From Fraud to Recovery: Restoring Integrity in Small Business Programs (S. Hrg. 119-350, February 25, 2026)
Summary
The printed record of a hearing of the Committee on Small Business and Entrepreneurship of the United States Senate titled From Fraud to Recovery: Restoring Integrity in Small Business Programs, on February 25, 2026, S. HRG. 119–350. Chair Joni Ernst and Ranking Member Edward J. Markey gave opening statements, and the chair's statement says the lack of oversight mechanisms in SBA's COVID relief programs "allowed swindlers to rob taxpayers of $200 billion". The witnesses were The Honorable William W. Kirk, Inspector General, U.S. Small Business Administration, and Kenneth Dieffenbach, Executive Director of the Pandemic Response Accountability Committee. The record includes a committee letter to the Administrator of the U.S. Small Business Administration and responses to questions submitted by Chair Ernst and Senator Scott.
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“From Fraud to Recovery: Restoring Integrity in Small Business Programs (S. Hrg. 119-350, February 25, 2026).”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/chrg-119shrg63360-3fc22174e1/
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S. HRG. 119–350
FROM FRAUD TO RECOVERY: RESTORING
INTEGRITY IN SMALL BUSINESS PROGRAMS
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
OF THE
UNITED STATES SENATE
ONE HUNDRED NINETEENTH CONGRESS
SECOND SESSION
FEBRUARY 25, 2026
Printed for the use of the Committee on Small Business and Entrepreneurship
(
Available via the World Wide Web: http://www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
63–360 WASHINGTON : 2026
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED NINETEENTH CONGRESS
JONI ERNST, Iowa, Chair
EDWARD J. MARKEY, Massachusetts, Ranking Member
JAMES E. RISCH, Idaho MARIA CANTWELL, Washington
RAND PAUL, Kentucky JEANNE SHAHEEN, New Hampshire
TIM SCOTT, South Carolina CORY A. BOOKER, New Jersey
TODD YOUNG, Indiana CHRISTOPHER A. COONS, Delaware
JOSH HAWLEY, Missouri MAZIE K. HIRONO, Hawaii
TED BUDD, North Carolina JACKY ROSEN, Nevada
JOHN R. CURTIS, Utah JOHN W. HICKENLOOPER, Colorado
JAMES C. JUSTICE, West Virginia ADAM B. SCHIFF, California
JON HUSTED, Ohio
MEREDITH WEST, Republican Staff Director
SEAN MOORE, Democratic Staff Director
(II)
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CONTENTS
FEBRUARY 25, 2026
OPENING STATEMENTS
Page
Joni Ernst, U.S. Senator from Iowa, Chair ........................................................... 1
Edward J. Markey, U.S. Senator from Massachusetts, Ranking Member ......... 3
WITNESSES
The Honorable William W. Kirk, Inspector General, U.S. Small Business
Administration ..................................................................................................... 5
Prepared Statement ......................................................................................... 7
Mr. Kenneth Dieffenbach, Executive Director, Pandemic Response Account-
ability Committee (PRAC) ................................................................................... 19
Prepared Statement ......................................................................................... 21
ADDITIONAL LETTERS/STATEMENTS FOR THE RECORD
U.S. Senate Committee on Small Business and Entrepreneurship Letter to
the Administrator of the U.S. Small Business Administration Dated Janu-
ary 8, 2026 ............................................................................................................ 48
QUESTIONS FOR THE RECORD
William W. Kirk Responses to Questions Submitted by Chair Ernst and
Senator Scott ........................................................................................................ 52
Kenneth Dieffenbach Responses to Questions Submitted by Chair Ernst and
Senator Scott ........................................................................................................ 56
(III)
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FROM FRAUD TO RECOVERY: RESTORING
INTEGRITY IN SMALL BUSINESS PROGRAMS
WEDNESDAY, FEBRUARY 25, 2026
UNITED STATES SENATE,
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP,
Washington, DC.
The committee met, pursuant to notice, at 2:32 p.m., in Room
428A, Russell Senate Office Building, Hon. Joni Ernst, chairwoman
of the committee, presiding.
Present: Senators Ernst [presiding], Young, Hawley, Markey,
Shaheen, Hirono, and Rosen.
OPENING STATEMENT OF SENATOR ERNST
CHAIR. I call the Committee on Small Business and Entrepre-
neurship to order.
Nearly 6 years ago, the Small Business Administration’s pan-
demic relief programs provided a much-needed lifeline for small
businesses in Iowa and across America. Millions of small business
owners and their employees were saved from closure and mass lay-
offs thanks to Paycheck Protection Program and Economic Injury
Disaster Loan funds awarded by the SBA.
But as we’ve seen time and again, when government funds
seemed free for the taking, bad actors are ready to steal and scam.
Government programs should never be able to be exploited at the
American taxpayers’ expense in the first place. However, the lack
of oversight mechanisms in SBA’s COVID relief programs coupled
with the quick disbursement of funds to save shuttered businesses
allowed swindlers to rob taxpayers of $200 billion in pandemic re-
lief loans.
The Pandemic Response Accountability Committee, or PRAC,
sounded the alarm years ago on how allowing applicants to self-cer-
tify their eligibility increases fraud. Self-certification allows the
government to rely on an applicant’s promise that they meet pro-
gram requirements. The SBA Office of Inspector General repeat-
edly echoed their concerns about this system.
Unfortunately, for taxpayers, the Biden administration ignored
repeated watchdog warnings, allowing blanket forgiveness without
additional verification on PPP loans under $150,000, and poten-
tially allowing a large swath of fraud to escape meaningful scru-
tiny. Self-certification was known to be a major problem as more
pandemic relief programs were created.
Consider the Restaurant Revitalization Fund, or RRF, and Shut-
tered Venue Operators Grant, the SVOG programs. These opened
(1)
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a menu of fraud for the taking. In 2024, music artist Chris Brown
exploited these awards to the tune of $10 million. Half of these
funds were paid directly to the singer himself. Additional funds
were spent on an $80,000 birthday party. The SBA never should
have been running a drive-through for fraudsters.
However, even though the RRF program had a 20-location limit
for franchisees restaurant chain, CoreLife eatery with 29 locations
still got served $7.8 million from our taxpayers that it never should
have been allowed to receive. But talk about fast fraud made to
order, one Oregon dentist known for illegally distributing pharma-
ceuticals, used his personal address and fictitious restaurant
names in Florida to generate nearly $8 million in RRF payments.
To date, the PRAC has diligently helped law enforcement part-
ners expose more than $2.4 million—or excuse me, billion, with a
B, $2.4 billion in estimated fraud loss. IG Kirk’s recent appoint-
ment as PRAC chair highlights how critical it remains to claw back
these funds, especially across SBA programs. Last July, the SBA
OIG flagged an astonishing $544 million of potential improper pay-
ments in the SVOG program. Yet, the Biden administration contin-
ued ignoring the program. Ultimately, officials from the previous
administration did not refer a single case to the Treasury.
Fraudsters can’t be left off the hook just because time has
passed. Congress must pass my SBA Fraud Enforcement Extension
Act to extend the statutes of limitations for SVOG and RRF pro-
grams, and give investigators the time they need to continue going
after crooks. Without my legislation, as soon as April, fraudsters
who stole funds will escape justice.
You heard me right folks, in just a little over a month, many of
the swindlers who took advantage of some SBA COVID relief pro-
grams can no longer be prosecuted. The good news is my statute
of limitations bill has already passed the House and this com-
mittee; it is now pending before the full Senate. I call on Democrats
to stop blocking this legislation so there can be real accountability.
I am grateful the current administration knows that the job is
not finished. The SBA is conducting manual reviews of more than
10,000 RRF awards, totaling over $3 billion. Just over 1,000 of
these awardees did not submit the required post-award report doc-
umenting how the money was spent. SBA also sent demand letters
to an additional 8,000 awardees who were not a part of the manual
review and never submitted a post-award report totaling over $1.2
billion in RRF disbursements. Additionally, last year, the SBA
issued hundreds of demand letters to SVOG grant recipients. The
total grant value of recipients who have not responded totals over
$150 million.
The SBA has been dealt an incredibly difficult hand reviewing
the entirety of both programs before the statutes of limitations and
referring all fraud to investigators. This critical work must con-
tinue. A few weeks ago, Administrator Loeffler suspended more
than 110,000 California borrowers who took home over $8.5 billion
in potentially fraudulent COVID relief funds. The recent fraud in-
vestigations in Minnesota have uncovered at least $9 billion from
State and Federal programs, including $400 million in PPP loans,
and Administrator Loeffler acted quickly to remedy this issue.
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Republican members of this committee sent a letter to Adminis-
trator Loeffler earlier this year, applauding her work to shut down
these schemes. I ask unanimous consent to enter into the record
our January 8th letter requesting information from the SBA on its
efforts to uncover fraud in the SBA programs.
Without objection so ordered.
I look forward to hearing from our Federal watchdog partners
today on how they are tackling fraud and recovering taxpayers’
hard earned dollars. Thank you for your service, and I look forward
to hearing your testimony.
I now recognize Ranking Member Markey for his opening state-
ment.
STATEMENT OF SENATOR MARKEY
Senator MARKEY. Yeah. Thank you, Madam Chair.
Last night, President Trump declared a war on fraud. While
fraud must be taken seriously, the Trump administration has
shown it is only interested in weaponizing fraud for political gain,
and last night was a clear example of that. Trump said the Somali
community in Minnesota is plundering America and has pillaged
$19 billion from the American taxpayer. You know, Trump lied and
cynically weaponized fraud to demonize immigrants. Trump is
falsely pointing the finger at immigrants while facing no account-
ability for his own behavior that enriches himself and his family.
Trump said last night, if we’re able to find enough of that fraud,
we’ll actually have a balanced budget overnight. That level of fraud
does not exist, and it should trouble every American because what
it really means is that Trump will use isolated incidents of fraud
to punish his perceived enemies, and the attacks have already
begun. Last month, the Trump administration used fraud as a pre-
text for freezing funding for childcare and low-income assistance
programs, threatened to withhold Federal Medicaid funds, and or-
dered a review of Federal funding for Democratic-controlled states.
These are not actions of a President fighting fraud. This is a
President determined to make life miserable for anyone who
doesn’t support him. All the while, DOGE has been accessing
American’s sensitive data. We recently learned DOGE employees il-
legally funneled voter data to an organization pushing disproven
conspiracy theories of widespread election fraud. We still don’t
know if sensitive data at SBA was compromised by DOGE because
our committee has never been briefed on DOGE’s activities at the
SBA, and that is unacceptable.
If the President cared about fraud, would he be doling out bil-
lion-dollar contracts to his cronies. Would he solicit donations for
his gold-plated ballroom from companies that do billions of dollars
of business with the Federal Government? Would he grant pardons
to criminals convicted of money laundering, bank fraud, and wire
fraud who have connections to him and to his administration? And
we are just 1 year removed from the night President Trump ille-
gally fired 17 independent watchdogs, including Mike Ware at the
SBA. Are these the actions of a President serious about fraud? Or
are those the actions of an administration where corruption is self-
dealing are the norm?
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There’s an old saying that hypocrisy is the tribute that vice pays
to virtue. And so, yeah, we now have Donald Trump paying vice,
paying tribute to the rooting out of fraud while at the same time.
That is a good way of describing the entirety of his administration.
And that’s the hypocrisy I think that really bothers people even as
they see the President up there trying to demonize a small number
of people and promising that eradicating that level of fraud will
balance the budget when he knows that is not true.
Today’s hearing is about fraud at the SBA, and we know that
bad actors took advantage of some of these COVID programs. We
don’t deny that, and we must hold them accountable. Absolutely.
But let’s be very clear about when that fraud occurred. Take the
Economic Injury Disaster program or the EIDL program, for exam-
ple. Of the approximately 4 million loans issued during the pan-
demic, more than 3.7 million of those loans, or more than 90 per-
cent of the loans, were approved in 2020 by the Trump administra-
tion itself, 90 percent of the loans that we’re going to be looking
at.
So, when we hear about fraud today, let’s keep in mind who was
on watch when it happened, and Democrats and Republicans
should stand up and acknowledge actual fraud wherever and when-
ever it occurs, and not just when it is politically convenient to do
so.
So, if we’re serious about protecting taxpayer dollars, policing
fraud should not become a farce where those in power give them-
selves a pass and use investigations to exact revenge on their polit-
ical counterparts. The Trump administration abuses of Minnesota
and other Democratic-led states like my home state of Massachu-
setts, which he mentioned last night, demonstrate exactly why we
need real independent oversight at all levels of government.
So, I thank you Madam Chair. I thank you for holding this hear-
ing, and I look forward to hearing from our witnesses.
CHAIR. Thank you, Ranking Member Markey. I do want to ex-
tend a warm welcome to our witnesses, and I’m thankful that you
took time out of your busy schedules to share your expertise and
insight with this committee.
And, first, Mr. William Kirk serves as the inspector general for
the Small Business Administration. Mr. Kirk was sworn in as SBA
inspector general in early January, and has extensive experience in
strengthening internal controls and combating fraud, waste, and
abuse in his three decades of leadership across higher education,
also private enterprise, and the Federal Government. So, yeah,
thank you for your service. He earned his bachelor of business ad-
ministration in accountancy and juris doctorate degrees from the
University of Notre Dame.
Mr. Kirk, I would also like to congratulate you on your recent ap-
pointment as chair of the Pandemic Response Accountability Com-
mittee, effective March 1. I am confident that you will continue to
shine a spotlight on the pandemic-era relief programs, and work
across the investigative community to recover funds and bring
fraudsters to justice.
Next, Mr. Ken Dieffenbach. Mr. Dieffenbach serves as the third
executive director of the Pandemic Response Accountability Com-
mittee, or PRAC, and brings over 28 years of experience in the
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oversight community. As executive director, Mr. Dieffenbach leads
the PRAC’s efforts to support and coordinate oversight of the pan-
demic response, enhance transparency, and use data to detect
fraud, waste, and abuse. Mr. Dieffenbach earned his bachelor’s de-
gree in business from the Citadel and a graduate degree in crimi-
nal justice from the University of Alabama at Birmingham. Thank
you again.
Briefly, I’d like to take a moment to explain our lighting system
to our witnesses. There are three lights in front of you. Green
means go, yellow means you need to wrap it up pretty quick, and
red means to conclude your remarks.
I ask unanimous consent that the witness’s full statements be in-
cluded in the record, and without objection, so ordered. As your
written testimony has been made part of the record, the committee
asks that you limit your oral remarks to 5 minutes.
And with that, Mr. Kirk, you are recognized for 5 minutes for
your testimony.
STATEMENT OF MR. WILLIAM ‘‘BILL’’ KIRK, INSPECTOR GEN-
ERAL, U.S. SMALL BUSINESS ADMINISTRATION WASH-
INGTON, D.C.
Mr. KIRK. Thank you, Chair Ernst, Ranking Member Markey,
and distinguished members of the committee. Thank you for the
opportunity to appear before you today. It is a great honor to rep-
resent the Office of Inspector General at the U.S. Small Business
Administration and the dedicated auditors, sworn law enforcement
investigators, analysts, and support professionals who work every
day to protect taxpayer dollars and promote integrity across SBAs
programs.
The SBA OIG operates independently under the Inspector Gen-
eral Act of 1978. Our mandate is straightforward, but consequen-
tial; we conduct objective oversight, grounded in evidence to detect
and deter fraud, waste, and abuse, and to strengthen SBA program
integrity through actionable recommendations and transparent re-
porting.
While the acute economic phase of the COVID–19 pandemic has
passed, oversight has not oversight, the scale and speed of SBAs
pandemic response was unprecedented. To avert an economic crisis
caused by lockdowns, business closures, and other impediments,
SBA dispersed approximately $1.2 trillion in pandemic economic
assistance.
The response delivered critical relief to millions of legitimate
small businesses, but it also created opportunities for fraudsters to
exploit internal control vulnerabilities. Fraudsters stole identity in-
formation, created synthetic identities, duplicated information to
exploit programs, all this to exploit to—they exploited programs
meant to help those in need.
Today I’m going to focus on three areas central to the commit-
tee’s oversight responsibilities. First, the systemic risks within the
8(a) Business Development Program and the importance of eligi-
bility oversight. Secondly, the underperformance in post-award
monitoring within the Restaurant Revitalization Fund, also known
as RRF, and the Shuttered Venue Operators Grant, known as
SVOG, or SVOG awards, and the recovery of funds that were im-
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properly or fraudulently dispersed. Third, the necessity of extend-
ing the statute of limitations to 10 years for RRF and SVOG fraud,
which would match the statute enacted for the Paycheck Protection
Program, PPP, and COVID–19 Economic Injury Disaster Loan, or
idle fraud.
These issues are interconnected. They all reflect the same under-
lying principle; when program eligibility is not rigorously verified,
when red flags are not fully resolved, or when enforcement
timelines are misaligned with investigative realities, the American
taxpayer bears the risk.
Our office has continued to identify indicators of potential ineligi-
bility, unresolved fraud flags, and delayed recovery actions in cer-
tain pandemic programs. At the same time, we have seen the bene-
fits of strength and controls, improved inter-agency data-sharing,
and enhanced investigative coordination through partnerships such
as with the Pandemic Response Accountability Committee, known
as the PRAC. Oversight is not about revisiting the urgency of 2020.
Rather, it is about ensuring that the structural lessons from that
period translate into stronger controls today and in the future.
Under my leadership, SBA OIG will continue to exercise inde-
pendent judgment, pursue complex fraud investigations, wherever
the evidence leads us, we’ll issue recommendations to strengthen
internal controls, and we pledge to keep this committee fully in-
formed of risks, corrective actions, and measurable outcomes. The
work before us requires persistence, sufficient time to investigate
potential fraud, and a sustained commitment to integrity.
I appreciate the committee’s engagement on these matters, and
I look forward to discussing them in greater detail. Thank you very
much.
[The prepared statement of Mr. Kirk follows.]
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CHAIR. Thank you very much. Mr. Dieffenbach, you’re recognized
for 5 minutes for your testimony.
STATEMENT OF MR. KENNETH DIEFFENBACH, EXECUTIVE DI-
RECTOR, PANDEMIC RESPONSE ACCOUNTABILITY COM-
MITTEE (PRAC) WASHINGTON, D.C.
Mr. DIEFFENBACH. Thank you. Chair Ernst, Ranking Member
Markey, members of the committee, it is an honor to be here today
to discuss the Pandemic Response Accountability Committee, or
PRAC, and our work to investigate fraud and improve fraud pre-
vention across Federal programs, including funds intended to help
small businesses.
PRAC’s success would not be possible without strong partner-
ships like the one we have with the Small Business Administra-
tion, OIG. Thanks to Congress, the One Big Beautiful Bill Act ex-
tended the PRAC and its data analytics capability until 2034, pro-
vided $88 million in funding and expanded our jurisdiction to pro-
grams funded in the law. Operating an annual budget of approxi-
mately 18.5 and a half million dollars, to date, the PRAC has
helped recover well over $500 million for the taxpayer.
As executive director of the PRAC, an entity Congress created to
oversee over $5 trillion in relief funding, I work with a phenomenal
team that is leveraging artificial intelligence to collect, organize,
and analyze data to rapidly provide insights into fraud risks. This
proactive approach is clearly needed so that fraud is prevented be-
fore funds are dispersed. This past summer, the PRAC issued two
fraud alerts that identified over $79 billion in potential fraud that
could have been prevented with pre-award vetting and cross-agency
coordination.
To address these issues, the PRAC is developing an artificial in-
telligence enabled fraud prevention engine, trained on 5 million
pandemic applications and other data, the tool can quickly identify
anomalies, trends, patterns, and hidden connections in applications
before payment. Our access to law enforcement sensitive and other
unique data, over 119 million applications for pandemic aid and
over 127,000 known or suspected pandemic fraud cases can reveal
powerful new insights and serve as an early warning system of or-
ganized, often transnational, criminal conspiracies and other
emerging threats.
Had our fraud prevention engine been in existence in March of
2020, pre-award vetting would’ve flagged at least tens of billions of
dollars in fraudulent claims for further scrutiny, allowing agencies
again to prevent fraud. One of the many lessons of the pandemic
is that fraudsters rarely target just one government program, they
exploit vulnerabilities wherever they exist. This is why the PRAC
uniquely focuses on cross program and cross agency risks. For ex-
ample, in one project we found over 40,000 instances where the
same person appears to have reported a low income to obtain hous-
ing benefits and also a high income to obtain small business ad-
ministration benefits.
These anomalies indicate potential fraud in more than $860 mil-
lion in PPP loans, and they were likely caused by identity theft or
other types of fraud schemes in one or both of the programs. Now,
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20
most importantly, it also means that legitimate beneficiaries likely
lost out on benefits that they needed and deserved to have.
The PRAC also works across—works with OIGs to develop ana-
lytics tools that provide new insights and prove effectiveness of
oversight. For example, we recently developed a risk dashboard for
the Pension Benefit Guarantee Corporation OIG, that to date has
contributed to them recovering over $260 million. And we just
launched a similar dashboard for the Federal Communications
Commission OIG, which aggregates data related to $11 billion in
disbursements to 14,000 entities that will allow them to provide
more effective oversight.
The PRAC also provides investigative support to more than 50
law enforcement partners related to 1200 investigations with
24,000 subjects and well over the $2.4 billion, Chair, that you ref-
erenced in your opening statement. In one of the tens of thousands
of pandemic fraud cases, we identified one PPP scheme involving
more than 450 applications from over 100 individuals across 24
states. This is but one example where the proactive use of data and
technology could have prevented or aided in the early detection of
a scheme, mitigated the need for a resource intensive investigation
and prosecution, and helped ensure taxpayer dollars went to the in-
tended recipients and not the fraudsters. Every dollar that goes to
a fraudster does not go to the recipients that Congress intended the
programs to help including small businesses, the unemployed, and
veterans.
With the support of Congress, we’ll continue our work on behalf
of the taxpayers to investigate fraud and demonstrate the value
and effectiveness of fraud prevention. Thank you again for the op-
portunity to be here today and for your continued support of the
PRAC, the IG community, and independent oversight. This con-
cludes my prepared remarks. I look forward to answering your
questions.
[The prepared statement of Mr. Dieffenbach follows.]
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CHAIR. Thank you very much to our witnesses. And now, we will
move into the question, answer session and I will recognize myself
for 5 minutes.
So, Mr. Kirk, we’ll start with you. Reports from your office state
SBA identified $544 million in potential improper payments in the
SVOG or SVOG program and $522 million in the RRF program.
Yet not one recipient had been referred to Treasury for recovery.
Not one. This is actually pretty appalling. Your testimony also
identifies more than $9.5 billion of RRF awards in need of review.
Given the scope of potential fraud across the two programs, will
you be able to investigate all credible leads before the statutes of
limitations expire in April for the SVOG program and May for the
RRF program?
Mr. KIRK. Thank you, Senator, for the question. There is no pos-
sible way that our office would be able to investigate all of the out-
standing referrals and cases that we have received in the SVOG
and the RRF program. I will acknowledge that the work of the SBA
OIG to this point in the RRF and SVOIG investigations has been
underwhelming, quite honestly. There’s lots more work we can do.
I can only say that that was probably as a result of resource allo-
cation on other programs. The investigators and auditors have done
tremendous work, but the scope of the work is such that we would
need much more time, which is why I’m strongly supportive of the
idea of extending the statute of limitations to allow for more time
to investigate and resolve and return money to the Federal Fed.
CHAIR. No, I really appreciate that. And does that mean that the
ongoing investigations as well would time out?
Mr. KIRK. I believe so. I believe that the handful of investiga-
tions, quite honestly, it’s an embarrassing number of investigations
that we currently have underway, those would probably time out
as well if we could not bring them to prosecution.
CHAIR. Yeah. So, even though you’ve invested time and resources
through the department they could not continue if the statute of
limitations runs out for the programs.
Mr. KIRK. Indeed, it’s my understanding that that work would be
for nought.
CHAIR. Okay. Which is exactly why we do need to extend the
statute of limitations. So, thank you. Mr. Dieffenbach, the PRAC
has produced over $57 billion in monetary findings and over 1200
indictments resulting in over 450 convictions. Is it safe to say you
are aware of the time and energy it takes to investigate pandemic
fraud?
Mr. DIEFFENBACH. Yes. Very safe to say. I spent the bulk of my
29-year career doing fraud and public corruption investigations in
the OIG world, and it takes time to identify the bad actors, track
them down, and to do the necessary work to, to serve the purpose
of justice. Yes.
CHAIR. So, if Congress extends the statutes of limitations by an
additional 5 years, how much additional SVOG and RRF fraud do
you realistically believe could still be uncovered and prosecuted?
Mr. DIEFFENBACH. So, Chair, I can’t provide you a numerical es-
timate for that, again, because there’s so many factors involved,
but I can assure you that with additional time, we’ll identify more
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bad actors and more losses and, and lead to more convictions and
more arrests. Yes.
CHAIR. Okay. Thank you. And maybe for both of you in, in the
remaining time that I have, the Biden administration chose auto-
matic forgiveness for paycheck protection program loans under
$150,000, effectively waiving through potential fraud. What front-
end control should have been mandatory before forgiveness was
granted? And, and if we could start with you General Kirk.
Mr. KIRK. Sure. Thank you, Senator. First off, the, the front-end
control that would’ve certainly avoided many problems would be
the avoidance of the use of self-certification of eligibility. That’s a
real problem. There are ways to crosscheck that self-certification,
but certainly self-certification is problematic. I would defer to my
colleague if there are others that he’s aware of.
CHAIR. Great. Thank you. Yes.
Mr. DIEFFENBACH. Sure. So, the PRAC has done a tremendous
body of work in lessons learned, and we’ve produced a program—
a blueprint for program integrity, it includes program certification.
The biggest point I’d make to you is that agencies own this risk
and they have to do risk assessments, and they have to identify
how are we verifying eligibility, what are the terms and conditions
of the award, what is the law as laid out by Congress, and how are
we ensuring that we’re mitigating a broad range of risk?
And every program has different risk, overlapping risk, but first
and foremost, agencies have to pay attention and devote resources
to those activities.
CHAIR. Okay. Thank you. Now I recognize Ranking Member Mar-
key.
Senator MARKEY. Thank you, Madam Chair, very much. The
questions that I’m going to begin with refer to the Paycheck—the
Paycheck Protection Program, or PPP, and the Economic Injury
Disaster Loan Program or EIDL, which helped save millions of
businesses during the pandemic. The SBA and Congress should be
learning from our experiences to improve programs, keep
fraudsters out, and target help to deserving small businesses.
However, Republicans seem more intent on blaming the Biden
administration than anything else. 2023 SBA report found that 86
percent of the fraudulent loans came under Trump during the first
9 months of the first pandemic relief programs. So, Mr. Kirk, your
office’s own 2023 report on pandemic fraud states that many of the
SBA’s improvements to stem fraud, ‘‘Were made after much of the
damage had already been done,’’ and that fraudsters, egregiously
exploited SBAs weakened controls during the first year of the pro-
gram, meaning during the Trump administration. So, Mr. Kirk,
when were most PPP and EIDL loans made?
Mr. KIRK. Thank you, ranking member, for the question. I appre-
ciate it. As you described, the vast majority of the loans were made
in the year 2020 and 2021. So, they were in that timeframe, that’s
when the pandemic occurred. So, the relief that the country needed
was at that time in those—that’s when the loans——
Senator MARKEY. So, 93 percent——
Mr. KIRK. Yes.
Senator MARKEY [continuing]. Of the EIDL grants were made in
2020 when President Trump was in office. Mr. Kirk, do you agree
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with your predecessor’s finding that the vast majority of fraudulent
PPP and EIDL loans were made during the first Trump adminis-
tration? It seems that you do. Mr. Kirk and Mr. Dieffenbach—ex-
cuse me?
Mr. KIRK. No, I was going to say that that was the time place—
time when the pandemic occurred, it was in 2020, and the economic
relief that the country needed was at that time. So, that’s when the
loans were disbursed.
Senator MARKEY. And I think I heard you say, Mr. Dieffenbach,
that if pre-award vetting had been in place in 2020, we would’ve
saved tens of billions of dollars. Is that what you said? Correct.
Mr. DIEFFENBACH. Correct, Ranking Member Markey. Had we
had the data systems, the authorities’ jurisdiction in place, we cer-
tainly could have identified significant amounts of potential fraud
for which the proper due diligence could have been accomplished
before the money went out the door.
Senator MARKEY. Right. So, back in 2020, if we had put those
programs in place, we wouldn’t be chasing fraud. We would’ve pre-
vented the fraud in the first place?
Mr. DIEFFENBACH. Correct.
Senator MARKEY. Right. Thank you. So, do you agree with that,
Mr. Kirk?
Mr. KIRK. Thank you, Senator. Yeah, I agree that had different
measures been taken, I think you learn an awful lot in hindsight.
But because the pandemic was raging at that time and there was
a strong desire, a bipartisan desire to try to save the economy,
that’s when those loans were made.
Senator MARKEY. And what programs should the Trump admin-
istration have put in place? Because as you’re saying, you live life
forwards, but you understand it backwards. So, what programs
should have been in place in order to prevent against faulty imple-
mentation of those laws?
Mr. KIRK. I’m sorry. I’m not—what, the program, the pandemic,
the people——
Senator MARKEY. You agree with Mr. Dieffenbach that we should
have had those checks in right from the get go. You do agree with
that?
Mr. DIEFFENBACH. The protocols in place to prevent.
Mr. KIRK. It would—again, hindsight is wonderful. I think there
were significant controls put in place, but the frauds were very ca-
pable, and they were able to get by some of them. As I said, I think
there was bipartisan interest in rescuing the economy from the rav-
ages of the pandemic. And so, the loans and grants that were made
were intended to save the economy. Obviously, in hindsight, we
can——
Senator MARKEY. I’m just trying to get the timeline down——
Mr. KIRK. Sure.
Senator MARKEY [continuing]. In terms of when that fraud, you
know, began.
Mr. KIRK. The fraud has continued in the past 5 years as
well——
Senator MARKEY. I appreciate that. But as we just heard earlier,
if the safeguards were in place initially, we would’ve saved tens of
billions of dollars. And that’s just the testimony that we received.
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And just a few weeks ago, the New York Times reported about a
huckster who had been convicted of peddling bogus energy drinks
in 2019, but was then pardoned with the help of one of President
Trump’s former lawyers as he concluded his first term in 2021. And
just last year, that same huckster was convicted again of another
fraud scheme that cost victims millions of dollars. So, what did the
President do? He granted another pardon to that same huckster.
So, Mr. Dieffenbach, as someone who has devoted nearly three
decades of your life to fighting fraud, how does it feel to see con-
victed fraudsters let off the hook not once, but twice, because they
happen to have a line into the President?
Mr. DIEFFENBACH. So, Ranking Member Markey, I’m not familiar
with that matter at all. But I can look into it if the law is followed
throughout then it’s followed throughout. I don’t—I don’t know the
facts.
Senator MARKEY. Okay. Thank you. Thank you, Madam Chair.
CHAIR. This might be an instance where both Ranking Member
Markey and I agree that if we had had the proper protocols in
place for that very bipartisan bill the Paycheck Protection Program
and EIDL, that we probably would’ve saved a lot of—a lot of tax-
payer money, and we wouldn’t be in this situation today. But I
would remind everybody, probably everybody on this committee
voted in favor of those programs because we did want to save our
small businesses back home.
But, you know, if we had instituted DOGE, Department of Gov-
ernment Efficiency at that time, we probably would’ve had the
proper protocols in place. So, next, we have Senator Hawley. You
are recognized for 5 minutes.
Senator HAWLEY. Thank you, Madam Chair. Thanks to the wit-
nesses for being here.
Mr. Kirk, if I could just start with you, help me understand the
scope of what you’re looking at with the Restaurant Revitalization
Fund and the Shuttered Venue Operators Act. These are the pro-
grams you’ve identified that are currently under shorter statutory
limitations that you think that we need to adjust. And partly that’s
because as you outline in your written testimony, there is a good
deal of potential fraud here that it sounds like to me your office
and others are currently running down. Is that fair to say?
Mr. KIRK. That is correct, Senator. Thank you for the question.
Yes, we’re running it down. I will acknowledge that I’ve only been
in place 7 weeks or so. I have learned that really there’s been an
inadequate attention paid to investigating RRF and SVOG fraud.
We can do much better. I commit to you we will do much better.
We have only a handful of investigations underway. To me it’s an
absolute priority, but it will be critically important for us to have
an extension of the statute of limitations to be able to continue
those investigations.
Senator HAWLEY. And you say only a handful of investigations
have been performed or are currently underway, but it sounds like
on the basis of your written remarks, that the potential fraud in
the Restaurant Revitalization Program’s quite large. Is that fair to
say?
Mr. KIRK. Yes, Senator. There’s potential fraud in the billions of
dollars.
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Senator HAWLEY. Billions with a B?
Mr. KIRK. Yeah.
Senator HAWLEY. That’s incredible. I’m reading from your writ-
ten testimony, you say, OIG in one review identified 33,168 res-
taurant revitalization recipients, who had also received PPP loans
that have been marked as potentially fraudulent or ineligible.
These recipients received nearly not quite $11 billion in RRF funds.
And you go on to outline that a bare minimum of these, a tiny per-
centage have had any kind of substantive review. It sounds like
there’s a lot to be done here.
Mr. KIRK. We have our work cut out for us, and we will make
good use of the additional time in the statute of limitations. Indeed,
there is a tremendous amount of fraud that has been uncovered,
identified potential fraud. Not all of it has been proven. Obviously,
we have work to do to ensure that fraudsters are brought to justice,
but it is billions of dollars, Senator.
Senator HAWLEY. You say that your recommendation called for
review of more than 61,000 RRF awards totaling almost $10 bil-
lion.
Mr. KIRK. That’s correct.
Senator HAWLEY. That’s quite substantial. Why is it that there’s
been so little investigation done before now? Do you have a sense
of that?
Mr. KIRK. Thank you, Senator. The magnitude of work available
to us to do is significant. I have come to know that the investiga-
tors and auditors that are in the SBA OIG right now are really
dedicated professionals. I believe that they were performing their
duties in other areas. The pandemic and EIDL fraud is significant.
We have so much work to do. Having said that, we can’t ignore one
area of fraud just because we’ve got fraud in others. We are going
to attack this fraud. We’re going to do it diligently. I’m really hon-
ored to be named to the Pandemic Recovery Accountability Com-
mittee because I selfishly will look forward to using the PRAC to
be able to identify more of the fraud.
For example, it would be impossible for our staff to review manu-
ally 61,000 loans. But with the data analytical capability of the
PRAC, we’ll be able to do a much better job of that and return far
more money to the—to the taxpayer. We need that time, though.
We need the extension of the statute of limitations to undertake
that work.
Senator HAWLEY. And remind us when it runs out one more
time, Mr. Kirk. When does the statute——
Mr. KIRK. Current, some of them as early as March or April.
Senator HAWLEY. Very, very soon.
Mr. KIRK. It’s very soon.
Senator HAWLEY. We need to act immediately.
Mr. KIRK. Yes, sir.
Senator HAWLEY. I’m glad that you’re making this a top priority.
Obviously, we’ve seen in recent weeks, I think just the scope of the
pandemic era of fraud that has continued into the present. I had
testimony at another committee, one expert suggested that we
could be looking at as much as a trillion dollars in fraud every
year. Not all of that pandemic fraud, of course, but that’s an as-
tounding, astounding number. I think the American people are as-
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tounded and also sickened by the fact that their tax dollars are
being used to fund fraudsters buy private planes, luxury yachts.
In one case there were 12,000 pounds of $100 bills smuggled out
of suitcases in the city of Minneapolis. I mean, this is outrageous
stuff. Any dollar of fraud is outrageous. But the scale that you’re
talking about here is truly alarming. What’s the first order busi-
ness for you? We get this statute extended, which is what we’ve got
to do, what’s the next order of business for you in terms of tackling
this?
Mr. KIRK. Oh, thank you, Senator. As I mentioned to our staff,
our focus is fraud, fraud, fraud. I mean, there’s three things we’re
concentrating on. We need to dedicate our investigative capabilities
to identify the fraud, to return the dollars to the—to the taxpayer.
The first priority really is to leverage data analytics, because when
you’re talking about billions, even trillions of dollars and hundreds
of thousands of loans, it’s simply not possible to do manual reviews
in these cases. We have to use data analytics. We have—the
fraudsters are taking advantage of the technology. We need to be
able to do so as well.
Senator HAWLEY. Very good. Well, I hope that we can get the
statute of limitations extended so you’ll be able to do your work.
Thank you for the terrific work you’re doing, both of you.
Mr. KIRK. Thank you.
Senator HAWLEY. Thank you, Madam Chair.
CHAIR. Thank you, Senator Hawley. Next, Senator Shaheen. 5
minutes.
Senator SHAHEEN. Thank you, Madam Chair, and thank you
both for being here and for the work that you’re doing. I appreciate
what the chairwoman said about the importance of the programs
and what you said Mr. Kirk, about the fact that when those pro-
grams were designed, and as somebody on this committee who
helped design the PPP program, there was real urgency about get-
ting that done, about trying to save the small businesses that were
going under and the economy, and a recognition that fraud needed
to be addressed. But it was secondary to ensuring that businesses
were able to continue to operate.
So, Mr. Dieffenbach, can you talk about how long it is taking to
develop those pre fraud measures that you mentioned?
Mr. DIEFFENBACH. I’m sorry, the pre fraud measures?
Senator SHAHEEN. Yeah. What you’re talking about.
Mr. DIEFFENBACH. The pre award vetting?
Senator SHAHEEN. Yeah.
Mr. DIEFFENBACH. Yes, ma’am. So, thank you for the—for the
question, Senator. We have developed, again, a artificial intel-
ligence enabled system that can very rapidly identify——
Senator SHAHEEN. And how long?
Mr. DIEFFENBACH [continuing]. Patterns, trends, anomalies. We
can—we can review once the system is set up——
Senator SHAHEEN. How long did it take you to develop?
Mr. DIEFFENBACH. To develop it? We’ve developed it over the last
6 to 7 months.
Senator SHAHEEN. Okay. So, having that kind of a system in
place before the program was done was probably unlikely given the
urgency about getting——
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Mr. DIEFFENBACH. From March of 2020, correct.
Senator SHAHEEN. Correct. Okay. I just wanted to be clear as
we’re looking at timeframe here. And one of the things that you
said was that we can’t ignore—maybe it was you, Mr. Kirk—we
can’t ignore one area of fraud because of fraud in other areas. And
Senator Ernst mentioned the DOGE work.
Last year we saw reports that DOGE had accessed SBA systems
that had sensitive information about people and businesses. We re-
quested a review of what they accessed and whether there was any
misuse of personal information. Mr. Kirk, have you looked into
what DOGE accessed and whether there was any tampering with
the information at SBA?
Mr. KIRK. Thank you, Senator for the question. I’ve just been in
place about 7 weeks. And in that time, I have not conducted any
review of DOGE. If I may say though, I was—at the time I was
a career employee in the Federal government over at the Depart-
ment of Education. And when I worked with DOGE employees, we
understood them to be government employees. Certainly, they were
from the Department of Government Efficiency, I guess the name
was, but they were government employees that were vetted and re-
viewed by the HR processes and procedures.
Senator SHAHEEN. But in fact, they weren’t.
Mr. KIRK. I can’t speak to that. I don’t know. But the folks that
I worked with were as I understood them to be, members of the
Federal service.
Senator SHAHEEN. Is this something you’re concerned about look-
ing at SBA?
Mr. KIRK. Not currently. No, ma’am.
Senator SHAHEEN. I would hope that you would do that. And in
fact, when this was happening, we requested on the committee a
briefing that I think both Senators Ernst and Markey said they
would try and make sure we received. And yet, we haven’t gotten
a briefing yet, so.
Mr. KIRK. Thank you, Senator. I would be happy to work with
your staff to see if there is additional work that we can assist you
in trying to understand that.
Senator SHAHEEN. That’d be great. I appreciate that. One of my
next question is also about SBA and how it operates, because one
of SBAs programs is the State Trade Expansion Program. It helps
small businesses that are exporting, it helps them to grow their
business. I think that’s something that this administration is also
very interested in. And Congress provided $20 million for STEP in
fiscal year 2025 funding last March.
But despite SBA putting out a notice of funding opportunities
last May, they have yet to announce any awards from STEP. So,
I would hope Mr. Kirk is your looking into the integrity of SBA and
how it operates, that you would also look into why SBA is not get-
ting out the funding that Congress has provided to ensure that
those programs that are so critical to our small businesses are ac-
tually being funded. Will you commit to looking into what’s going
on and why the STEP program is not funded?
Mr. KIRK. Thank you, Senator. It appears to me that you might
be making a referral to an impoundment issue. And if so, that’s a
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matter that falls under the Impoundment Control Act. That’s a
matter for the GAO to do that.
Senator SHAHEEN. Well, I don’t know that.
Mr. KIRK. Perhaps not, but I’d be happy to try to research that
more and understand if that’s what you’re referring to.
Senator SHAHEEN. Because there are also several other pro-
grams, the Women’s Business Centers and SCORE, where Con-
gress has funded them, but the money hasn’t actually gone out
from SBA. So, I assume in your position, you can check on that and
see if SBA is actually funding the programs that Congress deter-
mined it should fund.
Mr. KIRK. I’ll certainly be happy to work with my staff to try to
get answers to those questions for you.
Senator SHAHEEN. Thank you. Madam Chair, I hope that we can
follow up and make sure that we have those answers.
CHAIR. Yes, absolutely. Happy to work with you on that.
Senator SHAHEEN. Thank you.
CHAIR. Yes. And Senator Hirono, you’re recognized for 5 minutes.
Senator HIRONO. Thank you, Madam Chair. Mr. Kirk, in your
testimony, you discussed the need to investigate fraud in the 8(a)
Program, and I agree in fact, we should go after fraud by anyone
and in all programs. So, there you go. We agree on that. And we
should investigate fraud again in all programs, including the 8(a),
but to allege widespread fraud in this program, which involves—
how many people are—how many companies, entities are in the
8(a) Program?
Mr. KIRK. Gosh, I apologize, Senator. I don’t have that.
Senator HIRONO. Thousands, thousands.
Mr. KIRK. It is thousands. Indeed, I can assure you.
Senator HIRONO. And these are small businesses, and we have
decided in this committee that we should be supportive of small
businesses——
Mr. KIRK. Absolutely.
Senator HIRONO [continuing]. And to work with them. But to
come into the questions relating to this 8(a) Program as with the
idea that there’s massive fraud that is—that is inappropriate. So,
I just want to get your commitment that in your review of the 8(a)
Program that you maintain your independence from those within
the administration, including the SBA leadership that considers
the 8(a) Program to be a fraud magnet. But you would be inde-
pendent in your assessment of whether or not there is fraud in the
8(a) Program.
Mr. KIRK. Thank you, Senator, for the question. I can absolutely
assure you. I swore an oath to uphold the law, to act impartially,
to act without regard to political partisanship independently and
objectively. That’s an oath I take very seriously.
Senator HIRONO. I’m glad that you’re reiterating once again, that
the IG is really critical that you be independent. And I have the
questions that I asked you during your confirmation hearing.
Mr. KIRK. Yes, ma’am.
Senator HIRONO. Now, one question I did ask you was whether
the rule of law applied to the President of the United States, and
you didn’t answer that directly. I’m going to give you another
chance to answer that question.
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Mr. KIRK. Sure, Senator. I’m happy to acknowledge that the rule
of law applies to all citizens, all people in the United States, includ-
ing the President of the United States.
Senator HIRONO. Do you know that the President said that the
rule of law doesn’t—he doesn’t think the rule of law applies to him?
Mr. KIRK. I’m not aware of that statement.
Senator HIRONO. What if I were to tell you that that is his view
of the rule of law as applying to him? He doesn’t think the rule of
law applies to him. He thinks that the Supreme Court has given
him pretty much immunity from—although that that decision was
based on any criminal doings, I think he certainly applies it to the
civil situation.
So, I have some concerns about your independence. I’m glad that
you continue to affirm that you’re going to be independent. Now,
on the question of Planned Parenthood receipt of PPP funds, once
again I believe that you’re bringing up whether or not, or the SBA
is bringing up whether or not the Planned Parenthood should have
gotten this money. And your predecessor IG has said that it was
done appropriately.
Do you have any reason to suspect or disagree with your prede-
cessor’s assessment of whether Planned Parenthood had committed
fraud?
Mr. KIRK. Thank you, Senator. My understanding is that the
SBA is conducting a review of the eligibility of many institutions
and entities, including that one.
Senator HIRONO. No, but your predecessor had already said that
Planned Parenthood had complied with the requirements.
Mr. KIRK. Thank you, Senator. I’m actually quite pleased that
the agency is continuing to conduct reviews in all areas because the
job of tackling fraud is shared between the agency and the IG.
Senator HIRONO. Well, the thing is——
Mr. KIRK. This administration has made—the agency has made
really very significant efforts, since the beginning of last year
to——
Senator HIRONO. Hold on. I’m reclaiming my time. So, that’s
great that, you know, the agency is being very objective and all of
that. But this regime is not objective when it comes to the funding
of Planned Parenthood. And in fact, it continues to beat the drum
that somehow Planned Parenthood committed fraud, or that it was
inappropriate. Now, your predecessor IG has already reviewed—I
mean, you must have enough other things to look at regarding
fraud, but you’re going to once again, pursue fraud with regard to
PPP.
So, my question to you is, do you not accept your predecessor IGs
report, the assessment——
Mr. KIRK. Thank you, Senator.
Senator HIRONO [continuing]. That Planned Parenthood had not
committed fraud?
Mr. KIRK. I understand the question.
Senator HIRONO. Yes or no?
Mr. KIRK. The SBA is conducting a new review, reviewing the
eligibility of the affiliates, as I understand it. I am not involved in
that review. Our office is not involved in that review. If they make
referrals to the Inspector General’s office, it is our responsibility
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under the law, and we abide by the law in all cases to investigate
those matters.
Senator HIRONO. Well, I have to tell you that this is very politi-
cally motivated, as you can imagine. And you must be aware that
this regime—I call it a regime because of its authoritarianism—
that this is a regime that has been calling to question funding for
Planned Parenthood in many different ways, and certainly in this
instance, you must be aware of that. So, I’m just saying this is yet
another instance of politically motivated investigations. Thank you,
Madam Chair.
CHAIR. Thank you, Senator Hirono. And I, for one, have called
for additional information regarding those programs and the alloca-
tions that went out to Planned Parenthood, because I did not be-
lieve that they fit with the original congressional intent of the
package that we passed out of this Small Business Committee. So,
I would applaud the Inspector General’s efforts on reviewing that
matter. Senator Young.
Senator YOUNG. Well, thank you, Madam Chair. And I want to
thank our witnesses for being here today. Mr. Dieffenbach, I’d like
to start by discussing the AI enabled fraud prevention engine that
was developed by the Pandemic Response Accountability Com-
mittee that you highlighted in your written testimony. You noted
that the tool can review approximately 20,000 applications per sec-
ond before the funds are dispersed, and this would dramatically in-
crease the government’s ability to detect anomalies and potential
fraud in real time.
Given those capabilities, what specific action should Congress
consider to ensure agencies are fully leveraging AI driven fraud
prevention tools at the front-end, rather than relying on a costly
pay-and-chase model after funds go out the door?
Mr. DIEFFENBACH. Thank you, Senator Young. Indeed, we have
built a very powerful tool. To what Congress can do to help en-
hance fraud prevention, I think first and foremost, it’s ensuring the
right incentives are in place, and that agency officials are taking
their primary responsibility of preventing detecting fraud as they
should. Inspector General Kirk and the rest of the inspectors gen-
eral are here as kind of a secondary backup and an oversight mech-
anism. But the first and primary role of agency officials is to prop-
erly design programs, assess risk, and allocate proper resources to
it.
So, in my estimation, the more Congress pays attention to their
ownership of that risk, the more they will pay attention to it, and
the more they will seek assistance from the PRAC and from inspec-
tors general and follow recommendations so they can have
impactful prevention activities.
Senator YOUNG. Okay. Well, Congress will be—at least this
member of Congress will be attentive to those issues. I know fraud
throughout government programs is especially concerning to my
constituents. Are there any statutory data sharing or other barriers
that to your mind today prevent wider adoption of the AI tools you
referenced across Federal programs?
Mr. DIEFFENBACH. Sure. The biggest one that comes to mind is
our jurisdiction of the PRAC is currently limited to pandemic pro-
grams and to programs funded in the One Big Beautiful Bill Act,
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which is an expansion we received last summer we’re grateful for.
But the greater jurisdiction that we have at the PRAC, the greater
we can identify trends, anomalies, patterns, and hidden connec-
tions across all government programs.
As I said in my opening statement, most fraudsters don’t just de-
fraud one government program. They go to the ones that are the
weakest. We have an ongoing case now that involves frauds in 24
different states. The Department of Labor IG has identified one so-
cial security number that was used in 40 different states to obtain
unemployment insurance benefits. So, expanding our jurisdiction,
giving us the ability to responsibly look at a wider set of data, will
give better visibility into these emerging trends and these orga-
nized groups to be more——
Senator YOUNG. So, you would need statutory direction, is that
accurate? Or would some other sort of direction suffice in order to
broaden the scope of your current authorities or responsibilities to
encompass non pandemic response programs that may be rife with
or certainly you know, characterized by fraud?
Mr. DIEFFENBACH. So, as I outlined in my written statement, our
jurisdiction is currently limited, so we would need statutory au-
thorization to look at a broader array of programs, which would
allow us to collect more data to be more effective.
Senator YOUNG. Short of that, would it be allowable for members
of your staff, perhaps you individually, to visit with me, any mem-
bers of the Small Business Committee that would like to join and
talk more generally about how lessons you’ve learned might be ap-
plied to other areas or tools you’ve developed?
Mr. DIEFFENBACH. Yes, Senator. I would welcome that oppor-
tunity. I spent almost my entire 28-year Federal career as a Fed-
eral law enforcement investigating corruption and fraud. I can talk
fraud risks with you all day long, which is the first step in the
process. But happy to talk anytime.
Senator YOUNG. Here, today, I resolve to work with you and
members of your team and have my office do so, and we will ask
if other colleagues on the committee would like to also be sup-
portive of cracking down on indefensible fraud.
Mr. DIEFFENBACH. Anytime, sir.
Senator YOUNG. All right. And I see for the record, Senator
Rosen, her face lit up. So, perhaps we can work together on this.
Mr. Kirk.
Mr. KIRK. Yes, sir.
Senator YOUNG. You’ve highlighted in your written testimony the
recent steps the Small Business Administration has taken to
strengthen program integrity. I regret that we’re sort of running to-
wards the end of our time, but I’ll just ask you one threshold sort
of question here. How’s the SBA integrating AI machine learning
or advanced data analytics into its fraud detection and application
review processes today?
Mr. KIRK. Thank you, Senator. I know it is a priority of theirs.
I have had several meetings already with the chief technology offi-
cer there, and I look forward to continuing those. It’s really impera-
tive. What we have to do is, as we integrate AI and data analytics,
we have to make sure it’s done safely, in a way that protects data,
in a way that doesn’t create new problems, as such as we’re created
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44
with pandemic program, when steps were put into place that had
a tail to them. So, I am, I know they are committed.
I am very committed to using technology because as Senator
Ernst referred to, as Senator Markey referred to, we’re talking
about hundreds of thousands of loans, and there’s no way to manu-
ally review these, that we have to use the data analytic tools that
are available.
Senator YOUNG. Well, thank you for your focus on this important
matter. Chair.
CHAIR. Great. Thank you, Senator Young. Next, we’ll go to Sen-
ator Rosen. Thank you.
Senator ROSEN. Thank you, Madam Chair, Ranking Member
Markey, appreciate this. Data and analytics, you’re talking my lan-
guage here. So, I want to thank Senator Young bringing this up.
I was going to ask this very same question. I agree that early fraud
protection through better technology, AI, dashboards, and the like,
it is really preferable to—we don’t want to pay them ahead of time
and chase them down later. We want to prevent them.
And so, I do agree with your quote that the proactive use of data
and technology could have prevented or aided in early detection
schemes. So, I want to work with you to continue to use technology
in smart ways to prevent fraud and join us on that. What we need
to do to learn with you on ways that we can enhance your work.
So, thank you for that.
And I want to say since I entered Congress, I’ve worked really
hard to fight wasteful spending, look after Nevadans’ hard-earned
tax dollars, ensuring that waste is responsibly minimized. Respon-
sibly minimized, right? As fraud is prevented, should always be a
top priority. Tax dollars are precious. And so, I do believe this ef-
fort, and again, I agree with my colleagues that we must take the
preventative approach. It’s always better prevention—what do they
say? An ounce of prevention versus a pound of cure, right?
And so, our goal should be to improve access to the support and
SBA programs that are intended to provide. There’s a lot of pro-
grams out there, not to create more barriers but to really enable
people to navigate the complex environment that exists for I will
say the people who aren’t perpetrating fraud. The rest—the major-
ity of folks really want to do the right thing, and they look forward
and really dream about owning a small business. And so, we
should be focused on implementing evidence-based reforms, identi-
fying opportunities to improve compliance, and ensuring that crit-
ical resources do remain available for, look—99.2 percent of busi-
ness owner of businesses in Nevada are small business. These are
people’s dreams, large and small. And we want them to use these
resources.
So, one opportunity to improve compliance exists in better
leveraging small business resource partners. You have an extensive
network of resource partners, like Small Business Development
Centers, Veterans Business Outreach Center—I was glad to bring
the first VBOCs, two of them to Nevada—Women’s Business Cen-
ters, they’re all utilized extensively I know in Nevada by our small
businesses. And I believe that the reach of these resources can be
expanded to better help people who really want to do the right
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thing and own their own business and stay compliant with pro-
gram requirements.
So, Mr. Kirk, how can the small business resource partners, like
the ones I’ve named and others aid in the goal of educating busi-
ness on compliance requirements? And what efforts are you taking
to have the reach of our resource partners really get out there to
the multitudes? Like I said, almost 300,000 small businesses in Ne-
vada, so they know they’re there. They want to do the right thing,
and they just need to be able to get the resources to do it.
Mr. KIRK. Thank you, Senator for the question. I really appre-
ciate it because it allows me to talk about the other arm of what
we do in the Inspector General’s office. We are statutorily required
to investigate and prevent and detect waste, fraud, and abuse. But
our other critically important function is audit. And when we audit
these programs, we can identify ways where their reach can be ex-
panded. These are program responsibilities you’re talking about,
right? So, that those questions are—some of them are best directed
to the administrator, but we are critically involved in auditing the
programs to ensure that their reach is what Congress intended.
There are so many programs available. I’m only now becoming
familiar with many of them. But our audit work is geared in many
cases to identify how those programs might be improved, how the
reach of the programs can be expanded.
Senator ROSEN. Improved, for sure, because you can see the
roadblocks for people who are trying to get things done and what
are their obstacles to being compliant.
Mr. KIRK. Indeed.
Senator ROSEN. Sometimes they’re just not educated on what
they need.
Mr. KIRK. Indeed. And, you know, the problem, you know, the
pandemic relief was pushed out so quickly.
Senator ROSEN. Yes.
Mr. KIRK. It would be nice if we could push out SBA assistance
program assistance as quickly, but we would do so at the risk of
greater fraud. So, I really am grateful for your question because it
allows me to talk to our audit folks about really having them bear
down on the issue of how can we ensure that the program funding,
the program availability, the knowledge of how to use the programs
is made available to the 36 million small businesses.
Senator ROSEN. Right. Because some people are trying to per-
petrate fraud and others may just not understand——
Mr. KIRK. Absolutely.
Senator ROSEN [continuing]. How to be stay in compliance if they
don’t have—it’s not a very large business.
Mr. KIRK. Indeed.
Senator ROSEN. It could be just a mom and pop, a smaller busi-
ness that just doesn’t have the resources. So, thank you for that.
And Madam Chair, I yield back.
CHAIR. Yes, thank you, Senator Rosen. And an excellent point,
because we do have a lot of small businesses that just lack the abil-
ity to sort through some of the legalities.
Senator ROSEN. They are trying to do the right thing but they
just don’t have the resources. Maybe they’re not sure how to fill out
paperwork.
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CHAIR. Right. Exactly, exactly. Thank you for that line of ques-
tioning. And now I’ll recognize Ranking Member Markey.
Senator MARKEY. Thank you, Madam Chair. Mr. Dieffenbach,
you have been fighting government fraud for 28 years. You know
that fraud is not a problem that is unique to only red and only blue
states. Yet we’ve seen the SBA administrator take selective actions
against borrowers in Minnesota and California. In fact, Adminis-
trator Loeffler went so far as to pause annual grant funding to the
state of Minnesota after launching a probe into COVID–19 pro-
grams. I think the administrator is actually using isolated inci-
dents of fraud from 6 years ago to deny law abiding small busi-
nesses in Minnesota access to SBA programs today.
So, Mr. Dieffenbach, as head of the Pandemic Recovery Account-
ability Committee, you have a comprehensive understanding of the
fraud landscape. Has the data given you any indication that there
was a correlation between whether someone lives in a state that
voted against Donald Trump or for Donald Trump in terms of the
likelihood that they committed fraud?
Mr. DIEFFENBACH. Ranking Member Markey, fraud exists in any
program that gives away money. I have no data, no information
about the geographic disbursement or the voting piece that you just
discussed.
Senator MARKEY. Yeah. So, it’s not red states and blue states, it’s
all states?
Mr. DIEFFENBACH. I don’t know. It is—it is distributed across all
states. Yes.
Senator MARKEY. Thank you. So, do you think that targeting spe-
cific states for political reasons as the SBA has done is an effective
way to pursue recovery for the American taxpayers or does the
PRAC rely on more nuanced analytics yourself to identify con-
centrations of fraud?
Mr. DIEFFENBACH. I don’t have a comment on that except to say
that I have 3 billion data points, and every day I’ve got a team that
is looking for the patterns, trends, and anomalies of the fraud
where it may occur so we can pursue it and refer it to the right
inspectors general.
Senator MARKEY. Yeah. And I like that about you. You know,
you’re like, Sergeant Joe Friday in Dragnet, it’s nothing but the
facts, you know, and just follow the facts. It’s not let’s just target
the blue states, because obviously, you’ll be letting off most likely
half of the culprits at that point, because that’s just the way fraud
works.
So, Madam Chair, as you know, this committee passed the SBA
Fraud Enforcement Extension Vote Act by a voice vote this past
July, and I am committed to passing this legislation as part of a
comprehensive set of reforms and look forward to working with the
chair to advance it along with other bipartisan priorities. And that
said, our efforts to fight against fraud should not be limited to
going after small restaurants and theaters, especially when Presi-
dent Trump is letting off fraudsters left and right.
If we’re going to combat fraud, let’s look and see what DOGE is
doing with the social security numbers they illegally harvested and
take steps to make sure they’re not doing the same thing with
small business data. So, I just want to be consistent. Let’s call out
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the fraud across the board, including when it’s committed by the
President’s allies, as well as the President’s opponents. So, let’s not
allow the search for fraud to be used as a weapon to hurt people
in blue states. So, I’m committed to fighting fraud but we just have
to be consistent so that we call it out like you Mr. Dieffenbach re-
gardless of where we find it in the country.
So, with that, Madam Chair, I yield back.
CHAIR. Thank you. Thank you, Ranking Member Markey, and I
love that Sergeant Joe Friday, just the facts. And yes, I do believe
that if there is fraud out there, we need to call it out. I don’t care
whether it is a blue state or a red state. Unfortunately, we have
seen a lot of fraud in Minnesota. So, that’s the state that does gar-
ner the most attention. So, I’ll just ask a brief question.
So, the SBA had announced that there was nearly 7,000 Min-
nesota borrowers linked to an estimated $400 million in COVID re-
lief loans. They are being suspended after massive fraud rings were
exposed throughout Minnesota. So, right now, what we do know is
that Governor Walz is now proposing new forgivable loans, claim-
ing businesses are being harmed by law enforcement.
So, Mr. Kirk, maybe what warning, as we’re wrapping this up—
what warning would you give to officials advocating for broad new
grant forgivable loan programs?
Mr. KIRK. Gosh, thank you, Senator, for the question. I would
suggest they consult with my colleague here and with me and with
others, inspectors general to try to put in place methods in advance
that would prevent fraud from occurring. There’s many steps that
can be taken. They don’t require all that much effort. As I said,
hindsight’s 20/20. I hope that folks that would do that would look
to experts who can provide information in that regard.
For example, self-certification, a real problem in these matters.
There’s opportunities that exist to check the self-certification that’s
being made. There’s data tools out there that are available, and the
data tools are better now than they were 6 years ago when the
pandemic began, so.
CHAIR. Well, thank you. This has been a very good hearing, and
I appreciate it. And, ranking member, I absolutely agree, let’s go
after the fraudsters. It doesn’t matter, R, D, blue, red, does not
matter. Fraud is fraud.
So, again, I want to thank our witnesses for being here with us
today. I ask unanimous consent that the record of today’s hearing
remain open for 2 weeks for members to submit questions, revise
and extend their remarks, and submit additional information into
the record.
And without objection, so ordered.
And with that, the Committee on Small Business and Entrepre-
neurship stands adjourned. Thank you, Gentlemen.
[Whereupon, at 3:41 p.m., the hearing was adjourned.]
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