so I want to thank you, Chairman for holding this because
this also touches home as it does for many Americans.
I would imagine, Mr. Smith, that this is by no means the only
place that this is happening. Can you talk about or touch on simi-
lar instances that are occurring around the country from a factual
standpoint?
Mr. SMITH. Yes, sir. While we talk somewhat about transnational
criminal organized groups, our experience in the 5,000-plus crimi-
nal investigations that we have opened is overwhelmingly, you
know, homegrown actors. You talked about your home district,
Myrtle Beach. Our Columbia, South Carolina Field Office is one of
our most active field offices, especially when it comes to employing
taskforce partners. They actually won the cyber games that were
hosted by the National Computer Forensics Institute last year. So,
we do have a lot of capacity, a lot of law enforcement passion in
your district.
But as you mentioned in your question, that is a similar footprint
that exists in our other cyber fraud task forces, the 41 other ones
around the country. And what we do is employ not just agents with
guns, but analysts and other professionals that collaborate together
with those financial institutions, with those local banking commu-
nities and local law enforcement professionals to, you know, detect
and arrest bad people.
Mr. FRY. Thank you, and I know you touched on how you are in-
vestigating some of these actions, but can you touch on how you
are identifying new cases of fraud or abuse moving forward?
Mr. SMITH. So, early in the pandemic, as I mentioned in my
opening, we partnered with the Department of Labor, OIG, and
SBA OIG, and we assigned MOU, Memorandum of Understanding,
where we shared information, shared anomalies, shared indicators
of compromise that lead us to bad actors. I mentioned earlier how
we talked to a lot of money mules. We follow money, and once you
follow money and what accounts that those resources went into,
generally speaking, you are going to get to the bottom of a crime
because overwhelmingly, our investigations focus on folks that are
looking to enrich themselves through illicit activity. So, once you
start knocking on doors, asking questions, and looking into bank
59
accounts, you usually got to get some answers from a law enforce-
ment perspective.
Mr. FRY. Thank you. Mr. Dodaro, once an improper payment has
been made, how difficult is it to recoup that money?
Mr. DODARO. Well, it is important to recognize that the improper
payment estimates are estimates and projected, but when they are
found, it is always difficult to recover the money. I think in the last
two years, there have been improper payments of over $200 billion.
Recoveries have been about $20, $23 billion.
Mr. FRY. So 10, 12 percent-ish?
Mr. DODARO. Yes.
Mr. FRY. I mean, in this instance, would you agree that improper
payments are not always recoverable? I mean, you are going to run
into a brick wall?
Mr. DODARO. Absolutely, and you are going to have the same
issue with fraud.
Mr. FRY. Out of all the improper payments that had been made,
and I know you have collected $23 billion back, how much can we
realistically expect to recover?
Mr. DODARO. That has been about the consistent number that I
have seen over time. The main thing I have been trying to do and
convince Congress to have some legislation to do this and over-
sight, is the stop the improper payments in the first place. The
same with fraud. Unless you prevent this from happening, the
prospects of recovering this money over a period of time are pretty
slim, based on historical evidence.
Mr. FRY. And I am going to ask this to you and direct to my final
question. Is it possible from a strategy standpoint to enlist the help
of states either incentivizing it or whatever to broaden that per-
spective? Is that a decent policy initiative to look into?
Mr. DODARO. Absolutely. I have been trying to convince each ad-
ministration I have worked with the use the state auditors more
effectively in that area, Medicaid program in particular. The Med-
icaid program alone in the last two years has had $98 billion and
$80 billion in improper payments. State auditors could help great-
ly. State auditors could help in the unemployment insurance area,
and auditing the Federal Government, they ought to support state
auditors, and they can use them to hold people more accountable
for third party deliveries.
Mr. FRY. Thank you. I yield back.
Chairman COMER. The chair recognizes Mr. Moskowitz for five
minutes.
Mr. MOSKOWITZ. Mr. Chairman, thank you, and thank you for
holding this hearing today on Pandemic Response, Waste, Fraud,
and Abuse. I think we can agree on a bipartisan basis that, of
course, we want to find out about waste, fraud, and abuse because
in the emergency management business, one of the things we do
after a disaster is we do after action reviews, and we look at what
went right and what went wrong to not repeat those same mis-
takes.
And so, when the country began—you know, we are facing an un-
precedented whole-of-country crisis, the first 50-state disaster in
American history. Every state had a disaster declaration. At the
same time, the Trump administration was ill prepared and, in fact,
60
several times wanted the states to take the lead instead of the Fed-
eral Government, specifically when it came to PPE. And so, we
have heard a lot about fraud and abuse today.
I want to focus on the waste. It is not as sexy as fraud and
abuse, but the amount of waste that happened during the pan-
demic, especially in the PPE space, is something that I want to dis-
cuss. You know, that void that was created when the states had to
step up and procure all these resources. The states had to compete
against everybody but Antarctica, but, most importantly, the Fed-
eral Government. And while the Federal Government was raising
prices, companies were price gouging the Federal Government,
while the Federal Government was not following their own procure-
ment. In fact, $18 billion was spent by the Trump administration
procuring these goods. Ten billion dollars of that did not go through
procurement. It was sole-sourced contracts.
And so, one of the things I want to talk about as the former di-
rector of emergency management for the state of Florida for Gov-
ernor DeSantis is, and this question is for you, Mr. Horowitz. Did
the Inspector General’s Office ever look at anyone within the inner
circle at the White House on whether they were involved in specifi-
cally selecting vendors and negotiating pricing for PPE?
Mr. HOROWITZ. So, each inspector general has authority by law
in the IG Act over the employees in their building, in their agency.
We do not have authority to investigate individuals outside, and
there is no inspector general for the Executive Office of the Presi-
dent or the White House.
Mr. MOSKOWITZ. OK. I appreciate that. So, let’s switch over to
the GAO then. Has the GAO examined whether anyone within
Trump’s inner circle, including family members, were involved in
decisions on who should get what contracts and the $10 billion that
didn’t go through procurement, and the pricing that was paid for
all sorts of different PPE, whether that be masks or ventilators? I
mean, trust me, I have read all of the stuff, but I just want to
know, did you guys specifically look at any of that?
Mr. DODARO. No, we did not.
Mr. MOSKOWITZ. OK. So, what if I proffered for you that when
states could not get this PPE out of FEMA or out of HHS, that we
had to call the White House to get this stuff released directly from
his inner circle? What if I proffered for you? Would that sound like
normal procurement process during an emergency?
Mr. DODARO. Probably not.
Mr. MOSKOWITZ. Right. So, you know, one of the questions that
I think we should focus on, Mr. Chairman, in this hearing is that
COVID was not a two-year event. It was a three-year event. And
I am more than happy to join with the majority and look at the
fraud and abuse that went on in the last two years in COVID-re-
lated programs, but I think it is only fair for us to also look at the
beginning of the disaster and the amount of government waste that
existed by the Federal Government sole sourcing contracts and ne-
gotiating pricing within the White House subverting the process
from Federal agencies, because not only did that drive up cost and
waste. That filtered down to the other 50 states because if the Fed-
eral Government was paying more money, and if I wanted to buy
those supplies, I had to pay more money. So, it isn’t just the $18
61
billion that was spent here. It is the money now that FEMA has
to reimburse those states for goods that were too expensive because
the Federal Government drove up those prices. I yield back.
Chairman COMER. The chair recognizes Mrs. Luna for five min-
utes.
Mrs. LUNA. I just want to thank the chairman and all of the wit-
nesses for participating, and I know it has been a long day, so I
will try to keep this short.
COVID improper payments continue to be an area of concern in
the Federal Government due to lack of oversight from the Biden
administration, as Representative Boebert had stated. Estimates
range as high as $560 billion of government COVID spending was
subject to fraud, waste, and abuse. That is our hard-earned tax-
payer dollars that could have been used to feed families, heat
homes, and fill up the pump during the Biden-caused inflation cri-
sis.
President Biden continued to approve COVID spending with no
guardrails in place to make sure that money was going where it
was intended to go. We have seen the Federal Government spend-
ing and distributing to illegal immigrants, the same illegal immi-
grants, mind you, that did not take or pass the health screening
process for legal immigrants to come here. And in addition to that,
they did not pay into our taxpayer system. I would like to submit
the graphic into record.
[Chart]
Mrs. LUNA. We can see that the city of Chicago is sending $71
million for financial assistance for underserved communities, such
as undocumented residents. The state of Washington is handing
out $340 million in grant payments for immigrants or illegal immi-
grants who are not otherwise eligible for Federal stimulus. And the
city of Boston is sending $1 million in direct cash transfers to legal
immigrants, who are unable to receive Federal COVID benefits.
This rewards a dangerous process incentivizing people to come here
illegally where some estimated that a shocking 60 percent of Latin-
American children, who crossed the border largely because they are
seeking the American Dream and understand some of the benefits
people offer in this country are caught by cartels, exploited for
child pornography, and drug trafficking. These are not cherry-
picked facts or distorted figures. This is actually happening.
My question is for Mr. Horowitz. If illegal immigrants are prohib-
ited from Federal public benefits, then why are they allowed to re-
ceive Federal COVID dollars from programs like the American Res-
cue Plan?
Mr. HOROWITZ. So, I would have to go back and look at, you
know, each program and what eligibility determinations were
made, and who was eligible, and I am happy to follow up with you
and provide information to you. We are looking at anybody who is
ineligible. Frankly, we don’t break it down between the categories
of as to why, so we are looking for people who are ineligible. We
are working with our law enforcement partners on that, whether
you are here legally, not here legally, you really own the business,
or you never owned a business. You know, we are going to follow
up and pursue that.
62
Mrs. LUNA. Before I yield back my time, real quick, I just want
to put out there that obviously being a part of Oversight, we want
to ensure that our taxpayer dollars are being safeguarded, right?
But also, that government funds are not being used to largely
incentivize and hurt people in the process. And so, just to finalize
and maybe just your personal opinion, do you believe that because
of this type of inappropriate spending, that it is putting people in
harm’s way that would potentially not be subject to this victimiza-
tion?
Mr. HOROWITZ. So, you know, as I said earlier, I don’t think we
have heard testimony that these programs weren’t helpful to indi-
viduals. In fact, for many of them, like the PPP Program, we have
heard from small businesses that it saved them. For restaurants in
the restaurant revitalization program, for unemployment insur-
ance, we heard testimony about how it kept people afloat during
this period. So, we haven’t heard testimony that the programs were
a waste and useless.
What we heard was there was a lack of preparation to issue the
benefits. It resulted in fraud, a lot of identity fraud, and what we
have heard is how it victimized not just the public who lost the
benefit of these programs to wrongdoers, it harmed the person
whose identity was stolen. That individual has to deal with that,
and it often harms the individual who is intended to benefit be-
cause they often struggle to get the benefits because the fraudster
got there first——
Mrs. LUNA. Thank you.
Mr. HOROWITZ [continuing]. And the program said they were the
fraudster.
Mrs. LUNA. Thank you. And now before I leave, Chairman, would
you please submit the graphic for record? Thank you.
Chairman COMER. Without objection.
Chairman COMER. And thank you for your questions. Just to
note, they just called floor vote. We are going to get two more ques-
tioners in, then we will recess and reconvene 10 minutes after
votes. There are only two votes, and we move a lot quicker than
Pelosi did, so the recess won’t take long. But now, the chair recog-
nizes Mr. Connolly for five minutes.
Mr. CONNOLLY. I thank the Chair, and I welcome Mr. Dodaro.
Mr. Horowitz, welcome back. Mr. Smith, welcome to the committee.
My questions are going to be to you, Mr. Dodaro, and you, Mr.
Horowitz. On Monday, the Pandemic Response Accountability Com-
mittee, led by you, Mr. Horowitz, released a fraud alert that found
fraudsters used nearly 70,000 questionable Social Security num-
bers to obtain as much as $5.4 billion from SBA’s paycheck protec-
tion program. Is that correct?
Mr. HOROWITZ. That is correct.
Mr. CONNOLLY. And the fraud could have been stopped if the
Federal Government invested in appropriate data analytics capac-
ity and focused on sharing that data across agency silos and among
various levels of government. Is that fair assessment?
Mr. HOROWITZ. That is correct.
Mr. CONNOLLY. Would you agree with that, Mr. Dodaro?
Mr. DODARO. Absolutely.
63
Mr. CONNOLLY. So, based on previous conversations, we have
about improper payments and trying to curb that, which this com-
mittee has been talking about for a long time, and has been a high-
risk category for GAO for a long time as well. I introduced the Stop
Fraud Act, that in fact, would, by statute, do just that. It would
have used data analytics and would have propagated that data
analytics information sharing across Federal agencies, a desirable
goal that could very well have curbed or prevented the fraud we
are concerned about. And the bill would also create a center of ex-
cellence to look at best practices and to try to assist other agencies
in achieving those goals. Unfortunately, not a single Republican co-
sponsored that bill, today’s hearing concern notwithstanding.
So, I would invite the Chairman, Mr. Comer, maybe to take a
second look at the Stop Fraud Act, and maybe we can, as he indi-
cated yesterday his desire and the desirability of cooperating on a
bipartisan basis. I do think Stop Fraud Act has real bipartisan po-
tential, and I would welcome Mr. Comer joining me in that effort,
but I do think that there are steps we can take, and could have
and should have taken that might have made a difference. Mr.
Dodaro, would you like to comment on that?
Mr. DODARO. I have since 2015 recommended the permanent cre-
ation of a data analytics capacity to support the IG community. It
has proven value, and I was very disappointed that the Treasury
Department did not pick up that option that Congress gave them
to take over the Recovery Operations Center’s existing capacity,
and I was also disappointed that Congress didn’t act on my rec-
ommendation back in 2015.
Mr. CONNOLLY. Right.
Mr. DODARO. But better late than ever, and so, I hope that Con-
gress does pass that. I think it will have tremendous proven value
and return many more dollars than the investment, but it has to
be made permanent so it is ready to go any time.
Mr. CONNOLLY. Yes, absolutely. Mr. Horowitz, would you like to
comment on that?
Mr. HOROWITZ. I would just say ditto at some level, but I would
remind, as you know, and remind Congress, the law was created
with tens of millions of dollars in taxpayer money. It was very ef-
fective. It went away in 2015. We had to start from scratch in 2021
with a new appropriation from Congress and more money. We not
only wouldn’t have had to do that, but I bet we would have found
some wrongdoing, fraud, and other recoveries in that intervening
five years between the two disasters because there were other dis-
aster relief programs.
Mr. CONNOLLY. And I guess the final point I would pick up on,
and you testified to this earlier Mr. Dodaro, it is the culture too.
What is rewarded. You know, what is rewarded is pushing money
out the door, and funding programs, and having metrics that show
many people you have helped to reach all worthwhile goals. But
what is not really rewarded comparably is, and when I say $4 bil-
lion, I avoided fraud, I took measures to make sure it couldn’t hap-
pen. And we have to change that culture, and I am hoping this
piece of legislation is a big step in that direction, but I think your
point is very well taken. And I yield back.
64
Mr. DODARO. Yes. And actually, the other culture that has to be
corrected, if I may, Mr. Chairman?
Chairman COMER. Go ahead.
Mr. DODARO. Is to make it clear to agencies’ management for the
programs, that prevention of fraud is their responsibility. It is not
just the auditors coming in later, the investigators, Secret Service,
or whoever, because unless it is prevented up front, it is not really
going to be totally successful. We will always need to have inves-
tigations afterwards, but unless that culture shifts to the agencies’
management and Congress holds them accountable, you are not
going to really be as successful as we all want to be.
Chairman COMER. Thank you. And before we yield back, I would
like to comment. We are going to hold these agencies accountable.
That day starts today. I ask unanimous consent to enter into the
record a letter from the inspector general of the Social Security Ad-
ministration, dated January 31, 2023. This letter describes various
activities that that office has undertaken with respect to COVID
fraud, notably in relation to the misuse of social security numbers,
which is an issue at the heart of what you all have discussed today
in many COVID fraud schemes. This letter also points out that the
Social Security IG has never dedicated funds for oversight. He has
never received dedicated funds for oversight. This is another step
Democrats could have taken in the American Rescue Plan, but
chose not to.
So, without objection, I will enter this into the record.
Chairman COMER. Our last question before recess, Mr. Fallon
from Texas.
Mr. FALLON. Oh, thank you, Mr. Chairman. Mr. Horowitz, we are
hearing a lot of testimony, and would it be fair to say that we are
talking about billions of dollars in fraud?
Mr. HOROWITZ. Correct.
Mr. FALLON. It could be tens, it could be hundreds of billions of
dollars. The facts matter. I think we are discussing the largest case
of fraud in the history of the United States, and, frankly, this
might be the largest case of fraud in human history. As we have
known about these extremes since early 2021, and it is absolutely
an embarrassment to this institution, to the executive branch, to
all the Federal Agencies involved.
The U.S. Government has been swindled by not only our own
people, but criminals in Russia, in China, Romania, and Nigeria,
to name a few. It is estimated that 40 percent of pandemic unem-
ployment assistance funds, about $4 billion of taxpayer money
went to criminal organizations and authoritarian regimes, like Rus-
sia and China. Just put this into perspective, according to the
World Bank, there are 194 recognized countries on earth, and 171
of them don’t even have annual GDPs that rise to that level of
$560 billion. To add insult to injury, Democrats did not hold one,
not one full committee hearing on oversight last Congress on
COVID–19 fraud, which begs the question, what is this committee
even for? Quite frankly, it is for a hearing just like this when a po-
tential amount of $0.5 trillion has been stolen. And what did the
Democrats do instead of investigating rampant COVID fraud? They
used the reconciliation process to ram through $1.9 trillion of
spending in the form of the American Rescue Plan Act that contin-
65
ued to fund broken programs we knew were systemically fraudu-
lent.
So I ask again, what did the Democrats do for two years in over-
sight instead of investigating the largest fraud in history? Well,
they held hearings on the dangers of flea and tick collars for pets,
whether or not the Postal Service could handle packages during the
holidays, the developments in state cannabis laws, and potential bi-
partisan reefer reform. They made villains out of CEOs of the crit-
ical and essential American energy sector, who are the most effec-
tive and most efficient in the world at extracting natural resources.
In fact, they help guarantee our national security.
So, I wonder if Democrats considered if their massive spending
and barring Federal land leases and permits for drilling had any-
thing to do with the 40-year high in energy prices we have seen.
They held hearings on protecting the free speech of environ-
mentalist activists and others that agree with them, while at the
same time celebrating censorship of those who didn’t share their
views. And get this: they hosted two depositions, one roundtable,
and one full committee hearing on the Washington Redskins, or
Commanders rather they are called nowadays, and why? Because
somebody had a bee in their bonnet about Daniel Snyder.
We had hearings to tell us believe it or not that pollution is rac-
ist. The weather, racist. Climate change, racist. COVID–19 by defi-
nition, an indiscriminate virus was racist. Material healthcare, you
guessed it, racist. And America itself, the land of opportunity and
prosperity where millions of people come to this country every year,
both legally and illegally, to live their dream, many Democrats told
us for two years that America is systemically and irrevocably rac-
ist, that white privilege runs amok. Fortunately, the hard data
proves this leftist talking point to be categorically false, and the list
of useless hearings goes on and on. Plain and simple, the last few
years were an egregious dereliction of duty and a waste.
So, Mr. Chairman, it is with tremendous delight and relish that
I see this committee actually and actively tackling serious matters
of import to our country and our citizens, like, for instance, crimi-
nal transnational organized crime, stealing $0.5 trillion from the
American Treasury, and, by extension, the American taxpayers,
very pockets. So Mr. Chairman, thank you very much, and I yield
back.
Chairman COMER. Thank you, gentleman. We are going to now,
without objection, go into recess, and we will reconvene 10 minutes
after the last vote. We only have two votes, which won’t be long.
I know we have about eight or nine more questioners and then a
second panel. So, without objection, we are in recess until 10 min-
utes after conclusion of the last vote.
[Recess.]
Mr. LATURNER.[Presiding.] The committee will come back to
order.
The chair recognizes the gentleman from California, Mr. Khanna.
Mr. KHANNA. Thank you, Mr. Chair. You know, we have a tend-
ency in this place to always run down everything Congress does or
that Washington does. I would submit that our response as a Na-
tion to the pandemic is one of the most extraordinary responses on
66
a bipartisan basis that this country has ever had. We had 22 mil-
lion people out of work with the pandemic. Most other nations
around the world followed austerity politics. They didn’t have
enough aid.
We spent, on a bipartisan basis, $5 trillion to make sure that
millions of people got back to work, to make sure that we have a
3.5-percent unemployment rate, not a 10-percent employment rate,
to make sure that we didn’t have a depression in this country, to
make sure that 6 million people didn’t go into poverty. That was
what unemployment insurance extension was about.
We voted not because it was going to help red states or blue
states. We voted because it was going to help the United States of
America. And we learned the lesson of the Great Recession that the
stimulus then, which the Republicans opposed, was actually too
small, that we needed to go bigger, and the person who realized
that was not just the Republicans. It was Donald Trump. Three-
point-three trillion dollars of the spending we are talking about
was Trump oriented spending.
My first question to you is, what percent of fraud are we talking
about on the $5 trillion? Is it less than two percent, three percent?
I mean, what percent are we talking about?
Mr. HOROWITZ. Congressman, at this point, I am not in a posi-
tion to tell you——
Mr. KHANNA. Ballpark.
Mr. HOROWITZ. I have no idea at this point.
Mr. KHANNA. You don’t know? Is it less than 50 percent?
Mr. HOROWITZ. It is less than 50 percent.
Mr. KHANNA. Is it less than 10 percent?
Mr. HOROWITZ. There are some programs. I am not sure
where——
Mr. KHANNA. Overall. Are you saying there is a possibility?
Mr. HOROWITZ. We have a lot of investigating going on, so I am
not going to make a guesstimate when I don’t really have——
Mr. KHANNA. Does anyone have a sense if it is less than 10 per-
cent, five percent? You have no idea what percent?
Mr. DODARO. There are still hundreds of cases that are being in-
vestigated, so we——
Mr. KHANNA. So, let me ask this. Is there any evidence that the
fraud is higher on the $1.8 trillion that was allocated under Presi-
dent Biden’s Rescue Plan as opposed to the $3.3 trillion that Presi-
dent Trump signed off on the CARES Act? There is no evidence of
that, right? I mean, the fraud was equally applicable, potentially,
to the $3.3 trillion as the $1.8 trillion. Is that a fair statement?
Mr. DODARO. I would say that is a fair statement.
Mr. KHANNA. And Mr. Horowitz?
Mr. HOROWITZ. Yes.
Mr. KHANNA. Mr. Smith?
Mr. SMITH. The breakdown of our criminal investigations is
roughly 45 percent UI based and the other 55 percent SBA, but
that is just a Secret Service context, just to give you what we have
opened up.
Mr. KHANNA. Yes, but the UI was extended under the CARES
Act when President Trump was President. And by the way, the
Democrats objected back then to a lot of the deregulation on SBA
67
and a lot of the deregulation and how that was administered. But
I just want to be clear because they are trying to imply that some-
how this fraud, which, in my view is, is less than 2 to 3 percent,
I mean, you can’t say it, but even if you think that the fraud, it
was $100 billion, that is still less than a couple percent of the total
spending. They are trying to imply that somehow President Biden
is to blame for that, and that you would agree is just not factual,
correct? I mean, you can’t blame President Biden and not blame
President Trump with $3.3 trillion of it was under Trump. Is that
correct?
Mr. DODARO. I mean, we are looking at the totality of the pro-
grams from 2020 to current day, and we are finding problems
across that whole spectrum.
Mr. KHANNA. Mr. Horowitz?
Mr. HOROWITZ. Yes, the fraud began in March 2020. We are look-
ing at fraud cases throughout. Most of the money went out in the
earlier periods of time, but there is fraud throughout.
Mr. KHANNA. It is a great point. Most went out earlier. So, if
anything, the Trump administration probably is more to blame for
that three percent of the fraud. Let me ask this to Mr. Dodaro. One
of the challenges has been the antiquated IT systems in many of
these states prior to the pandemic, and this is actually one of the
challenges with the unemployment claims. Could you compare Re-
publican led state performances on these IT systems versus Demo-
cratic states or talk more generally about these IT systems?
Mr. DODARO. Well, I can talk generally. We didn’t look at it that
way. We don’t look at things on a partisan basis. But the IT sys-
tems, some of them date back to the 1970’s, from what we under-
stand, and efforts were made to try to modernize them. You know,
we keep a list of the highest risk areas. This is at the Federal level
for the Federal Government. IT acquisitions and operations on the
high risk list government wide for the Federal Government.
At the state level, they were having similar problems, and that
contributed to their inability to detect some of the fraud. They
weren’t able to do matching on some cases in some of the larger
states, and with the volume of claims that came through, they
needed to have automated processes. And some states, they were
doing it manually, you know, visually just trying to——
Mr. KHANNA. That was one of the big reasons for the fraud, cor-
rect?
Mr. DODARO. That was a contributing factor, yes. And the other
contributing factor was self-certifications, and self-certifications, I
think was one of the biggest contributing factors were, you know,
the people could just say, I’m eligible for this program. In some
cases, they weren’t allowed and not required to submit supporting
documentation, so he just said it, take people word for it, and that
is a prescription for fraud.
Mr. LATURNER. The gentleman’s time has expired. The chair rec-
ognizes the gentleman from North Carolina, Mr. Edwards.
Mr. EDWARDS. Thank you, Mr. Chair. This is working now. Gen-
tlemen, thank you so much for being with us this afternoon. And
I have got to tell you, sitting here and watching you be still for as
many hours as you did at our age, is a real test of stamina, so you
68
have my respect. You are going to have to tell me how you do that
some time.
I want to shift gears just a little bit. We talked about fraud, and
waste, and abuse quite a bit. I would like to turn the conversation
if we may, just for a couple of minutes to government efficiency.
Through the pandemic, I have observed across all industries, be-
cause of the loss of work force, and we could get into the reasons
for that. That is a whole series of hearings, I am sure. But every
industry that I talked to seems to have been forced to reinvent
itself through the pandemic and now that the pandemic is coming
to a close. And by reinvent itself, I am talking about doing more
or the same job with fewer people. And serving as an appropria-
tions chair for the state of North Carolina immediately before I got
here, it occurs to me, because every state agency that was coming
to me asking for their appropriation for the following year was ask-
ing for more, not less. And I am just curious what you might be
seeing, or are you in a position to comment on, has government
been able in any way to reinvent itself.
This Congress is on the cusp of having to make some really crit-
ical decisions to raise the debt limit to change our spending trajec-
tory. And I would like to know that government is working as hard
to reinvent itself and do more with less just like every other indus-
try out there is doing. Do you have any evidence or commentary
on that observation?
Mr. DODARO. I don’t know if I put it in the category of rein-
venting itself, but for 11 years now, I issued an annual report to
the Congress on overlap, duplication, and fragmentation in the
Federal Government, and how to achieve cost savings and perhaps
revenue enhancements, and we have issued almost 1,300 rec-
ommendations over that period of time. About half of those rec-
ommendations have been fully implemented, some partially imple-
mented. To date, there have been financial benefits to the govern-
ment of over half a trillion dollars, and I think $565 billion. So,
there are efforts underway, and there are hundreds of other GAO
recommendations we haven’t opened yet, that haven’t been imple-
mented, that could save tens of billions of additional dollars.
Right now, we probably have around 5,000 recommendations im-
plemented. I will be issuing that report again this spring. And we
also have the high risk list that I have referenced earlier in areas
that need a transformation, and that program over the last 15
years has saved $675 billion. So, there are improvements being
made. They are difficult to effectuate, but there is much more that
could be done for government to do that, and I think congressional
oversight has been key where there has been progress. It has been
through congressional action for the big dollars.
Mr. EDWARDS. Thank you. I will be waiting on that report. That
will be my favorite read this spring. One other quick question. I
know from chairing oversight of unemployment in North Carolina,
the Federal Government had this process where they came back
and asked for unemployment funds that had already been appro-
priated through a process called sequestration. Are you familiar
with that, and if so, can you tell me nationwide how many dollars
were sequestered? And of that, how many were actually recollected
from the state?
69
Mr. DODARO. Yes. I am not familiar specifically with the Unem-
ployment Insurance Program. The only sequestration I am familiar
with was due to the Budget Control Act of 2011, and by there, the
Congress set limits on discretionary spending. And if the appro-
priation bills didn’t come down to those levels, there was an across-
the-board government cut to bring them down to those levels. That
happened in 2013 and 2014. That was like the equivalent of, if my
memory serves me right, about seven percent cut at that time.
Mr. LATURNER. The gentlemen’s time has expired.
Mr. EDWARDS. Thank you very much.
Mr. LATURNER. The chair recognizes the gentlelady from New
Mexico, Ms. Stansbury, for five minutes.
Ms. STANSBURY. Thank you, Mr. Chairman, and ranking mem-
ber, members of the committee. And of course, gentlemen, on the
panel, thank you for your time today. I want to take this oppor-
tunity at the start of this Congress and this committee’s first hear-
ing to say how honored I am to serve on this committee and to join
in the oversight of this committee’s work. As a New Mexican and
as an American, I am deeply proud to serve our country and to
serve our communities, and to serve under the leadership of our
ranking member in particular, Mr. Jamie Raskin, who is a hero
and a scholar here in the House.
Our job on this committee is to defend our democracy and our
basic institutions, to protect our rights as Americans, and as a
member of the truth squad on this side of the aisle, to hold our gov-
ernment accountable, and counter the lies, conspiracy theories, and
extremism that we are going to hear on this committee this Con-
gress. In a couple of words, we are here to fight for the American
people and for the people of New Mexico, which is where I was
born and raised.
And in fact, I am grateful for this discussion today, because as
a native New Mexican and as somebody who grew up in a working
family that struggled to make ends meet with a single mother, I
personally know what it means to live on the edge, and why critical
relief programs, like the programs that we are talking about here
today in this committee, were passed by this body to help millions
of Americans, who would have fallen through the cracks, as we saw
in previous economic disruptions.
In fact, the early relief programs, whether that is the insurance,
the PPP Program, the subsequent American Recovery Plan, lit-
erally saved lives. Let me say that, again, these programs saved
lives. In fact, in New Mexico, almost 93,000 New Mexicans received
unemployment insurance. When the pandemic began, I was serving
in the state legislature. We called thousands of New Mexicans in
my district to find out how they were doing welfare checks: elders
who were stranded in their homes without access to healthcare,
people whose family members had died, people who were unable to
get food and water, especially in our rural and tribal communities.
These programs were designed to save lives and to keep individuals
from falling into the free-fall of economic disaster during a pan-
demic.
We know there was fraud and abuse. There is fraud and abuse
wherever there are humans who take advantage of systems that do
not have proper oversight. I know a lot about oversight. I used to
70
work in the Office of Management and Budget in this government.
I was a Senate staffer, I conducted financial oversight. I know what
that looks like. And I have never seen more financial fraud and
abuse of this system than I saw in the previous administration
under Donald Trump in which financial systems were abused, in-
cluding by his cronies and fraudsters who were involved in his ad-
ministration and his friends across the country. And our job is to
make sure that they are held accountable and that we are looking
out for the people and our communities. So, let’s get the story
straight.
I know, gentlemen, you have been here a long time today, many,
many hours. I know you are ready probably to go take a break and
rest, and we thank you for your time this morning for serving our
country and the roles that you all play in doing that oversight, but
I want to just ask a couple of few questions to clarify what is going
on.
So, Mr. Dodaro, I know you have talked a lot this morning and
probably answered this question in multiple ways, but I want to be
very specific. Can you tell us how many convictions and guilty
pleas have come from Federal charges regarding fraud with these
COVID relief programs?
Mr. DODARO. Yes. So far, according to the Department of Justice
system, there have been over 1,000 people who have either pled
guilty or have been convicted. There are another 600 people where
charges are pending. There are hundreds of investigations under-
way now——
Ms. STANSBURY. Thank you.
Mr. DODARO [continuing]. And will be done of the 1,000 people
who have been guilty or——
Ms. STANSBURY. Thank you, Mr. Dodaro. I want to just clarify.
So, we are talking less than 2,000 people, and we are talking about
millions of Americans whose lives were impacted by these pro-
grams: 93,000 New Mexicans and less than 3,000 cases of fraud
and abuse. Now, we need to hold those who committed crimes ac-
countable, and that is exactly what we are going to do on this com-
mittee through the oversight of our Federal programs, who are
tasked with that role and our law enforcement and our court sys-
tem.
Mr. LATURNER. The gentlelady’s time has expired.
Ms. STANSBURY. But our job is to make sure that the American
people are represented and we keep this government accountable.
And with that, Mr. Chairman, I yield back.
Mr. LATURNER. The chair recognizes the gentleman from New
York, Mr. Langworthy.
Mr. LANGWORTHY. Thank you very much, Mr. Chairman, and I
thank the witnesses for their long testimony here today and your
patience.
This is an interesting topic for me because I was a victim of un-
employment fraud in my prior role as chairman of the New York
state Republican Party, and a fraudster and a criminal applied for
unemployment insurance in my name through a previous address
that I hadn’t lived at for over 10 years. The Erie County District
Attorney in my community also was a victim in the same fashion
where a fraudster used his name and very public profile to apply
71
for unemployment insurance. So, it was a very prevalent problem
in my state, and reports indicate that billions of taxpayer dollars
had been wasted due to mismanagement, fraud, inefficient proc-
esses by the government throughout this entire pandemic. You
know, when a stock brokerage loses billions of dollars of their cus-
tomers’ investments, the brokerage itself is blamed. However, when
government does this, it is swept under the rug. The government
should not be excused for losing money on this extraordinary level.
Mismanagement and indiscretion to this degree is unacceptable,
and it is an absolute disservice to the hardworking taxpayers that
have entrusted their dollars, their hard-earned money to this gov-
ernment.
So, Mr. Dodaro, in my home state of New York, a report from the
Department of Labor showed that throughout the state Fiscal Year
of 2021, the government wasted an estimated $11 billion of tax-
payer money. The primary reason for this waste is the New York
State Department of Labor was using outdated technology that it
was recommended to replace not once, not twice, beginning in 2010,
and again in 2015. So, Mr. Dodaro, I would like to ask you, are
there other agencies in the Federal Government or any state gov-
ernments, to your knowledge, whose outdated technology has led to
wasted taxpayer dollars to that extent, and if so, would you mind
mentioning who they are?
Mr. DODARO. The problems with the IT systems affected a num-
ber of states, and, you know, to what extent compared to New
York, I am not able to talk about that at this time. I know there
were similar problems in California, for example, and we are now
looking at additional states, but it was a problem affecting a lot of
states.
Mr. LANGWORTHY. And it was Federal money coming down to the
states to make these programs whole. How, in the future, would we
hold Federal agencies and state Governments accountable for fail-
ing to put in place mechanisms to reduce this risk of improper pay-
ment or actually just being so porous a fraud is so many states like
New York were?
Mr. DODARO. Yes. One way would be to make sure that they im-
plement our recommendations that we have made by the GAO, in-
spector generals, and state auditors. Figures that you quote on
New York came up from state auditors’ office, state auditors, and
other states—California, Kansas, and others—have issued reports
as well. So, one way is to make sure all those recommendations are
implemented. Another way is to make sure that states certify that
their systems meet certain standards and that there is appropriate
independent verification that those systems are now able to meet
certain standards. The Department of Labor should also provide
some standards to the states, but each state has its own different
system and eligibility requirements. So, it has to be tailored to the
individual State.
Mr. LANGWORTHY. Are there any mechanisms or penalties avail-
able to the Federal Government to prevent this sort of thing from
happening again with states that won’t listen to the guidance?
Mr. DODARO. Not to my knowledge right now. They would have
to be instituted, and I think it would be good to be able to do that.
72
Mr. LANGWORTHY. It seems like we put ourselves in a pretty
feckless position as a Federal Government, if we, you know, con-
tinue to allow states to ignore guidance that has been leveled on
them, especially large populous states, you know, that have a popu-
lation that is open to that much unemployment benefit. We can all
agree that their losses to the tune of half a trillion dollars is unac-
ceptable. I think everybody in this room can agree to that. We can’t
allow this to occur again. We have to be way better stewards of the
taxpayer dollar and take that responsibility much more seriously,
but I thank you very much for your time here, and I yield back.
Mr. LATURNER. The gentleman yields back.
The chair recognizes the gentleman from Maryland, Mr.
Burlison.
Mr. BURLISON. From Missouri. Thank you. Thank you, Mr.
Chair.
Mr. LATURNER. My apologies. I am sorry. The ‘‘O’’ looks like a
‘‘D’’ on my list here. The gentleman is recognized.
Mr. BURLISON. Thank you. I am very honored to serve on House
Oversight Committee this Congress, and I would like to thank the
chair for the hard work that he has been doing on this committee.
I look forward to working with each one of my colleagues here in
the 118th Congress.
My question is to Mr. Horowitz. On Monday, Senator Ernst re-
vealed that thousands of Federal employees have double dipped on
taxpayers and applied for pandemic unemployment assistance in
addition to receiving their Federal paycheck. You know, just as a
personal note, business owners and working families in Southwest
Missouri, which is not exactly the richest part of the Nation, strug-
gled quite a bit during the pandemic and their livelihoods were
threatened, and yet Federal employees have the comfort of a gov-
ernment paycheck. Yet there is evidence that thousands of these
Federal employees may have falsely claimed that they lost their
job. My first question is, how is this even possible? Is there nothing
in place to cross-check these employees or do we just pay out the
benefits to whomever it applies?
Mr. HOROWITZ. So, one of the challenges is, in fact, the absence
of cross-checking information, and that has been a problem across
programs. I am aware of Senator Ernst’s letter, and we are fol-
lowing up on that. We have done that, for example, at DOJ. I have
looked at some of these issues, and we can look at it. It takes a
fair amount of time once you get the hits to figure out actually
whether there are fraud cases or not because there are spouses
who potentially were eligible. We have identified where there are
addresses. It turns out there are apartment buildings, so we then
have to figure out who else is in that building, you know, whether
that address is a hit or not. So, there are things we need to do to
make sure we have got the right number ultimately, but it is an
important issue, and we are going to follow up on it.
Mr. BURLISON. Before I forget, Mr. Chairman, I seek unanimous
consent to enter into the record the letter from Senator Ernst to
the Honorable Michael Horowitz.
Mr. LATURNER. Thank you. Without objection. My apologies.
Mr. BURLISON. Thank you. Mr. Horowitz, in your report to Con-
gress last fall, you said that the PRAC was working to identify ac-
73
tive Federal employees who applied for PPP, and that so far, you
had matched tens of thousands of employees with SBA loans for
which they were not eligible. Do you have any updates on that
analysis?
Mr. HOROWITZ. We have matched the numbers, and that is what
I was mentioning to you, we are working through. For example, in
my office, we do have cases that are moving forward as a result of
that, but it has taken a considerable amount of time to get from
the large number to the smaller number because of the absence of
particularized data. The challenge has been Agency data not being
sufficient to immediately figure this out.
Mr. BURLISON. Do you have an estimated, like an ETA, as when
you might have the results?
Mr. HOROWITZ. Well, when we find the case, we start inves-
tigating it. We were working with our law enforcement partners at
that point, and hopefully those cases will wind up being pros-
ecuted.
Mr. BURLISON. And then what actions have we taken, if any, or
what actions will be taken? I guess, if you could answer both, what
action has been taken against Federal employees who might have
applied for unemployment benefits fraudulently, and what actions
would be taken?
Mr. HOROWITZ. Well, you know, we are going to pursue those
cases to the fullest extent possible, including seeking prosecutions
working with our law enforcement partners on it. I can give you
an example. We have several on the PPP/EIDL side. For example,
a relatively higher-level person at NASA Agency was sentenced to
considerable number of years in prison. He was worked in their fi-
nancial office, who engaged in, I can’t remember whether it was
PPP or EIDL fraud, but——
Mr. BURLISON. That is disturbing.
Mr. HOROWITZ. So, we are pursuing those cases.
Mr. BURLISON. That is good to know. Thank you. Mr. Chairman,
before I forget, earlier we heard from Congressman Donalds about
an article from Politico that the Biden administration had re-rout-
ed billions in emergency stockpile funds for the border, and I seek
unanimous consent to enter this into the record.
Mr. LATURNER. Yes, Mr. Burlison, from Missouri, without objec-
tion.
Mr. BURLISON. Thank you. I yield back.
Mr. LATURNER. The gentleman yields back. The chair recognizes
the gentlelady from Georgia, Ms. Greene.
Ms. GREENE. Thank you, Mr. Chairman. I would like to bring up
something that was brought up by one of our Democrat colleagues
on this panel about Republican Members of Congress taking PPP
loans. I never took one as a Member of Congress, but as a business
owner, I did take a PPP loan in order to be able to pay my employ-
ees. And I am so thankful I was able to do that because they would
have lost their jobs, and I think it is important to recognize. But
the minority side of our committee here is having a witness on the
next panel that had said that she didn’t or her or any of her affili-
ates take any Federal grants or contracts related to this hearing’s
subject matter. But in fact, as executive director of the National
Employment Law Project, they took over $825,000 in PPP loans
74
from the SBA, so that that does need to be pointed out about the
next panel witnesses.
Here we are a Nation that our government spent over $5 trillion
in COVID relief funding, and we can’t find $560 billion, I believe,
of that money of the Americans hard-earned taxpayer funding. We
are also a Nation at $34 trillion in debt, and we are on the verge
of having to handle our debt ceiling, raise it once again, and here
we are looking at waste, fraud, and abuse.
And gentlemen, I thank you for coming and speaking to our com-
mittee on this issue. I know it has been a long day for you, but I
would like to ask some questions about the type of funding that
has been used with COVID relief funds, and it is pretty shocking
to me. You know, I read some examples. For example, Washington,
DC.’s Mayor Muriel Bowser plans to use $31.5 million in American
Rescue Plan Funds to transition homes to green energy over the
next five years.
As many small businesses were shut down, children lost two
years in education, child suicide rates went up, and it is hard to
even imagine a child committing suicide. Many people died from
COVID. Healthcare workers were fired from vaccine mandates,
many other people were fired because of vaccine mandates, and all
the issues that have come out of COVID. I want to ask about how
this money has been spent because clearly, there is a tremendous
amount of waste, fraud, and abuse. And a lot of our hard-earned
taxpayers’ dollars spent on things that don’t even make sense that
they have been spent on.
So, Mr. Dodaro, if you don’t mind answering a few of my ques-
tions, can you tell me as our comptroller of the United States, how
much COVID cash was given to abortion?
Mr. DODARO. I do not know that answer. I don’t have that an-
swer.
Ms. GREENE. Oh, OK. So, I can tell you Planned Parenthood
Clinics received $80 billion in COVID relief loans, which is hard to
understand how that happened. Mr. Dodaro, can you tell me how
much money COVID cash went toward diversity, equity, and inclu-
sion, or racism issues?
Mr. DODARO. Again, we have not looked at that issue, so I don’t
know.
Ms. GREENE. Oh, geez. Well, I can tell you the Pennsylvania Hu-
manities Council did receive $1.4 million in relief and used it for
equity and geographic diversity. I am not sure how that helped in
a pandemic time. Mr. Dodaro, can you tell me how much COVID
cash went to CRT?
Mr. DODARO. CRT?
Ms. GREENE. Critical race theory in education. It is a racist cur-
riculum used to teach children that somehow their white skin is
not equal to black skin and other things at education.
Mr. DODARO. Yes. No, I do not know that, but I do know that
there are provisions that the Federal funds, generally, they are not
used—supposed to be used for curriculum. That is a state——
Ms. GREENE. Oh, Mr. Dodaro, I have to tell you in Illinois, they
received $5.1 billion at an elementary school there that used it for
equity and diversity, so it is being used for these things. Mr.
75
Dodaro, can you tell me how much money was given at Drag Queen
Story Hour?
Mr. DODARO. I am sorry. Can you repeat that?
Ms. GREENE. Drag Queen Story Time where men dressed up as
women and read confusing books to children.
Mr. DODARO. At first, I thought you said, ‘‘dry clean,’’ so I am
sorry.
Ms. GREENE. It is OK.
Mr. DODARO. No, I don’t know the answer to either one of those
two.
Ms. GREENE. We need to look into this, and I urge you to do that.
Bradbury-Sullivan LGBT Community Center in Pennsylvania re-
ceived $16,000 for Drag Queen Story Time from COVID cash. I
think this is an issue that needs to be looked into. A lot of this
money went to things that should have never gone to.
Mr. LATURNER. The gentlelady’s time has expired.
Ms. GREENE. And I thank you so much, and I yield back the re-
mainder of my time.
Mr. LATURNER. The gentlelady’s time has expired.
The chair recognizes the gentleman from Pennsylvania, Mr.
Perry.
Mr. PERRY. I thank the chairman. Gentlemen, thanks for hang-
ing in there. I know it has been a long day. Listen, I think it is
important a couple of things to acknowledge. A lot of these folks
that are involved in this, the government took them out of their
jobs, told them they couldn’t go to work, Federal or state govern-
ment couldn’t run their businesses, and so there are a lot of people
that this did a lot of good things for, and we all want to acknowl-
edge that. There was a lot that was unknown.
I don’t agree with taking people out of their jobs or not allowing
them to run their businesses, but that is another story for another
day. The other thing that I just want to make a point is a personal
sticking point for me. I don’t see unemployment insurance. I see
unemployment compensation. There is no insurance about this.
There is no actual aerials, there is no risk assessment to any of
this, but that is a sticking point, but it becomes an entitlement for
some folks.
But in the interest of unemployment compensation, what I won-
der, what I find interesting, among other things, is that according
to a combination of estimates, $560 billion of that Federal COVID
relief funding may have been either lost to fraud or paid improp-
erly. And while some of my colleagues on the other side of the aisle
condensed that to a percentage of the overall and would kind of
have us believe that it is acceptable because it is a small percent-
age of trillions of dollars, I don’t know: $560 billion. I am from a
little town in Pennsylvania. That seems like a lot of money to folks
like me. I imagine you feel the same way. This is pursuant to ID
ME, 40 percent, that is nearly half of pandemic unemployment as-
sistance funds. That is $400 billion that did not go to Americans
and instead went to criminal gangs in Russia, China, and Nigeria.
Now I am from Pennsylvania, and we have got our own par-
ticular problems there, and we can get into that, but a Nigerian
crime ring named Scattered Canary was involved in submitting
more than 2 million claims. Two million claims from Nigeria. There
76
is this other one, APT 41, and I know that you have all—mentioned
here before—talked about that $20 million stolen unemployment
comp scheme began in mid–2020 and spammed 2000 accounts with
more than $40,000 financial transactions. What in the Sam Hill is
going on in our states? But the Federal Government gives the
money to the states. They have an unemployment compensation
system, so it is already up and running. So, we are just adding
some more fuel to them so that they can take care of these people
that have been put out of work by their government.
How are foreigners? Like, do these states not see Nigeria, China,
or some IP address that be associated with a foreign country and
say, huh, I wonder why foreign countries are getting unemploy-
ment compensation, or, you know, do they fly back to work in
America every day from Nigeria or from China or from Russia?
Well, I don’t know. Can you make sense of this to, like, a small
country boy like me?
Mr. HOROWITZ. I don’t think I can make sense of it, but I can
tell you that it is one of the problems we have identified along the
way, not just in the Unemployment Insurance Program and others
that agencies aren’t picking up the IP addresses for these appli-
cants because the country was largely shut down. Most of these ap-
plications came in electronically, and that is clearly one of the red
flags. And something by the way, as we get this data, we are going
to be looking at is how many IP addresses were there associated
with these various programs that were IP addresses from overseas.
Mr. PERRY. I mean, some of the most egregious ones Washington
State, California, New York. I come from Pennsylvania. I have got
a whole list here of infractions from the state that I am proud to
represent. These unemployment compensation systems have been
around for a long time, so this is kind of in the past now or maybe
it is still ongoing, maybe it is not at the same level. What assur-
ance can you give me or anybody else here that the states have ad-
dressed any of this so that it, like, maybe it is not happening at
the same scale, but if it has happened here, it probably continues
to happen? What assurance can you give any of us that this has
been solved at this point, and why should the Federal Government
give one more dime to any of these states that are allowing that?
Look, we are looking at a debt ceiling increase. They want $2.6 tril-
lion. We just talked about $500 billion just handed out to foreign
criminals. What assurance can you give us moving forward that
any of this is solved right now?
Mr. HOROWITZ. I am not going to give you any assurance that it
is all——
Mr. PERRY. Is zero the right answer?
Mr. HOROWITZ. That is why this hearing is actually important
because, among other reasons, but there are fixes that need to hap-
pen. GAO has been talking about this for decades, and the Con-
gress has to get involved. The administration has to get involved.
The states have to get involved. We have to fix the problem.
Mr. LATURNER. The gentleman’s time has expired.
Mr. PERRY. Thank you, gentlemen. I appreciate you.
Mr. LATURNER. The chair recognizes the gentlelady from Ohio,
Ms. Brown.
77
Ms. BROWN. Thank you, Mr. Chair. I would just like to point out
that my Republican colleagues are once again demonstrating the
extreme lengths they will go to villainize reproductive freedom.
Contrary to their allegations, Planned Parenthood health centers
that received PPP loans were eligible non-profit recipients con-
sistent with the SBA’s rules governing affiliation, status, and size.
The Small Business Office of the Inspector General affirmed this
conclusion in a September 2022 report that specifically determined
Planned Parenthood health centers met PPP loan eligibility re-
quirements. So, I would ask unanimous consent that the SBA OIG
report be made part of the record, and I urge my Republican col-
leagues to cease their baseless draconian attacks against the repro-
ductive freedoms of people once and for all.
And finally, the last point I want to make is just because you dis-
agree with the spending doesn’t mean that it is fraudulent, waste-
ful, or abusive. And with that, I yield back.
Mr. LATURNER. Without objection, it will be entered into the
record.
Mr. LATURNER. The gentlelady yields back. The chair recognizes
the gentleman from Tennessee, Mr. Burchett.
Mr. BURCHETT. Thank you, Mr. Chairman, and I am not an at-
torney, and I am not trying to do any ‘‘got you,’’ so if you all want
to give me just a ‘‘yes’’ or ‘‘no,’’ it would be great. All right. Assist-
ant Director Smith, in 2021, NBC reported that between $90 and
$400 billion pandemic-related unemployment U.S. taxpayers’ dol-
lars had been stolen, and half of that was taken by foreign crimi-
nals. Is this consistent with what your investigation revealed?
Mr. SMITH. Sir, I can’t validate that particular news piece. Which
outlet did you say it was from?
Mr. BURCHETT. NBC News. It has been widely reported in other
areas, but they were the biggest dog that wagged its tail on that,
I guess.
Mr. SMITH. I am not the——
Mr. BURCHETT. OK. Well, the former assistant director of inves-
tigation of the Secret Service, Jeremy Sheridan, called this theft,
‘‘the largest fraud scheme that I have ever encountered.’’ And I
guess what I am getting at is, is that it seems to be it is clear that
foreign and maybe some localized organized crime syndicates and
other bad actors have perpetrated some crimes against the Amer-
ican taxpayers. Assistant Director Smith, do you agree with Mr.
Sheridan or have you ever encountered a larger fraud scheme?
Mr. SMITH. I agree with former Assistant Director Sheridan’s
sentiments. The magnitude of pandemic-related fraud was what
made it unique.
Mr. BURCHETT. Do you think that in your professional capacity
or otherwise that maybe some of these funds could be linked to ter-
rorism organizations, that these things would fund them?
Mr. SMITH. Sir, I don’t have any direct evidence linking terrorist
organizations to pandemic relief funds, but as I mentioned earlier,
it is not beyond the realm of possibility of transnational criminal
organizations and groups of various sorts.
Mr. BURCHETT. And drugs and human trafficking, all those dirt
bags that kind of run together, I guess.
78
Mr. SMITH. Yes, sir. The group I mentioned earlier, like Black
Axe out of Nigeria, they involve themselves in human trafficking,
drug trafficking, the full gambit itself.
Mr. BURCHETT. OK.
Mr. SMITH. They are also involved in pandemic-related——
Mr. BURCHETT. All right, and thank you. Comptroller Mr.
Dodaro—did I say that name right? I get it.
Mr. DODARO. Pretty close.
Mr. BURCHETT. Pretty close. Well, Burchett, so we can just go to
get massacred together. I sent a letter in April 2020 to then Treas-
ury Secretary Mnuchin, raising concerns about economic impact
payments going to ineligible foreign nationals. And my Republican
colleagues have tried to warn our friends across the aisle that we
should not go blindly throwing money at this pandemic without
oversight. Unfortunately, I am afraid they didn’t listen. Does the
GAO have details in the amount of payments that were incorrectly
provided to eligible foreign nationals or deceased individuals during
the rush to send COVID checks to all corners of the world? I am
sure this has sort of been asked earlier, but I have been in and out,
so if you would tell me.
Mr. DODARO. No, no, I understand. First on deceased individuals,
there is a tax inspector general.
Mr. BURCHETT. Right.
Mr. DODARO. They found $1.4 billion sent to deceased individuals
in the first and second round of the economic incentive payments.
Mr. BURCHETT. Right. Now, would you call that fraud or just
mistakes, or just people have died since that had gone on?
Mr. DODARO. It is a mistake.
Mr. BURCHETT. OK. Wow.
Mr. DODARO. It is a mistake. And actually, IRS interpreted it
that Congress intended them to do that. So, it wasn’t until Treas-
ury stepped in and said that that was inappropriate and we rec-
ommended that they try to get that money back, and they did re-
ceive about half of it back.
Mr. BURCHETT. OK. Do you agree with the assessment that sev-
eral experts and some government officials at different levels, they
have indicated that there was so much fraud in the COVID relief
because of the lack of clear guidance, and that was done by Con-
gress obviously amid the rush to give away taxpayer dollars?
Mr. DODARO. That was a contributing factor, particularly at the
PPP level, but I think the main things were self-certification, lack
of supporting documentation.
Mr. BURCHETT. Right.
Mr. DODARO. And actually, the CARES Act prohibited the Eco-
nomic Injury Disaster Loan Program from using tax transcripts to
compare against the loans.
Mr. BURCHETT. Wow.
Mr. DODARO. And so, now Congress fixed these things later, but
those things affected the Unemployment Insurance Program, too.
Mr. BURCHETT. Right.
Mr. DODARO. Congress gave an incentive for states to waive some
of the requirements by giving them additional money to do it.
Mr. BURCHETT. Cow is already out of the barn.
Mr. DODARO. The cow, the pig, the chicken, and——
79
Mr. BURCHETT. Yes, the whole barnyard. So, because of that lack
of clear guidance, have we learned anything? Do we have the prop-
er things in place to stop that from happening again? And I am
running out of time. Give me a quick one, Mr. Chairman.
Mr. DODARO. We are starting to move, but it is slow, but much
more needs to be done to be better prepared next time.
Mr. BURCHETT. All right. Thank you. Thank you, you all. I know
you all probably woke up this morning and thought, wow, I am
going to go before Congress. It is going to be great, and now, you
are still here, so——
Mr. LATURNER. The gentleman’s time has expired. I am going to
recognize myself for five minutes.
Although, I served on this committee last Congress, I am excited
to bring much needed accountability to Washington for the first
time in over two years. My Republican colleagues and I are com-
mitted to returning this committee to its proper role of rooting out
waste, fraud, and abuse, and mismanagement in the Federal Gov-
ernment, and that commitment starts today.
In the span of one year, Congress passed upwards of $4.6 trillion
in the form of economic stimulus bills and expanded eligibility for
Federal relief programs, like unemployment insurance. When com-
munities across America started to recover from the pandemic,
Congress continued to saturate states with millions of taxpayer dol-
lars under the guise of COVID–19 relief without the means to dis-
tribute it efficiently or safely. A Kansas audit showed that my
home state may have made hundreds of millions of dollars in
fraudulent payments when state agency systems were over-
whelmed by an unprecedented number of claimants. As recently as
last September, the Department of Justice charged 47 people with
using the Federal Child Nutrition Program in Minnesota to siphon
$250 million. And it is no secret that many states have used these
funds to alter school curriculums, give illegal immigrants stimulus
checks, and advance green energy initiatives.
Public trust in our government is at an all-time low, and we can-
not expect that to change if we continue this poor stewardship of
Americans’ tax dollars. I think Congress can do better, and I look
forward to discussing with our witnesses how to avoid this level of
fraud and waste of taxpayer dollars in the future.
Mr. Dodaro, and I will ask the same question of the other two
witnesses, your institution is tasked with monitoring administra-
tive agencies and providing recommendations for improvement. Per
GAO’s website and the testimony we have heard, fraud detection
is a difficult task. Can GAO ascribe a monetary cost to conducting
fraud detection and retroactive certification of payments? If not,
can you describe the potential opportunity cost to the taxpayer of
directing agency attention toward auditing massive COVID pay-
ments after they are distributed?
Mr. DODARO. It is much more efficient to prevent the fraud from
occurring in the first place. That is why we worked with Congress
back in 2015 to 2016 to pass the Fraud Reduction and Data Ana-
lytics Act to put in place a framework that we develop for best
practices on how to prevent fraud in the first place. Much more ef-
ficient, much more effective.
Mr. LATURNER. Mr. Horowitz?
80
Mr. HOROWITZ. Yes, I would say the same thing. We talked about
this earlier, about the recovery rate when the money is already
gone and you have to chase it down. It is a 10–12 percent rate, I
think Mr. Dodaro indicated. Keep in mind, money, for example,
that goes overseas takes a long time to try and track that down,
if you ever can, and so that is the challenge. There is no better way
to eliminate or reduce fraud rates than to detect it and prevent it
at the outset.
Mr. LATURNER. Mr. Smith? The winner of the easiest name
award on the panel today.
Mr. SMITH. Thank you.
Mr. LATURNER. Yes, it is.
Mr. SMITH. I agree with my colleagues. The Secret Service, prior
to the pandemic, is in the business of mitigating financial crimes
and fraud. I mentioned earlier that that is in our DNA, if you will.
We do advanced work because we know criminals are nonstop in
their efforts in trying to defraud Americans, whether before the
pandemic or not.
Mr. LATURNER. Let’s stay with you. You worked with govern-
ment entities like the Small Business Administration, the Depart-
ment of Labor, ahead of the enactment of the pandemic relief fund-
ing to explore strategies to address what you describe as a, quote,
‘‘a looming wave of potentially fraudulent activity.’’ Drawing from
your experience, tracking fraud in Federal relief programs, what
could the government have done to better support states and enti-
ties in charge of dispersing funds?
Mr. SMITH. What could we have done to support the states?
Mr. LATURNER. Correct.
Mr. SMITH. So, one of the things I mentioned earlier was putting
out alerts. So, our Cyber Fraud Task Forces and our Global Inves-
tigative Operations Center, which is the hub of all of our task
forces, submitted alerts, GIOC alerts, if you will, to 30,000-plus fi-
nancial institutions and to those partners. What we were doing was
sharing indicators of compromise with those entities, such as if an
individual was using an IP address that was from an overseas orig-
inating point, or if a financial institution saw, if you happen to see
an account being opened fairly recently and that account was being
used to move a substantial amount of money in a short period of
time, that would be something you would flag. So, one of the things
we did at the beginning of the pandemic and even prior was shar-
ing information and indicators of compromise that we are seeing
not only from other entities, but from criminals themselves, be-
cause keep in mind, as a Federal law enforcement entity, we do
work with criminals. We have confidential informants, and we get
information from the inside, if you will, regarding what tactics are
afoot.
Mr. LATURNER. Thank you, and the committee thanks all three
of you for being here today and doing a great job answering ques-
tions.
At this time, we are going to pause and change out the panels.
[Recess.]
Mr. LATURNER. The committee will come back to order.
81
For our second panel today, I would like to introduce Ms. Re-
becca Dixon, the executive director of the National Employment
Law Project. Welcome to the committee.
Please stand and raise your right hand.
Do you swear or affirm that the testimony you are about to give
is the truth, the whole truth, and nothing but the truth, so help
you God?
Ms. DIXON. Aye.
Mr. LATURNER. Let the record reflect the witness has answered
in the affirmative. Thank you.
Without objection, your written statement will be part of the
record.
You are now recognized for five minutes for your opening state-
ment.
STATEMENT OF REBECCA DIXON, EXECUTIVE DIRECTOR OF
THE NATIONAL EMPLOYMENT LAW PROJECT
Ms. DIXON. Good afternoon, Chairman Comer, Ranking Member
Raskin, and members of the committee. Thank you for the oppor-
tunity to testify today. I am Rebecca Dixon, executive director of
the National Employment Law Project, a nonprofit research, policy,
and capacity-building organization that for more than 50 years has
sought to strengthen protections and build power for workers in
the U.S., including workers who are unemployed.
We must never lose sight of the terrible hardship that the early
days of the COVID–19 pandemic imposed on workers, families, and
communities nationwide. By April 2020, 23 million U.S. workers
were unemployed. Congress stepped up to pass six bills which cre-
ated programs that literally saved lives and livelihoods and pre-
vented what could have been a prolonged and devastating economic
collapse. This robust policy response helped to make the COVID re-
cession the shortest on record and contributed to an economic re-
covery that has brought the unemployment rate from a high of 14.7
percent in 2020 to 3.5 percent today. Indeed, according to Moody’s
Analytics, without these programs, the economy would have suc-
cumbed to a double-dip recession. A combination of well-designed
social insurance programs drove poverty to the lowest level on
record in 2021, cutting the number of poor children by nearly half
and keeping over 25 million people out of poverty.
One important piece of the protections enacted by Congress were
the pandemic unemployment insurance programs that not only con-
tributed to the historic reductions in poverty in 2020 and 2021, but
they also broadly supported recipients’ financial stability and over-
all well-being, filling in the substantial gaps in the Nation’s inad-
equate UI system. UI is particularly effective at getting money into
the hands of consumers who need it and who will spend it quickly,
and this supports businesses in their communities and stabilizes
state economies.
Unfortunately, a decades-long failure to properly invest in the
administration of the UI system made it an appealing target for or-
ganized crime during the pandemic. Chronically underfunded and
understaffed state UI systems operating with antiquated tech-
nology were tasked with building and implementing a major new
set of Federal programs with little advanced preparation. This re-
82
sulted in multiple points of vulnerability for criminal enterprises,
which have previously stolen the identities of workers during pri-
vate sector data breaches. They seized upon this pandemic as a
time to use those stolen identities to fraudulently obtain UI bene-
fits.
As the temporary Federal pandemic programs had to be built vir-
tually overnight, state agencies were not able to design systems to
protect against identity fraud in these programs. As detailed in my
written testimony, Department of Labor has had notable recent
successes in pioneering national fraud prevention solutions and en-
listing state participation. Using funds from the American Rescue
Plan, DOL has made substantial investments in strengthening
state systems to detect and prevent future identity fraud. DOL
Tiger Teams, equity grants, and IT modernization assistance all
combine a focus on improving access to UI for eligible workers with
resources and expertise to combat fraudulent activity. DOL also of-
fers a wide range of technical and system support for state fraud
prevention, detection, and recovery.
State participation in the Integrity Data Hub and the use of its
crossmatch systems have increased significantly since the pan-
demic with more states using DOL’s identity verification service,
incarceration data exchange, and recently launched bank account
verification service that enables states to thwart ID fraud by
verifying that a bank account belongs to the worker claiming bene-
fits. Moreover, states can no longer bring in contractors to help run
their programs as they were given emergency flexibility to do so
during the height of the pandemic. GAO noted that a major cause
of increased identity fraud was the insufficient number of state UI
staff and the fact that new staff were severely under-trained. Al-
though intended to handle a historic increase in claims, inexperi-
enced and insufficiently trained contract staff, through no fault of
their own, both contributed to increased fraudulent activity and
created greater obstacles for workers who were seeking benefits.
As for the outdated IT systems used by so many state programs,
Congress has provided much-needed increases in Federal funding
for UI administration and worker-centered technology moderniza-
tion over the past two years. Congress must continue making these
investments because sophisticated criminal enterprises will con-
tinue to seek vulnerabilities in state systems, and state agencies
will need to keep pace.
In conclusion, the pandemic relief that Congress enacted com-
bined to provide critical lifeline to workers, families, and commu-
nities in the Nation’s economy. I hope that this committee will rec-
ognize the tremendous value of COVID relief programs and work
together to find meaningful solutions to the ever-evolving problem
of identity fraud that has undermined their effectiveness. Thank
you.
Mr. LATURNER. Thank you, Ms. Dixon. The chair recognizes the
gentlelady from Ohio, Ms. Brown.
Ms. BROWN. Thank you, Mr. Chair. Since this is our first com-
mittee hearing of this Congress, I want to express my hope that
this committee will, on a bipartisan basis, find ways to strengthen
Federal programs and serve everyday working people. I truly want
83
to work with my colleagues on both sides of the aisle to make life
better for all our constituents, including mine back home in Ohio.
In that spirit, I want to share some real-life stories of people in
Ohio who have benefited from some of the lifesaving pandemic re-
lief programs we are discussing today. Here is an example. Tiffany
from Northeast Ohio said, and I quote, ‘‘I was laid off on March 13,
2020. Even though it took a month to begin receiving my unem-
ployment benefits, I am so thankful for them. Without them, my
family of four wouldn’t have anything at all coming in. The extra
Federal money per week enabled me to pay my bills and helped me
to provide for my children in such a traumatic situation.’’ Tiffany’s
testimony is just one example among millions in all our districts,
urban or rural, dense or sparse, rich or poor, for whom this Federal
assistance made all the difference.
Ms. Dixon, how did COVID–19 relief legislation, such as the bi-
partisan CARES Act and the American Rescue Plan, save Amer-
ican families from disaster?
Ms. DIXON. So, one thing we know is that the economy is 70 per-
cent consumer spending. Consumer spending drives our economy,
and with 23 million workers out of work, there would have been
an enormous contraction of spending, which would have then sent
us into a double-dip recession. It also prevented hunger and home-
lessness and really allowed families to focus on caregiving for their
sick family members. And it was just really a lifeline, a critical, im-
portant way that Congress came through for working families.
Ms. BROWN. Thank you very much. So, it is clear to me that the
Biden administration and Congress took decisive action to provide
relief for the American people. The critical and much-needed in-
vestments in health and economic programs are helping the coun-
try recover and bounce back from the worst pandemic in recent
memory, so let us not forget that, and we are continuing to emerge
stronger than ever. And with that, Mr. Chairman, I yield back the
balance of my time.
Mr. LATURNER. The gentlelady yields back. The chair recognizes
the gentlelady from Vermont, Ms. Balint.
Ms. BALINT. Thank you, Mr. Chair. First of all, thank you for
being here. I really appreciate it. As you know, Ms. Dixon, in
March and April 2020, we experienced really an unprecedented eco-
nomic shock. Twenty-two million people lost their jobs, millions of
people suddenly found themselves without an income, and in April
in 2020, when I was a leader in the Vermont Senate, we saw
Vermont’s seasonally adjusted unemployment rate go up to 15.6
percent, which was up 12 percent from the year before. So, thank-
fully, Congress stepped in and helped us to expand the unemploy-
ment insurance. And as you said and as others have said, it was
an absolute lifeline for families and individuals.
So, my question is, without unemployment insurance programs,
how would individuals and families be able to respond to such an
economic crisis? Like, what happens without these kinds of funds
to allow individuals and families to stay afloat?
Ms. DIXON. It is not necessarily well-known, but the unemploy-
ment insurance is the first line of defense against poverty and
homelessness. It is the only universal cash program that we have
that provides cash to working families when they lose a job. There
84
is nothing else. And what we saw in the Great Recession, when
folks were exhausting their benefits, is the other program that they
turned to was the SNAP program, and there really was nothing
else. And so, it just can’t be stressed enough how critical this pro-
gram is to making sure that families can maintain while they
search for work.
Ms. BALINT. I really appreciate that distinction, and I think we
can’t overstress it. I know for me, having worked directly with indi-
viduals and families, thousands of Vermonters, that is exactly what
I was hearing from my own constituents. So, when we think about
unemployment insurance programs and how they assist workers in
job searches, do job searches change when an individual is bene-
fiting from an unemployment insurance benefit?
Ms. DIXON. The benefit has many important qualities. One is
that it allows workers to actually match with jobs that match their
skills so they are not trying to take the first possible thing that is
offered to them, which is not good for the economy because those
folks’ skills are being unused. So, it does give them the breathing
room to find a good match that is going to be close to the salary
that they were receiving before they lost their job.
Ms. BALINT. And I would assume that not only would those skills
go unused, but when you have a worker who is mismatched, they
are much less likely to stay in that job, so exacerbating this cycle
of turnover, which we know is not good for employers, it is not good
for employees or families. And is that the case? Do we see that
there is a connection there with job churn?
Ms. DIXON. There absolutely is, and we have heard employers
loud and clear, particularly in some of the industries that were
hardest hit in the pandemic, the service industry, the restaurant
industry, where workers have actually left those industries entirely
to go to other industries because better conditions and better pay.
And so, if a worker takes a job, we want them to actually be able
to stay in that job, advance in that job. So, it is important to them
and their families, just as it is important to employers to have sta-
bility in the role that they are in.
Ms. BALINT. Thank you. Just one more question. From your per-
spective, from your experience, and your research, and the work
that you do in your position, why do you think we need to continue
to invest in and modernize state unemployment insurance systems,
because we heard in the earlier testimony how there was a break-
down there. So, we would love to hear from you, from your perspec-
tive, why that is so important.
Ms. DIXON. So, about a decade ago, I did a report that was a
deep dive on unemployment insurance administration and the im-
pact on being able to pay benefits, and what I found then was that
the average UI benefits IT system was 26 years old. That was 10
years ago, and at the time, the oldest one was 46 years old. And
so, it is critical for us to invest, to actually put the money in. So,
usually when there is a crisis like this pandemic, there is invest-
ment in unemployment, there is investment in the IT systems,
there is investment in administration, but then as soon as the
economy recovers, we take our foot off the gas, and we really need
to keep our foot on the gas for this program. We need to actually
make the changes that are needed so that these systems function
85
correctly all the time, whether it is one family who is suffering un-
employment or it is millions of people suffering unemployment.
Ms. BALINT. Thank you so much. I yield back.
Mr. LATURNER. The gentlelady’s time has expired. The chair rec-
ognizes the gentlelady from Missouri, Ms. Bush.
Ms. BUSH. Thank you. St. Louis and I are here in support of a
government that ensures no one lives in poverty. During March
and April 2020, the U.S. economy lost more than 22 million jobs.
Our unemployment rate jumped from 3.5 percent in January 2020
to a pandemic peak unemployment rate of 14.7 percent in April
2020. St. Louis families and families all across the country were in
need of emergency assistance during those uncertain times.
One such story shared by the National Employment Law Project
comes from my constituent, Deshauna, a single mother from St.
Louis. She said, ‘‘If it wasn’t for unemployment, I would have been
put out of my apartment. Thank God for the help. I am still trying
to get myself out of debt, but the pandemic unemployment gives me
and my son a little security. I am a single parent getting no help
from the other parent, plus losing my job, so it has definitely been
a blessing.’’
The CARES Act created a temporary unemployment insurance
program called the Pandemic Unemployment Assistance, or the
PUA. In 2020, President Biden signed the American Rescue Plan
into law, which extended PUA and other temporary unemployment
insurance benefits. The PUA unlocked unemployment insurance
benefits to workers and to families who were otherwise excluded
from regular UI programs. This program was the difference be-
tween a full dinner table and an empty one for a number of fami-
lies. Ms. Dixon, who benefited the most from these programs, and
can you tell us why? And thank you for being here.
Ms. DIXON. So, the unemployment insurance program was cre-
ated 80-plus years ago, and it has not been substantially modern-
ized, and it was created on a structurally racist foundation that
was aimed at white male breadwinners. And so, if that is the foun-
dation. That is who mostly benefits from unemployment insurance,
and so that means women workers, folks who work part time. It
means people who work in restaurants and service jobs where their
wages are low, they often are just entirely left out of the program,
and most workers who are in gig jobs are also excluded from the
program.
So, as the work force has changed over time, many workers have
been left on the sidelines, and particularly, this impacts women
and workers of color. And so, adding this program actually invited
them into the program, some for the first time in their working
lives.
Ms. BUSH. Thank you. In August 2020, the Department of Labor
announced that it would distribute up to $260 million in grants to
states to address disparities in the service delivery and administra-
tion of state unemployment insurance systems and promote equi-
table access to benefits. Ms. Dixon, how have the Department of
Labor’s equity grants impacted local communities across our coun-
try?
Ms. DIXON. One of the most critical things to understand when
folks are doing this work in the states, they want to pay benefits,
86
so they are not standing in the way. They are actually working
really hard when they are understaffed and, you know, under-
invested in. And one of the things that the Equity Grant Program
has helped is for those folks to understand what the impacts are
of the way the program is designed, so that it is not necessarily the
individuals and the actions that they are taking, but it is the sys-
tem and how they need to change what they do to help offset the
inequities in the system. And that has been a really critical piece
for states to take to heart as they are working to serve unemployed
workers.
Ms. BUSH. Thank you. Sadly, Republicans are so focused on cut-
ting programs that benefit regular everyday people, that it is im-
possible to take their criticisms of these programs seriously. We
need to ensure funds are being used properly and then expand
these programs and expand them permanently. Democrats will con-
tinue to lead with bold legislation that tackles our Nation’s crises
while advancing equity and equal opportunity. Thank you, and I
yield back.
Mr. LATURNER. The gentlelady yields back. The chair recognizes
the gentlelady from Pennsylvania, Ms. Lee.
Ms. LEE. Thank you, Chairman, and thank you so much, Ms.
Dixon, for your testimony. On the last panel, I discussed and we
discussed my time at the state legislature in Pennsylvania where
we heard intimate struggles of Americans that they faced through-
out the pandemic. They often had to choose whether to pay their
rent or their childcare, as we know. And we also know that these
conditions are unacceptable. Ms. Dixon, I understand all states ap-
proach unemployment differently. Based on your research, is there
an ideal state system we could learn from here in Congress?
Ms. DIXON. So, rather than an ideal state system, the thing that
Congress could do is create a universal baseline that is Federal
standards that every state has to meet. Right now, depending on
the state that you happen to be unemployed in, you may receive
a benefit as low as $235 a week as the maximum, or you may re-
ceive eligibility for as low as 12 weeks of payment as opposed to
26 weeks in other states. And so, that doesn’t make any sense that
we would have this patchwork of programs if we really want to
make sure and we are serious about coming through for unem-
ployed workers when they need us the most.
And so, having a baseline of standards where there is a min-
imum 26 weeks that all states have to pay, where there is a min-
imum dollar amount that fits what the state’s economy is, that
there is a minimum set of eligibility standards that fits all workers.
We need that, and we need that crucially. We also need an ex-
tended benefits program that turns on automatically and just trig-
gers on when there is a crisis so that workers are not waiting for
congressional action, but they can rely on their programs to just
spring into action.
Ms. LEE. Thank you. We talked about how some of the different
workers or different people benefited more from some of these pro-
grams. Could you elaborate on the disparate impact the pandemic
had on communities of color that you shared in your testimony?
Ms. DIXON. Yes. So, our labor market is very stratified, and by
‘‘stratified,’’ I mean that women make up the largest portion of low-
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wage workers and people of color also, and those jobs were actually
really hit hard in this pandemic. And so, those folks lost their jobs,
but because of history, they also don’t have wealth accumulated in
savings. And so, the fact that Congress took action so quickly and
was able to get the money out the door, it meant a lot to folks who
did not have savings to rely on and for whom this program made
the difference between being able to pay rent and stay in their
homes.
Ms. LEE. Thank you. Last, where would we have been without
these programs? In other words, what would have happened to the
millions of individuals who relied on these programs during the
pandemic without them?
Ms. DIXON. We would have had incredible child poverty, and a
tsunami of evictions, and many other ills that we were able to
avoid, and that was really great for children, for families and com-
munities. And Congress really came through for working people in
this program, and it is something that we will feel the positive ef-
fects of for generations. When families are in poverty, it is very
hard on children. It is hard on the mental health of parents if they
don’t have income. And so, there is a payoff beyond just the actual
monetary amount that happens in families that we will be reaping
the benefits for generations to come.
Ms. LEE. Thank you for your testimony and for your answers.
With that, I yield back.
Mr. LATURNER. The gentlelady yields back. The chair recognizes
Mr. Goldman from New York.
Mr. GOLDMAN. Thank you very much, Mr. Chairman, and thank
you, Ms. Dixon, for being here with us today. I am from New York.
New York State experienced its first COVID–19 case on March 1,
2020, and I actually got COVID myself on March 10, very early on.
New York was at the epicenter of the pandemic at the beginning,
and more than 78,000 New Yorkers have died as a result of
COVID. As families in New York endured record unemployment
throughout the pandemic, the unemployment insurance system be-
came a lifeline to nearly 5 million New Yorkers. In my district, or-
ganizations like the Chinese-American Planning Council connected
at least 740 households with unemployment insurance, nearly
2,000 families with housing assistance. And more than 1,300 peo-
ple who were excluded from Federal relief programs got aid
through New York City’s innovative Immigrant Emergency Relief
Program, and that is just one outstanding organization of many.
When COVID surged and 22 million people lost their job, it fell
to our unemployment insurance system to take on the immense
volume of new claims. New York’s Department of Labor distributed
more than $105 billion, which is the equivalent of 50 years’ worth
of benefits in the two years from the start of the pandemic. But ob-
viously, this new influx of benefits opened itself up to fraud, espe-
cially through identity theft online, which I know you have spoken
about. The New York State Department of Labor has recommended
that Congress provide sustained investments and additional re-
sources to help states combat the ever-evolving threat of cyber
fraud.
And, Ms. Dixon, I am curious what you think Congress should
do to assist states, separate from the sort of Federal baseline that
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you talked about. Where would our resources be most effective in
assisting states to modernize and upgrade its unemployment insur-
ance systems?
Ms. DIXON. I am echoing folks from the first panel. The informa-
tion technology investments are critical. We have a decentralized
system. There are 53 different unemployment insurance programs,
and so there are 53 opportunities for criminal fraud rings to attack
the system. And so, really being able to invest in those systems, to
harden those systems, to make sure that those offices are staffed.
And one other really critical thing that Congress could do is create
a program like the Extended Benefit Program that actually can be
pre-programmed and already have the fraud measures built into it
so that when there is a crisis, it just triggers on, and states are
ready, and they are not rushing to program a different program
each time that there is a crisis.
Mr. GOLDMAN. Thank you. One of the most, I think, productive
and effective measures that Congress passed was the child tax
credit, and I would love for you to talk a little bit about the success
of the child tax credit and why it was so successful at reducing
child poverty.
Ms. DIXON. So, one piece of it was that money actually went into
families’ bank accounts, and they did not have to wait until they
filed their taxes to get this money. And so, when you add that
money together with the unemployment insurance payments, you
have families actually getting cash to meet their needs at a critical
time. And we see that in the reduction of poverty, like what the
huge impact that was to families and children all over the United
States.
Mr. GOLDMAN. And you are drawing a distinction between the
earned income tax credit, which comes when you are paying your
taxes, as opposed to cash direct deposited or sent to you by check
in that moment. Is that what you are saying?
Ms. DIXON. No. So, the child tax credit is also generally not paid
on a monthly basis the way it was in this instance. So, it generally
is something that either folks are changing their tax withholding
to account for, or they are waiting until they file their taxes to get
it. So, what was really revolutionary was actually giving the cash,
putting the cash in families’ bank accounts.
Mr. GOLDMAN. And in my final seconds, can you talk especially
about how important that child tax credit was to underserved com-
munities and people of color in particular?
Ms. DIXON. Well, we know that those families are the ones who
are hit the hardest in this pandemic, but they are also sort of
chronically hit the hardest because they are in the lowest-paying
jobs. And so, to make sure that children actually have their needs
met, this was critical, and it was critical. It would have been crit-
ical at any time, but it was especially critical during this pandemic,
and it would be great if Congress could figure out how to reinstate
it because the impact was just phenomenal for families.
Mr. GOLDMAN. Thank you, and I yield back.
Mr. LATURNER. The gentleman’s time has expired. The chair rec-
ognizes the gentlelady from New York, Ms. Ocasio-Cortez.
Ms. OCASIO-CORTEZ. Thank you, Mr. Chair. It can be difficult to
remember given all that has happened in the last three years, but
89
I would like us to envision ourselves back in those first few months
of the pandemic in the spring of 2020. In March and April 2020
alone, the economy lost more than 22 million jobs, and the unem-
ployment rate skyrocketed to 14.7 percent. Jobs in sectors that are
absolutely essential to the American economy were threatened. But
after the CARES Act, states were able to put in place expanded un-
employment insurance programs to assist workers who had lost
their jobs, and Census data shows that these expanded benefits
kept approximately 5.5 million people out of poverty in 2020.
Ms. Dixon, I am curious about, from your vantage point, how ex-
panded unemployment insurance played out as such a vital lifeline
for workers as well as states during the pandemic.
Ms. DIXON. So, one of the reasons that Congress put in place
these programs is because the unemployment insurance program in
the states is inadequate, inadequate in who it covers, inadequate
in how much the weekly benefit amount is. And so, when Congress
added $600 a week and then $300, that was amazing, especially in
states where the national average benefit is only $300 a week. And
so, this made it possible for folks to stay in their homes. They
didn’t have to choose between food and gas in their cars. It was
critical, and I think that part of what we have to do is learn from
the successes.
So, we have talked a lot about instances where there was iden-
tity theft and fraud, but we haven’t talked about the amazing num-
ber of folks who got UI for the first time and what it meant for
them and their ability to stay attached to the work force. And so,
I think we really have to mine the data on the good pieces and fig-
ure out what we can carry forward and what Congress can do to
actually carry those pieces forward as a minimum standard for
states to implement.
Ms. OCASIO-CORTEZ. Absolutely. Thank you for that information
because, you know, for so much in this hearing, there is a constant
focus not just on the notion of the pandemic response being fraudu-
lent or wasteful, but it seems as though a particular fixation on the
unemployment program, which, as you stated, if it weren’t for the
Federal unemployment supplemental program, families would have
been potentially enduring months of unemployment and having to
just scrounge by on as little as $300 a week. And especially when
it comes to skyrocketing costs of housing, would it be also in your
assessment that this could have also potentially, without that Fed-
eral response, dramatically expanded the amount of housing inse-
curity and people who may even be struggling with homelessness
if it weren’t for that supplemental?
Ms. DIXON. It absolutely did because even though there were also
things that Congress created that were housing supplements and
assistance, it did take a while to get out, and the UI program is
the quickest way to get money into the pockets of workers. And so,
this really did have a critical influence on being able to stay in
homes and for folks to be able to pay their rent. And, you know,
there was an eviction moratorium, but it also means that they are
not sitting there with $10,000 of back rent that they can never pay.
So, you know, it kept them going in a way that made sure that
they weren’t incurring debt to actually try to just do their basic liv-
ing expenses.
90
Ms. OCASIO-CORTEZ. Absolutely, and despite the United States
experiencing the worst job losses since the Great Depression during
that early COVID period, the COVID–19 recession was also the
shortest on record. But to expand on this point that you are mak-
ing, how did these pandemic relief programs, particularly unem-
ployment insurance, help stabilize the economy even from a more
macro perspective?
Ms. DIXON. So, because so much of our economy is based on con-
sumer spending, that is the first thing that families cut back on,
and so we know it is kind of like a, it is an unvirtuous cycle. So,
there is an economic downturn, there is a contraction, and it just
gets worse and worse. And so, the UI program actually did what
it was designed to do, which was to stabilize the economy, to sta-
bilize communities and state economies, and to prevent that down-
ward spiral, and to prevent a double-dip recession, which we had
some experience with a pretty terrible recession not that long ago.
And so, just being able to get through this pandemic without that
protracted recession and also without that protracted high unem-
ployment rate.
Ms. OCASIO-CORTEZ. So thank you, and I yield back to the chair.
Mr. LATURNER. The gentlelady yields back. The chair recognizes
the distinguished ranking member, Mr. Raskin.
Mr. RASKIN. Thank you kindly, Mr. Chairman. Ms. Dixon, wel-
come. I have got a question that is triggered by something that you
said, which is, well, why did our unemployment insurance system
grow up in such a way that it is decentralized in the 50 states rath-
er than being one national program because it seems like the prob-
lems are just legion with doing it that way.
Ms. DIXON. So, the reason is because the Southern planter class
in the 1930’s would not have approved a program of that nature.
There were actually proposals to make it a universal program, to
make it paid for out of general fund dollars, and those were not
adopted because the Southern states did not want people of color,
black people in particular, to have access to this program. They
wanted the control to be able to decide who qualifies and who does
not.
Mr. RASKIN. I mean, to my mind, it is almost like having 50 dif-
ferent Social Security programs or 50 different Medicare programs,
right? And we have just been through a period where we have seen
the brokenness of a system that is that decentralized. So well,
thank you for clarifying that for me. The bottom line here is that
expanded unemployment insurance, even with these dysfunctional
antiquated state systems, allowed millions of people to fill in finan-
cial gaps in their lives at a time of unprecedented difficulty and
loss. Would you share a few examples with us of how expanded un-
employment insurance benefited the people that you work with?
Ms. DIXON. So, though we don’t directly represent workers, I do
get emails from workers who don’t know that, and often I can refer
them to legal representation. But it is very, very satisfying when
the email that you get from a worker is about how grateful they
are, that this program is in place, that this program got extended,
and that they are able to focus on their family and their livelihood.
And so, getting those kinds of emails from workers, it really does
91
fill my soul and makes me want to show up every day to do this
job.
And so, workers were really organizing around these benefits.
They were active, they were engaged, and it has been critical and
phenomenal that they had these benefits to cover their basic needs
in this, like, you know, once-in-a-century crisis.
Mr. RASKIN. Got you. Is there anything else you would like to tell
us before you go?
Ms. DIXON. Don’t take your foot off the gas in supporting UI ad-
ministrative funding and providing support for upgrading IT sys-
tems and all of the things. On behalf of working people, really
grateful for the way that Congress came through, and just hope
that you all, with what you have heard today from me and from
the other panel, will take seriously the need to invest in the infra-
structure of this program so that it can function well without Con-
gress having to step in when there is a crisis or just when there
is a personal crisis for a family.
Mr. RASKIN. Thank you for your wonderful testimony and for
your commitment to the cause. And, Mr. Chairman, I will yield
back to you.
Mr. LATURNER. The gentleman yields back. Before we adjourn
this hearing, I would like to introduce our five subcommittee chairs
on behalf of Chairman Comer. Congresswoman Nancy Mace will
chair the Subcommittee on Cybersecurity Information Technology
and Government Innovation, Congressman Pat Fallon will chair
the Subcommittee on Economic Growth, Energy Policy, and Regu-
latory Affairs, Congressman Pete Sessions will chair the Sub-
committee on Government Operations and the Federal Workforce,
Congresswoman Lisa McClain will chair the Subcommittee on
Health Care and Financial Services, and Congressman Glenn
Grothman will chair the Subcommittee on National Security, the
Border, and Foreign Affairs.
I yield to the ranking member for introduction of his sub-
committee ranking members.
Mr. RASKIN. Well, thank you very much. Mr. Connolly will be our
ranking member on the Subcommittee on Cybersecurity, IT, and
Government Innovation, Ms. Bush will be our ranking member on
Subcommittee on Economic Growth, Energy Policy, and Regulatory
Affairs, Mr. Mfume will be the ranking member on Government
Operations and the Workforce, Mr. Krishnamoorthi will be the
ranking member on the Subcommittee on Health Care and Finan-
cial Services, and Ms. Porter will be ranking member on National
Security, the Border, and Foreign Affairs.
Mr. LATURNER. I ask unanimous consent that the resolution
naming the five subcommittee chairs and the five ranking members
is approved.
In closing, I want to thank our panelists once again for their im-
portant and insightful testimony today. I also want to thank my
colleagues for participating in our first oversight hearing of the
118th Congress, an oversight hearing that goes to the very heart
of this committee’s jurisdiction, protecting taxpayer dollars from
fraud, waste, and abuse.
With that and without objection, all members will have five legis-
lative days within which to submit extraneous materials and to
92
submit additional written questions for the witnesses to the chair,
which will be forwarded to the witnesses for their response.
Mr. LATURNER. With that, our hearing is adjourned.
[Whereupon, at 3:52 p.m., the committee was adjourned.]
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