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Cited in: Beth Mueller · James E. Clyburn · Jennifer Naomi Gaspar · Molly Claflin · Raja Krishnamoorthi · Russell M. Anello
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ROOTING OUT FRAUD IN
SMALL-BUSINESS RELIEF PROGRAMS
HEARING
BEFORE THE
SELECT SUBCOMMITTEE ON THE CORONAVIRUS
CRISIS
OF THE
COMMITTEE ON OVERSIGHT AND
REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
MARCH 25, 2021
Serial No. 117–12
Printed for the use of the Committee on Oversight and Reform
(
Available on: www.govinfo.gov,
oversight.house.gov or
docs.house.gov
U.S. GOVERNMENT PUBLISHING OFFICE
43–986 PDF WASHINGTON : 2021
COMMITTEE ON OVERSIGHT AND REFORM
CAROLYN B. MALONEY, New York, Chairwoman
ELEANOR HOLMES NORTON, District of JAMES COMER, Kentucky, Ranking Minority
Columbia Member
STEPHEN F. LYNCH, Massachusetts JIM JORDAN, Ohio
JIM COOPER, Tennessee PAUL A. GOSAR, Arizona
GERALD E. CONNOLLY, Virginia VIRGINIA FOXX, North Carolina
RAJA KRISHNAMOORTHI, Illinois JODY B. HICE, Georgia
JAMIE RASKIN, Maryland GLENN GROTHMAN, Wisconsin
RO KHANNA, California MICHAEL CLOUD, Texas
KWEISI MFUME, Maryland BOB GIBBS, Ohio
ALEXANDRIA OCASIO-CORTEZ, New York CLAY HIGGINS, Louisiana
RASHIDA TLAIB, Michigan RALPH NORMAN, South Carolina
KATIE PORTER, California PETE SESSIONS, Texas
CORI BUSH, Missouri FRED KELLER, Pennsylvania
DANNY K. DAVIS, Illinois ANDY BIGGS, Arizona
DEBBIE WASSERMAN SCHULTZ, Florida ANDREW CLYDE, Georgia
PETER WELCH, Vermont NANCY MACE, South Carolina
HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia SCOTT FRANKLIN, Florida
JOHN P. SARBANES, Maryland JAKE LATURNER, Kansas
JACKIE SPEIER, California PAT FALLON, Texas
ROBIN L. KELLY, Illinois YVETTE HERRELL, New Mexico
BRENDA L. LAWRENCE, Michigan BYRON DONALDS, Florida
MARK DESAULNIER, California
JIMMY GOMEZ, California
AYANNA PRESSLEY, Massachusetts
VACANCY
DAVID HICKTON, Select Committee Staff Director
RUSSELL ANELLO, Chief Counsel
SENAM OKPATTAH, Deputy Chief Clerk
CONTACT NUMBER: 202-225-5051
MARK MARIN, Minority Staff Director
SELECT SUBCOMMITTEE ON THE CORONAVIRUS CRISIS
JAMES E. CLYBURN, South Carolina, Chairman
MAXINE WATERS, California STEVE SCALISE, Louisiana, Ranking Minority
CAROLYN B. MALONEY, New York Member
NYDIA M. VELÁZQUEZ, New York JIM JORDAN, Ohio
B ILL F OSTER, Illinois M ARK E. GREEN, Tennessee
JAMIE RASKIN, Maryland NICOLE MALLIOTAKIS, New York
RAJA KRISHNAMOORTHI, Illinois MARIANNETTE MILLER-MEEKS, Iowa
(II)
C O N T E N T S
Page
Hearing held on March 25, 2021 ............................................................................ 1
WITNESSES
The Honorable Hannibal ‘‘Mike’’ Ware, Inspector General, Small Business
Administration
Oral Statement ........................................................................................................ 4
The Honorable Michael E. Horowitz, Chair, Pandemic Response Account-
ability Committee, Inspector General, Department of Justice
Oral Statement ........................................................................................................ 6
William B. Shear, PhD, Director, Financial Markets and Community Invest-
ment, Government Accountability Office
Oral Statement ........................................................................................................ 8
Written opening statements and the written statements of the witnesses are
available on the U.S. House of Representatives Document Repository at:
docs.house.gov.
INDEX OF DOCUMENTS
No additional documents were entered into the record during this hearing.
(III)
ROOTING OUT FRAUD IN
SMALL-BUSINESS RELIEF PROGRAMS
Thursday, March 25, 2021
HOUSE OF REPRESENTATIVES
SELECT SUBCOMMITTEE ON THE CORONAVIRUS CRISIS
COMMITTEE ON OVERSIGHT AND REFORM
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:05 p.m., via
WebEx, Hon. James E. Clyburn (chairman of the subcommittee)
presiding.
Present: Representatives Clyburn, Waters, Maloney, Foster,
Raskin, Krishnamoorthi, Jordan, Green, and Miller-Meeks.
Chairman CLYBURN. Good morning. The committee will come to
order.
Without objection, the chair is authorized to declare a recess of
the committee at any time.
I now recognize myself for an opening statement.
The Paycheck Protection Program, or PPP, and the Economic In-
jury Disaster Loan Program, or EIDL, have been essential lifelines
for millions of small businesses harmed by the coronavirus pan-
demic. More than $1 trillion has been disbursed by these programs,
with good reason given the scale of the crisis. With so many tax
dollars expended, it is vital that we ensure that the money is being
used for its intended purposes and not diverted to fraud.
Unfortunately, the Trump administration failed to take basic
steps to prevent fraud when it implemented these programs last
year. Thanks to the work of this committee and our oversight part-
ners, we now know that this failure led to nearly $84 billion in po-
tential fraud, including $79 billion in potentially fraudulent EIDL
loans and grants and $4.6 billion in PPP loans. That means billions
in taxpayer dollars may not have reached the small businesses that
most urgently needed support.
Last October, the SBA Inspector General found that the Trump
administration—I’m quoting him here—‘‘lowered the guardrails’’ by
removing or weakening controls in the EIDL Program. Specifically,
the administration ignored flags of potential fraud, approved loans
in batches with little to no vetting, and abandoned a rule that re-
quired two SBA employees to approve each loan application. Ac-
cording to the IG, these actions increased fraud risk significantly.
In a staff report last year, this committee identified more than
22,500 PPP loans worth $4 billion that may have been subject to
fraud. The SBA Inspector General has since found at least $4.6 bil-
lion in potentially fraudulent loans because the Trump administra-
tion refused to implement internal controls that—and I quote here
(1)
2
again—‘‘could have reduced the likelihood of an ineligible or fraud-
ulent business obtaining a PPP loan,’’ end of quote.
As a result of the lack of controls, the Inspector General uncov-
ered tens of thousands of PPP loans that exceeded the maximum
loan amount that had been approved to businesses registered
under the program cutoff date or were mailed to businesses that
exceeded the program’s size standards.
Earlier this year, GAO added PPP and EIDL to its High Risk
List, citing the failure to implement adequate controls or make rec-
ommended improvements.
Former Treasury Secretary Steven Mnuchin asserted last year
that, given the need to get relief money out quickly, it was inevi-
table that the programs ran into a lot of issues. Let me be clear:
That is a false choice. Americans should not have to, and did not
have to, choose between quickly getting aid during a crisis and pre-
venting the theft or waste of billions of tax dollars.
While disbursing PPP and EIDL funds quickly was rightly
prioritized during the crisis, this committee and the oversight bod-
ies before us today all outline simple steps that the prior adminis-
tration could’ve taken to prevent oversight—or to provide oversight
and prevent fraud without causing harmful delays.
The Trump administration not only ignored these recommenda-
tions, but it resisted legitimate oversight by removing and bullying
Inspectors General and withholding basic information from Con-
gress. As The Washington Post reported earlier this week, we now
know that this was a widespread problem in the prior administra-
tion. Today, we face the challenge of fixing the resulting damage.
Our committee released a staff memo this morning showing just
how vast a challenge this is. The SBA has referred a staggering
1,340,000 claims of potential fraud concerning EIDL loans and ad-
vances to the agency’s Inspector General. The SBA Inspector Gen-
eral has received another 148,000 complaints on its fraud hotline.
The Inspector General already has more than 200 open investiga-
tions related to PPP and EIDL.
And it is not just a single inspector general playing a role. Given
the scope of the problem, 32 Federal and state agencies have been
pulled into investigations involving the small-business relief pro-
grams.
Fortunately, the Biden-Harris administration is taking the risk
of fraud seriously and investing in oversight. President Biden has
called for, in his words, fastidious oversight of pandemic relief
funds and charged his administration to—and I quote him here—
‘‘make sure the relief arrives quickly, equitably, and efficiently,
with no waste or fraud,’’ end of quote.
The American Rescue Plan will further enhance transparency
and accountability by investing $142 million to support critical
oversight by the Pandemic Response Accountability Committee, or
PRAC, the inspector general community, and the Government Ac-
countability Office.
Today, I am pleased to welcome distinguished representatives of
these watchdogs who are appearing before the select subcommittee.
With us this afternoon is Hannibal ‘‘Mike’’ Ware, the SBA Inspec-
tor General; Michael Horowitz, the Inspector General for the De-
partment of Justice and Chair of the PRAC; and William Shear,
3
the Director of Financial Markets and Community Investment at
GAO.
I’m also pleased to welcome the select subcommittee’s newest
member, Mrs. Miller-Meeks.
I look forward to hearing how our panelists plan to use the funds
provided in the American Rescue Act to combat fraud in small-
business relief programs and how we can continue to work together
to ensure that our Nation’s response to the pandemic is effective,
efficient, and equitable.
In the ranking member’s absence, I now yield to Mr. Jordan for
any public opening statement he may wish to make.
Mr. Jordan.
Mr. JORDAN. Thank you, Mr. Chairman. Thanks to you and to
our witnesses for appearing virtually today.
[Inaudible] we continue to hold only virtual hearings in this sub-
committee, even though four members of the majority celebrated
the $1.9 trillion spending bill in person at the White House just
two weeks ago.
I want to also welcome our new Republican member to the select
committee, Representative Mariannette Miller-Meeks from the
great state of Iowa. We appreciate Mrs. Meeks’ hard work on be-
half of her constituents, especially as Speaker Pelosi and the Demo-
crats are currently challenging Dr. Miller-Meeks’ election.
Mrs. Miller-Meeks won the general, she won the recount, and the
state of Iowa certified her results, but her opponent skipped the
courts and ran straight to the Speaker and congressional Demo-
crats to try to overturn the will of the people in the state of Iowa.
It’s wrong, what they’re doing. It’s a dangerous game that the
Democrats are playing with this election.
Adding Dr. Miller-Meeks, we now have our second medical doctor
on the select subcommittee, which I think is a good thing.
Today we’re here to talk about fraud. Anyone that commits fraud
and steals taxpayer dollars from hardworking Americans should be
punished to the fullest extent of the law, and the money should be
recouped for the taxpayers.
The Trump administration harnessed the full force of the Federal
Government to find and prosecute fraud, particularly in the PPP
program. In fact, the Trump Department of Justice stood up a PPP
fraud task force, which brought us its first fraud case within one
month of the program starting. This enforcement pace is un-
matched in the history of the Department’s white-collar prosecution
efforts.
So far, the FBI has opened 537 fraud cases, arrested 111 people,
and began the process of recouping millions of stolen dollars. This
is good. This is how the justice system is supposed to work.
The Democrats will claim that the PPP program is rife with
fraud, when, in fact, it is just the opposite. Using the Democrats’
own statistics, over 99 percent of PPP money got to the correct re-
cipient and has been used appropriately. This is a better rate than
the private insurance—or, excuse me, private mortgage market.
The Democrats will also ignore the massive successes of the pro-
gram. PPP supported 51 million jobs, over 80 percent of America’s
small businesses, and saved almost 19 million jobs from permanent
loss. That is truly unprecedented.
4
Of course, it can’t go on forever. It’s time to reopen our states,
even the blue states. We must get people back to work and get kids
back to school. Just this week, the Federal Reserve Board Governor
in charge of community banking said the economy must reopen and
lockdowns must be lifted.
Florida reopened and was vilified. New York and Governor
Cuomo shut down and were praised. The facts are clear now,
though: Florida is successful, and Governor Cuomo is under crimi-
nal investigation. Florida protected seniors, while Governor Cuomo
sent the virus to seniors. Florida’s death rate among seniors is 50
percent lower than that of the state of New York’s. Of course, in-
stead of investigating Cuomo’s actions, Democrats rewarded him
with a $13 billion bailout.
Contrary to the chairman’s own statements, this subcommittee
remains focused on politics. It is past time we hold in-person hear-
ings on getting kids back to school, getting vaccines to rural com-
munities, on Cuomo’s nursing-home disaster, and the health crisis
at our southern border. Instead, this subcommittee is focused on
attempting to tear down a bipartisan program that kept the econ-
omy afloat during the early and toughest days of the pandemic.
We all agree fraud is bad, but we should all agree that a 99-per-
cent success record is unprecedented, and we have President
Trump to thank for that.
Mr. Chairman, thank you, and I yield back and look forward to
hearing from our witnesses.
Chairman CLYBURN. Thank you very much, Mr. Jordan.
The witnesses will now be unmuted so we can swear them in.
Please raise your right hands.
Do you swear or affirm that the testimony you are about to give
is the truth, the whole truth, and nothing but the truth, so help
you God?
Mr. HOROWITZ. I do.
Mr. WARE. I do.
Mr. SHEAR. I do.
Chairman CLYBURN. Let the record show that the witnesses an-
swered in the affirmative.
Thank you. Without objection, your written statements will be
made part of the record.
With that, Mr. Ware, you are now recognized to provide your tes-
timony.
STATEMENT OF THE HON. HANNIBAL ‘‘MIKE’’ WARE,
INSPECTOR GENERAL, SMALL BUSINESS ADMINISTRATION
Mr. WARE. Thank you very much.
Chairman Clyburn, Ranking Member Scalise, and distinguished
members of the subcommittee, thank you for inviting me to speak
with you today and for your continued support of my office.
I come before you today in the midst of a historic challenge to
the Nation, a challenge for which the SBA has a pivotal and un-
precedented role in stabilizing the U.S. economy. The men and
women of my office have been working diligently to provide over-
sight of SBA’s pandemic response. I am always proud to represent
them publicly and to speak to you about our important work. We
share in the Nation’s grief for those lost to the pandemic and are
5
keenly aware that nothing short of the public’s trust is at stake in
our oversight efforts.
SBA is managing over a trillion dollars in lending authority
through the PPP and the EIDL programs, with the most recent
tranche of lending authority being contained within the American
Rescue Plan Act. As with my office, the men and women of SBA
have been running at a sprinter’s pace; however, the race we are
running has been more of a marathon. Nonetheless, we have
sought to have an aggressive and focused approach to our oversight
to ensure our work is properly calibrated and relevant.
The Congress recognized that the oversight required of the pan-
demic response was outsized for existing oversight resources across
government, to include my office, and we have received three sup-
plemental appropriations to increase our oversight capacity.
Initially, we focused on the recruitment of a mix of auditors, ana-
lysts, and criminal investigators to provide immediate and timely
insight into those programs.
In December, we received funding directed to oversight of the
EIDL Program that seeks to address the rampant fraud identified
by my office. These funds are being used to increase our investiga-
tive staff and enhance our data analytics capacity.
We received our most recent supplemental increase a couple of
weeks ago, and those funds will be used to further increase our in-
vestigative capacity to combat fraud. Fraud investigations will be
a decade-long effort due to the performance of these loans within
SBA’s portfolios and the statute of limitations for fraud.
Our office will have approximately 40 percent more staff on
board after our hiring surges for EIDL and ARPA conclude than we
had before March 2020.
Even still, we recognized from the beginning that the level of
oversight required will take a whole-of-government approach. We
partnered with law enforcement entities across government and
joined multiple task forces to multiply our reach. Since the outset
of the pandemic response, our strategy has been to prevent and
deter fraud, waste, and abuse and to identify and combat instances
of the same.
The first step was the issuance of three reports sharing risks and
lessons learned from our past oversight work, principally, that
most closely related, which is of the American Recovery and Rein-
vestment Act of 2009. These reports as well as a fraud and scam
alert were published before SBA made the first PPP and EIDL
loans.
Recognizing the speed at which lending was occurring in both
these programs, we developed innovative report products to provide
timely insight to our stakeholders. Our first flash report was pub-
lished just a little over 30 days of PPP’s implementation. Our next
report would come out in July, which found significant deficiencies
in internal controls and rampant fraud within the EIDL Program.
We have issued 11 reports on SBA’s PPP and EIDL programs to
date, with two more near issuance.
While our audit work was ongoing, our criminal investigators
were aggressively pursuing fraud. On May 5, just a little over a
month after the first PPP loans, the first-in-the-Nation fraud
charges were announced against an individual fraudulently seeking
6
a PPP loan. We have since initiated over 420 investigations, and,
together with our law enforcement partners, the Department of
Justice has announced over 100 charges against individuals com-
mitting fraud against the PPP and EIDL programs.
Now, if I may, I would like to clarify a number I mentioned at
a hearing yesterday before the Senate. Together with our law en-
forcement partners and with SBA and with the financial institu-
tions, we have realized approximately $2.5 billion in moneys being
returned and seized that were associated with fraud and suspicious
activities.
We have received nearly 150,000 complaints on our hotline since
March of last year. This is over 150 years’ worth of complaints
when compared to prior years. We have sought and obtained assist-
ance from the PRAC to catalogue complaints being received outside
of our online complaint submission system. As we continue to ad-
dress our processing backlog, we will employ data analytics to fur-
ther triage and guide these efforts.
I look forward to discussing our most recent published work sur-
rounding implementation of PPP and EIDL, but I must tell you
that data analytics has made a difference in our office’s ability to
keep our stakeholders currently and fully informed in a timely
manner.
Thank you for the opportunity to speak to you today, and I am
happy to answer any questions you may have of me.
Chairman CLYBURN. Thank you very much, Mr. Ware. That was
perfect timing.
The chair now recognizes Mr. Horowitz.
STATEMENT OF THE HON. MICHAEL E. HOROWITZ, PANDEMIC
RESPONSE ACCOUNTABILITY COMMITTEE, INSPECTOR GEN-
ERAL, DEPARTMENT OF JUSTICE
Mr. HOROWITZ. Thank you, Chairman Clyburn, Ranking Member
Scalise, members of the subcommittee. Appreciate you inviting me
to testify at today’s important hearing. And we appreciate the
strong, bipartisan support for our work from Congress.
The Pandemic Response Accountability Committee, or PRAC,
was created by Congress one year ago and is comprised of 22 Fed-
eral inspectors general working collaboratively to oversee the more
than $5 trillion in pandemic relief emergency spending.
The PRAC’s mission is to promote transparency and to work with
the IGs to ensure that taxpayer money is used effectively and effi-
ciently to address pandemic-related public health and economic
needs. Let me briefly highlight some of our independent oversight
work to date.
First, we’ve advanced transparency of the Federal Government’s
pandemic-related spending through the launch of our robust
website, pandemicoversight.gov. The website makes publicly avail-
able a wide range of spending data and is currently the only place
where certain spending data is available to the public. The website
also contains accountability information, including information
about OIG audits, inspections, and investigations, as well as GAO
reports.
Second, we’ve issued crosscutting reports on issues that tran-
scend Federal agencies. For example, in February 2021, the PRAC
7
issued a ‘‘Top Challenges in Pandemic Relief and Response’’ report
highlighting management challenges facing Federal agencies dur-
ing the pandemic, and we recently issued a report on COVID–19
testing.
Third, the PRAC has played an important role facilitating coordi-
nation and collaboration among IGs and other oversight partners,
including GAO and state and local auditors.
Fourth, the PRAC is using the resources and tools Congress gave
us to enhance shared services across the IG community. For exam-
ple, we have, among other things, provided resources to PRAC
members to combat fraud in pandemic relief programs, including
with regard to the PPP and EIDL programs.
Fifth, the IG community is actively engaged in combating fraud
and criminal behavior. To date, the community has led or partici-
pated in investigations leading to over 240 indictments or com-
plaints, 190 arrests, and 36 convictions. We’re looking to use all of
the tools available to us—criminal prosecution, civil enforcement,
and suspension and debarment—to ensure that those who engage
in fraud and wrongdoing are held accountable.
Having highlighted some of our work to date, let me briefly dis-
cuss some of the initiatives we have ongoing.
First, in order to fulfill the PRAC’s mission, we need better tech-
nological tools for IGs and our oversight partners, including the use
of advanced data analytics. To that end, the PRAC is developing
the Pandemic Analytics Center of Excellence, or PACE, to conduct
data analysis, to provide fraud-fighting tools to the IG community,
to enable the sharing of data analytics and leading practices across
our community, and to broadly assist the IG community’s audit and
investigative work.
Second, the PRAC is continuing to develop crosscutting oversight
projects. We have three ongoing currently, and we’re developing
more, and you will see more from us in the months ahead.
Third, the PRAC has established a fraud task force to serve as
a deconfliction and coordination tool to assist IGs in their inves-
tigative efforts, to serve as a coordinating body with the Depart-
ment of Justice and other law enforcement agencies, and to allow
IGs to tap into investigative resources from across the IG commu-
nity.
Fourth, we’re working with OMB and Federal agencies to ad-
dress data gaps that we have identified and reported on. Having
necessary data is critical to advancing transparency and account-
ability and to be able to assess programmatic impacts.
Fifth and finally, we’re looking to use the Program Fraud Civil
Remedies Act, or PFCRA, to fight pandemic-related relief. How-
ever, our ability to do so is limited and would be greatly enhanced
if certain amendments were made to PFCRA. We look forward to
working with Congress to enact those important changes.
Thank you again for the strong, bipartisan support for our work.
I would be pleased to answer any questions the committee may
have.
Chairman CLYBURN. Thank you very much, Mr. Horowitz. That’s
even more perfect with your timing. Thank you very much.
The chair now recognizes Mr. Shear.
And let me see how perfect you can be.
8
STATEMENT OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL
MARKETS AND COMMUNITY INVESTMENT, GOVERNMENT
ACCOUNTABILITY OFFICE
Mr. SHEAR. I’ll try my best.
Chairman Clyburn, Ranking Member Scalise, and members of
the subcommittee, I am pleased to be here today to discuss our
work on SBA’s PPP and EIDL programs.
SBA has made or guaranteed more than 17 million loans and
grants, providing about $910 billion to help small businesses ad-
versely affected by COVID–19. Over time, we have found the fol-
lowing:
First, as far as PPP oversight, given the immediate need for PPP
loans, SBA implemented limited safeguards for approving those
loans. Because of ongoing oversight—because ongoing oversight is
crucial, we recommended in June 2020 that SBA develop plans to
assess PPP risk. SBA has since developed plans to review PPP
loans and has recently provided us detailed information about its
oversight process.
Second, analysis of EIDL data. We reported in January 2021 that
SBA had provided about 5,000 advances totaling about $26 billion
and approved at least 3,000 loans totaling about $156 million for
potentially ineligible businesses. Therefore, we recommended that
SBA conduct portfolio-level analysis to detect potentially ineligible
applications.
Third, assessment of fraud risk. Although SBA has taken some
steps to mitigate fraud risk to PPP and EIDL, such as conducting
PPP loan reviews and implementing new EIDL controls, the agency
has not yet conducted a formal fraud risk assessment for either
program.
Suspicious activity reports. From April through October 2020, fi-
nancial institutions filed more than 21,000 suspicious activity re-
ports related to PPP. From May through October 2020, financial in-
stitutions filed more than 20,000 such reports related to EIDL.
Department of Justice charges. From May 2020 through Feb-
ruary 2021, the Department of Justice publicly announced charges
in over 100 fraud-related cases associated with PPP loans and 30
fraud-related cases associated with EIDL loans. I’ll refer to, I’m
glad to be here with SBA’s Inspector General. And I’ll just say that,
in October 2020, he reported that there were strong indicators of
widespread potential fraud in the EIDL Program.
The financial statement audit. In December 2020, SBA’s inde-
pendent financial statement auditor issued a disclaimer of opinion
on SBA’s Fiscal Year 2020 consolidated financial statements be-
cause SBA could not provide adequate documentation to support a
significant number of transactions and account balances related to
PPP and EIDL.
Since June 2020, we have reported on the potential for fraud in
both programs. Further, as we have reported multiple times, SBA’s
failure to provide us with data and documentation on PPP and
EIDL in a timely manner has impeded efforts to ensure trans-
parency and accountability for the programs. This includes delays
in our obtaining key information from SBA, such as detailed over-
sight plans and documentation for estimating improper payments.
9
Results of SBA’s most recent financial statement audit are con-
sistent with our findings. As a result, we included these programs
as a new area on our High Risk List in March 2021 because of
their potential for fraud, significant program integrity risk, and
need for much-improved program management and better over-
sight.
According to Federal internal control standards and our fraud-
risk framework, managers in executive-branch agencies are respon-
sible for managing fraud risk and implementing practices for miti-
gating those risks. When fraud risk can be identified and miti-
gated, fraud may be less likely to occur. Risk management is a for-
mal and disciplined practice for addressing risk and reducing it to
an acceptable level.
In addition to our previous recommendations, we anticipate mak-
ing four recommendations on fraud risk in PPP and EIDL and one
on EIDL oversight in our March 2021 report, to be issued next
week, on the Federal COVID–19 response. SBA agreed with the
recommendations, stating it would implement fraud-risk assess-
ments for both programs and an oversight plan for EIDL.
This concludes my statement. I would be glad to answer any
questions.
Chairman CLYBURN. Thank you very much, Mr. Shear. You did
it. Thank you.
Mr. SHEAR. Thank you.
Chairman CLYBURN. Let me thank all of our witnesses here
today.
Now, each member will have five minutes for questions. And,
with that, I will now recognize myself for my five minutes.
Now, as I stated earlier, the Trump administration’s failure to
implement robust fraud controls in the EIDL Program and PPP
has led to nearly $84 billion in potentially fraudulent loans.
We were making all kinds of recommendations as to what steps
need to be taken, but, instead of taking these steps, the Trump ad-
ministration—and I’m quoting the Inspector General here—‘‘low-
ered the guardrails’’ on the EIDL Program, leading to $79 billion
in potentially fraudulent loans in the program alone.
Mr. Ware, your report found that SBA removed or weakened ex-
isting controls in EIDL last year. Would you please describe how
SBA’s actions contributed to an increased risk of fraud?
Mr. WARE. Thank you for that question.
Well, initially, we knew—we had a feeling that this would hap-
pen. Or, more than a feeling, we knew this would happen based on
our prior experience and the prior reports that we had done. And
that’s why we notified SBA up front that, ‘‘Hey, this is the time
where we have to strengthen our controls.’’
What happened was, when they started doing the batch proc-
essing, a lot of the controls that should’ve gone in place up front,
especially to address very, very early indicators that fraud was in
place—I mean, almost immediately the banks were contacting us.
We had over 5,000 contacts from banks almost off the bat. And
that’s where we sat down with the executives here at SBA to say,
‘‘We have a problem.’’ And that’s when we started to see what was
going on with the reduced controls.
10
So, definitely, any proper control environment—any type of fraud
mitigation has to begin with an internal control environment. And
that was reduced up front to expedite the funds going out, which—
we understood the need for the funds going out, but we were re-
quiring that SBA strike a balance, a delicate balance, between the
two. Plus, we thought the things we were asking to be done, if im-
plemented correctly, would not slow the program down at all.
Chairman CLYBURN. Thank you.
Now, what recommendations did you offer SBA? And please
share with us what the administration’s response was.
Mr. WARE. So, we made quite a bit of recommendations, and they
had to do with—I could probably—some specifics off the top of my
head:
We wanted them to assess vulnerabilities—right?—for the pur-
pose of strengthening and implementing internal controls to ad-
dress the notices of potential fraud that we had.
We wanted them to create a process or a method for lenders to
be able to report suspected fraud to ODA and for how to recover
the funds. That was not in place.
We wanted them to review all the loans that had—especially the
ones that had the bank account number changed from what was
shown on the original application to determine if those changes
were indeed legitimate or fraudulent.
And then we wanted their assistance in recovering the funds and
de-obligating the funds.
We just needed them to completely strengthen the internal con-
trol environment. And we offered, I mean, dozens of recommenda-
tions for how to do that.
So, initially—well, it depends on what we’re talking about. For
the Paycheck Protection Program, the Office of Cap Access, they
were on top of it, in terms of putting in these controls and getting
ahead of things, which is why, to date, we’ve found less fraud, or
less potential for fraud, than we have in the EIDL Program. Be-
cause with the EIDL Program, although some of the changes were
made up front, many were not, mainly because it wasn’t taken as
seriously.
Chairman CLYBURN. Well, thank you.
My time has almost expired. I’m going to yield now to Mr. Jor-
dan and let him have 17 seconds of my time.
Mr. Jordan?
Mr. JORDAN. Thank you, Mr. Chairman.
Mr. Horowitz, are Democrats the only people allowed to object to
election results?
Mr. HOROWITZ. I’m not sure how to answer that, Congressman.
Mr. JORDAN. Well, I mean, you’re a—I’ve worked with you nu-
merous times. You do great work. You’re a lawyer. You’re the In-
spector General at the Justice Department. You’re a guy who I
know cares deeply about fairness.
And I’m just wondering—you know, Democrats criticized Repub-
licans for objecting to the Presidential electors being counted on
January 6, 2021, but they objected to every Republican Presidential
winner this century.
In fact, on January 6, Mr. Horowitz, the Democrat chair of the
Rules Committee objected to the counting of Alabama. President
11
Trump won—January 6, 2017, they objected—a state President
Trump won by 30 points. A member of this committee, on January
6, 2017, the lead impeachment manager, in fact, objected to the
state of Florida. And on January 6, 2017, the Democrat chair of the
Financial Services Committee objected to the state of Wyoming—
Wyoming, a state President Trump won by 40 points.
And now they’re trying to kick off the newest member of this
committee—trying to kick—the newest member of this committee
they’re trying to kick out of Congress.
And so, I’m just wondering, are they the only ones allowed to ob-
ject, or can Republicans object as well?
Mr. HOROWITZ. Well, Congressman, I’m sure anybody of what-
ever political background they want can make an objection.
I’ll just say, I have enough oversight issues at the Justice De-
partment. I, fortunately, don’t have oversight over the election ap-
paratus. So, I’ll stick to what I’m doing there as well as with the
PRAC.
Mr. JORDAN. Yes. Well, I appreciate the work you do. And I just
find what the Democrats are attempting to do to one of our newest
colleagues, who is now a member of this select subcommittee, I just
find this unbelievable, particularly in light of the statements they
have made over the last several months. And so, we just wanted
to raise that point.
I do appreciate the work that you do and you have done for our
government over the last several years, and appreciate the work
you do for all the Inspector Generals in our government.
With that, Mr. Chairman, I appreciate you yielding me the 17
seconds, but I don’t need it. I have to run to another engagement.
So, I will yield back the balance of my time.
Chairman CLYBURN. Thank you very much for yielding back the
17 seconds. I’ll take that to remind my friend that we might be fol-
lowing suit. If my memory serves, he cast a vote against our new
President.
Thank you.
Mr. JORDAN. No. The point is, Mr. Chairman, let’s be consistent.
If you’re going to criticize Republicans for exercising our constitu-
tional duty and doing—and objecting to the unconstitutional way
some states change their election law, let’s be consistent with what
happened on January 6, 2017, and what the Democrats are at-
tempting to do to the newest member, Dr. Miller-Meeks, Lieuten-
ant Colonel Miller-Meeks, the newest member of this committee.
That’s my point.
Chairman CLYBURN. I understand your point, and I accept serv-
ice.
With that, the chair now recognizes for five minutes Ms. Waters.
Ms. WATERS. Thank you very much, Mr. Chairman.
And I’m so sorry that Mr. Jordan, you know, takes up time on
this committee, where you’re dealing with, you know, substantive
matters, particularly relating to fraudulency in the PPP program,
with election matters that have no business in this committee.
And so——
Mr. JORDAN. Mrs. Miller-Meeks thinks it’s substantive, I will tell
you that, Madam Chair. Mrs. Miller-Meeks thinks it’s substantive.
12
Ms. WATERS. Reclaiming my time, I’m not talking to you. I’m ad-
dressing the chair.
Mr. Chairman, I’m going to go on with my question. And I’m
hopeful that we can stay on point on the issues that you have orga-
nized thus far today in this hearing.
I believe the tradeoff between speed and program integrity is a
false one. Our government should be able to help Americans quick-
ly without losing billions to fraud.
Mr. Horowitz, in what ways could the Trump administration
have instituted stronger controls in PPP while still issuing loans
quickly and efficiently?
Mr. HOROWITZ. Congresswoman, I think several of those points—
several of those items have been identified by IG Ware. I think
there could have been efforts beyond, in some of the programs—
and I’ll let IG Ware speak to the PPP specifically—but, in some of
the programs, simply relying, for example, on self-certification.
That’s an issue that we’ve identified as IGs—IG Ware has, others
have, GAO has.
There were additional steps that could have been undertaken,
that recommendations were made to undertake, that would not
have significantly slowed down, in our view in the oversight com-
munity, the delivery of funds to the public.
Ms. WATERS. I’m also concerned that the sheer number of poten-
tially fraudulent PPP transactions presents an enforcement chal-
lenge. As highlighted in today’s staff memo, of the 7.9 million PPP
loans issued to date, only 242 individuals have been criminally
charged. And, of the nearly $84 billion of potentially fraudulent
transactions in PPP and EIDL, only $626 million, less than one
percent, has been recovered.
Mr. Horowitz, as a former fraud prosecutor, can you describe
some of the challenges with addressing fraud on this scale through
criminal prosecutions?
Mr. HOROWITZ. It’s an important question, Congresswoman, and
you’re exactly right. One of the substantial challenges is, with hun-
dreds of billions and trillions of dollars out there and the scope and
level of the fraud, it’s going to take us months and years as we pur-
sue it.
What we’re trying to do is leverage, for example, data analytics.
We very much appreciate the funding that was given to us that the
chairman mentioned that will allow us to undertake that effort, be-
cause it will help us focus our efforts and find the fraud more spe-
cifically. That’s what data analytics helps us do.
We’ve also set up a fraud task force and are working to help IGs
like IG Ware and others across the community by leveraging the
tools and looking at this, Congresswoman, as a whole-of-govern-
ment approach by the IGs so that we’re leveraging resources.
Ms. WATERS. Thank you very much.
I am interested in learning whether or not there was organized
crime involved in this, where operations were set up supposedly to
help many of the PPP applicants, who really didn’t know govern-
ment, had not understood government very well, had not been in-
volved in the past, but they went to and were directed to an orga-
nized effort that was turning out these applications for
unsuspecting individuals.
13
Have you detected any of that, Mr. Horowitz?
Mr. HOROWITZ. You know what? I’m going to ask on PPP specifi-
cally if IG Ware wants to jump in on that, because——
Mr. WARE. Yes.
Mr. HOROWITZ [continuing]. His agents have been on top of that
issue.
Mr. WARE. If it’s OK.
I am very aware of that. That was something we found very, very
early on, that that wasn’t the case. In the complaints we were get-
ting, particularly from the banks early on, from the onset, it was
that, when they asked a followup question relative to the money,
the people had no idea, they never had a business, they had noth-
ing like that. They said that they were contacted by people who
they didn’t know, said the government was giving out free money.
We also found this on the dark web, in terms of free money, free
government money to be had, where they would contact people, tell
them the government is giving out this money, and, for a percent-
age of the money, they could have the money placed in their ac-
counts, the persons who were contacted, and then they’ll get the
money and then pay the organizers behind the scheme.
So, we found that that was a regular occurrence.
Ms. WATERS. Well, my time really is up, but I just want to say,
there are a lot of the small-business people who could end up, you
know, being accused of fraud. I want the big boys. I want the orga-
nized efforts. I want those who have misused this program and
misled these small-business people, rather than going out and lock-
ing up and indicting a whole bunch of little, little business people
who just didn’t know. So, I’m hopeful that that avenue will be, you
know, approached and dealt with.
I yield back.
Chairman CLYBURN. Thank you very much, Chair Waters.
The chair now recognizes for five minutes Dr. Green.
Mr. GREEN. Thank you, Chairman Clyburn and Ranking Member
Scalise. Can you guys hear my OK?
Chairman CLYBURN. Yes.
Mr. GREEN. I want to thank our witnesses for being here today.
You know, one year ago this week, as the pandemic struck our
Nation, Congress passed and President Trump signed into law the
CARES Act. At the time, we knew that the economic danger we
were facing threatened to overwhelm small businesses across the
Nation. Unemployment claims reached record levels——
[Audio interruption.]
Mr. GREEN. Sorry. I’m in three different committee meetings at
the same time here.
The centerpiece of the CARES Act was the popular PPP program
that gave small businesses access to forgivable loans to cover pay-
roll expenses and saved millions of jobs. The program was a lifeline
to small businesses hit hardest by strict lockdown orders in many
cities and states.
According to the U.S. Census Bureau, nearly 75 percent of all
small businesses received PPP loans. This was not a bailout of spe-
cial interests; it was a-broad based effort that played a critical role
in saving tens of millions of American jobs.
14
The PPP included significant mechanisms to protect against
fraud and ensure taxpayer money went to the intended recipients.
Leaders had to abide by existing Federal know-your-customer, anti-
money-laundering, and bank-secrecy laws.
Now, any program swiftly arranged to spend hundreds of billions
of dollars will inevitably incur fraud. That’s just a fact. But the
Trump administration made serious governmentwide efforts to in-
vestigate and prosecute COVID–19-related fraud starting from day
one. The DOJ Criminal Division immediately set up a team specifi-
cally to root out and prosecute PPP fraud. By September, the DOJ
announced that it had initiated multiple separate PPP fraud cases.
And fraud can happen in many ways, such as false information
on an application, misuse of funds for personal use. And those who
take advantage of a national crisis for their own corrupt ends
should be held accountable. However, according to calculations
from the majority on this committee, the fraud rate within PPP
was lower than the fraud in several other programs, such as the
Pandemic Unemployment Assistance Program and the EIDL Pro-
gram.
By every possible measure, the PPP was a success that saved un-
told millions of jobs. But these mechanisms were not in place to
capture two of the most outrageous frauds from this past year.
What happens when a Governor deliberately misleads the public
and covers up the number of COVID-related nursing home deaths?
The Attorney General of New York found that Governor Cuomo’s
administration undercounted nursing home deaths by 50 percent.
And for months now, my colleagues and I have been calling for an
investigation of Governor Cuomo and his false statements and poli-
cies, but silence from the majority.
Or take another example. What of the fraud perpetrated on the
American taxpayer under the false pretenses of COVID stimulus?
Democrat leadership larded up a bill with handouts for special in-
terests and their political cronies. Blue-state Governors that
crushed their economies with lockdowns get rewarded with money
to bail out years of mismanagement. This includes over $100 billion
for schools that are closed, most of which doesn’t even get paid in
the near term.
Ninety percent of the $1.9 trillion spending spree has nothing to
do with public health. Instead, congressional Democrats viewed
this as a—and I quote—‘‘tremendous opportunity,’’ end quote, to
push their political agenda in the Trojan horse of a misnamed
American Rescue Plan. But it’s the taxpayers who will be footing
the bill for generations to come. That’s fraud by any definition.
Thank you, Mr. Chairman, and I yield.
[Audio interruption.]
Chairman CLYBURN [continuing]. Five minutes.
Bill? Bill Foster? You are now recognized for five minutes. You
need to unmute, I think.
Mr. FOSTER. Oh, my apologies, Mr. Chairman. I was unaware of
the order we’re operating under. I’m happy to proceed.
Chairman CLYBURN. Thank you.
Mr. FOSTER. In its January 2021 High Risk List, the GAO made
recommendations to the Small Business Administration to provide
greater oversight of the PPP and EIDL programs to reduce fraud
15
in both programs, including using data analytics to identify poten-
tially ineligible businesses.
And I was encouraged to hear Mr. Ware cite the use of data ana-
lytics as one of the force multipliers that allowed the SBA and its
OIG to more effectively identify fraud.
Mr. Ware, can you go into some more detail about how data ana-
lytics have been used to detect fraud in the PPP and EIDL pro-
grams and what future plans are?
Mr. WARE. Yes. Thank you very much.
With access to the data warehouse that SBA has, particularly on
the PPP side—because we are just working out a more direct rela-
tionship within EIDL—we were able to overlay a lot of the data
coming in. For example, working with the Do Not Pay list with the
Department of Treasury, working with the Department of Treasury
on that, we were able to see that quite a bit of money went out
to folks who should never have gotten paid.
Using data analytics, we were also able to capture quite a bit of
duplicate payments as well.
And the speed by which you see law enforcement moving right
now is unprecedented, as was stated earlier by—I can’t remember
who. But the reason it’s allowed to move as quickly as it is because
of access to data, transparent data, and the ability of data analysts
and data scientists within our office and within the community to
be able to quickly overlay information and get it in the hands of
criminal investigators.
Mr. FOSTER. Yes.
Well, I’m particularly concerned about identity theft and syn-
thetic identity fraud in the PPP and EIDL programs as well as
other areas in our government. You know, fraudsters may improp-
erly use the personal information of hardworking Americans, such
as names, addresses, Social Security numbers, to fraudulently
apply for pandemic relief loans.
And the situation is compounded by the lack of a coherent ap-
proach to identity in this country, so that, for example, the list of
bad actors who may be known to Treasury or to financial regu-
lators or to the individual states may not be automatically known
to the SBA.
And, last Congress, I sponsored a bill called the Improving Dig-
ital Identity Act of 2020, which would modernize systems that pro-
vide driver’s licenses and other identity credentials in our country
and upgrade digital identity verification tools in citizens’ inter-
actions with government.
Mr. Ware, has the SBA OIG found identity theft or identity fraud
to be a problem in the PPP and EIDL programs? And what are the
common forms of that fraud that you see?
Mr. WARE. Right. So, we have found—identity theft is probably
the most common underlying cause of the fraud that we’re finding,
particularly in the EIDL Program. As a matter of fact, it’s really
showing up itself in PPP now with the inclusion of Schedule C’s.
This is a major issue for us.
And the way that is happening is, of course they have many of
the romance-type schemes, many of the social media schemes by
which people gain access to other people’s identity. Most of it came
to us when people were—victims received letters from SBA saying,
16
‘‘There’s a deferment on your loan,’’ when they had never, ever ap-
plied for any type of loan. So, we’ve got quite a bit of that.
We’re up to, what, well over a million applications flagged for
identity theft right now in these programs.
Mr. FOSTER. Wow.
And what are the better identity verification tools that you think
would make a real difference in this?
Mr. WARE. Well, it’s simply verifying that the person that you’re
giving the money to actually exists. I honestly don’t believe it’s that
much of a lift, but it is. I guess it could be a little bit more time-
consuming.
Mr. FOSTER. Yes.
I’m struck by how other countries that have more rational sys-
tems to identify their citizens have not had the same kind of prob-
lem with, you know, fraudulent—everything from stimulus checks
to other payments.
And so, any conclusions that you come up with as to what tools
would really make your life easier here would be very appreciated.
Thank you. I’m basically out of time, so I’ll yield back.
Chairman CLYBURN. Thank you very much, Mr. Foster, for yield-
ing back.
The chair now recognizes for five minutes Mrs. Miller-Meeks.
Mrs. MILLER-MEEKS. Thank you very much, Chair Clyburn.
And thank you to our witnesses speaking about the very impor-
tant programs that were initiated in response to this pandemic.
Mr. Horowitz, your oversight testimony had a link to it regarding
COVID–19 testing. And this was COVID–19 testing that was done
at Federal agencies, so I realize that it’s limited. And it was from
February to August 2020. And it indicates in that link that 10.7
million tests were completed at Federal healthcare agencies at a
cost of $659.5 million. And that was underestimate because it
doesn’t include the VA.
Would you have an idea of how much has been—how many tests
or how much has been spent now on testing at those agencies or
in general for all testing in the U.S.?
Mr. HOROWITZ. Congresswoman, I don’t have that with me. I can
certainly followup with my colleague at HHS OIG and see what the
latest data is. We cut it off at that time so that we could obviously
move forward and start doing analysis.
Mrs. MILLER-MEEKS. The reason for my question is, as a physi-
cian and a former director of the Iowa Department of Public
Health, I closely monitor what’s happening with the number of
cases, the number of hospitalizations, the number of deaths, the
number of those who recovered who would have natural immunity,
and then the vaccinations, at least here in Iowa. And given every-
thing that I have seen since the vaccination was first approved in
November, which is remarkable—and then now we have a total of
three vaccinations—I’ve seen this decline very rapidly and expo-
nentially and feel that we’re very close to herd immunity.
In this most recent American Rescue Plan for COVID–19, there
is allocated $47.8 billion in testing and another $7 billion to go to
community health centers for testing. And it seems to me that with
the decline that we’re having that that amount of funding may be
17
excessive. Do you have any, you know, suggestion or comment on
that?
Mr. HOROWITZ. So, I wouldn’t be in a position, necessarily, to
comment on how much money should or shouldn’t have gone. I’ll
leave it to other policymakers to decide that.
I will say that what we’ve found and I’ve seen at DOJ, for exam-
ple—because I have oversight over the Federal prison system. And
what we found a year ago, in the first several months of this, was,
the absence of testing impaired the ability of the BOP to identify
asymptomatic inmates so that they could segregate those individ-
uals rather than simply wait for them to develop symptoms.
And so, we certainly think there will continue to need to be test-
ing available, much like there is for other diseases——
Mrs. MILLER-MEEKS. And I think there’s more recent data that
shows that there is not the transmission of asymptomatic that we
originally thought there was.
I’m hoping that some of this money can be used in accordance
with a bill that I introduced, H.R. 1897, that would do COVID–19
testing for those migrants coming across our borders, which is not
done now.
So, thank so much.
Mr. Ware, I’m going to direct this to you. The PPP program to
the individuals, both when I was a state senator helping small
businesses get PPP and then those I’ve talked to, has been an ex-
tremely successful program.
To be eligible, an applicant had to have not more than 500 em-
ployees. And because of large chains receiving loans designated for
small businesses, the SBA had instituted an affiliation rule. If the
parent exerted control or had the power to exert control over the
affiliates, the entirety of their employees should be counted toward
that limit.
So, is having affiliates using the same bylaws as the parent ‘‘ex-
erting control’’?
Mr. WARE. We have not taken a look as yet into how that works
out and if it’s the same or not, but——
Mrs. MILLER-MEEKS. Or——
Mr. WARE [continuing]. We did—sorry. Go ahead.
Mrs. MILLER-MEEKS. Are having affiliates apply for accreditation
from the parent company ‘‘exerting control,’’ the parent company
imposing performance policies on the affiliate ‘‘exerting control,’’ or
the parent mandating certain services be performed at the affiliate,
are those things ‘‘exerting control’’?
Mr. WARE. Without the work to actually dig into it, I’m unable
to answer the question at this time.
Mrs. MILLER-MEEKS. Well, Planned Parenthood across the Na-
tion had 16,000 employees nationwide, but they got more than $80
million in PPP loans. Even their own lobbyist admitted that the
rules made their affiliates ineligible when they said the CARES Act
money had broad discretion to exclude Planned Parenthood.
Has Planned Parenthood returned any of that money?
Mr. WARE. We have not taken a look at Planned Parenthood spe-
cifically. We have a series of reviews in the queue dealing with eli-
gibility across these programs.
18
Mrs. MILLER-MEEKS. Thank you. That was going to be my next
question, if there was a reviewing of the affiliation status. Thank
you so much for your testimony.
Thank you, Chair Clyburn. I yield back my time.
Mr. WARE. Thank you.
Chairman CLYBURN. Thank you very much for yielding back.
The chair now recognizes Mr. Raskin for five minutes.
Mr. RASKIN. Mr. Chairman, thank you for calling this very im-
portant hearing about more than $80 billion lost in fraud and rip-
offs of the taxpayers within these programs. And some of our col-
leagues prefer to minimize the damage, saying, oh, well, it’s less
than one percent or two percent.
Mr. Horowitz, let me start with you. Is that the right way to look
at it, to say, well, it’s a small percentage of an overall amount of
money, or do we look at and say, that’s $80 billion that could’ve
gone to small businesses that deserved it and people who needed
the money?
Mr. HOROWITZ. Well, I think the way we look at it from the ac-
countability community is, could there have been steps taken that
would have reduced the fraud to a greater degree, or the risks to
a greater degree? And, as you’ve heard, GAO and the IG at SBA
made important recommendations to try and do that. So that’s
really the issue that we look at.
Mr. RASKIN. And those were ignored by the Trump administra-
tion. So, I’m glad that we’ve got a President in who is serious about
cracking down on fraud and making the government actually work
for the people.
I’ve had a number of constituents reach out to me for help after
their identities were just, out of the blue, fraudulently used to ob-
tain SBA loans for some of these criminals. One of my constituents
is currently getting payment notices from the SBA on a $150,000
EIDL loan that was taken out in his name without his knowledge.
He didn’t know anything about it. And he got one letter saying that
SBA was reviewing the case, but, otherwise, he hasn’t gotten any
updates or info from SBA at all about how this is going to be rem-
edied.
And so, the SBA I don’t think is addressing this with serious
enough concern and attention. It’s one thing if there are people out
there ripping off the government. OK, let’s go after them, and if it
takes a little time, it takes a little time. But if they’re ripping off
the government using other people’s names, that’s an emergency
for my constituents whose names are being used, whose credit is
being ruined, and who have a shadow cast over their name.
So, Mr. Ware, is there anything that I can tell my constituents
about what to expect in this situation? What steps is the SBA’s Of-
fice of IG taking to respond to and remedy complaints about iden-
tity theft? And can you set up a special unit just to respond to
these kinds of cases?
Because, believe me, it’s a dire thing in the lives of people. Imag-
ine if your name was used by somebody else with your Social Secu-
rity number to get an SBA loan.
Mr. WARE. Yes——
[Audio interruption.]
19
Mr. WARE. Thank you. I know that we’re having connection prob-
lems because——
Chairman CLYBURN. Yes, we are having a bit of a problem. Mr.
Ware?
Mr. WARE. Yes? Can you hear me?
Chairman CLYBURN. I hear you now.
Mr. WARE. OK. Sorry. I don’t know what’s happening. I’ll blame
it on SBA’s technological advances. Just teasing, just teasing.
No, but if you can hear me now, I think I got the gist of the ques-
tion, although on my screen Representative Raskin is completely
frozen. So, I hope I got it, in terms of what is my office doing to
assist the victims of identity theft.
Now, clearly, we’ve heard countless stories and complaints in-
volving identity theft to fraudulently obtain those loans, but it’s im-
portant to understand a couple of things.
We don’t have principal jurisdiction on investigations involving
identity theft. That belongs to the Federal Trade Commission.
What we’ve done is work with SBA to set up a system where people
could receive assistance and have moved to investigate many of
these complaints.
We do have a report that will be coming out very, very shortly
on SBA’s handling of identity theft. By ‘‘very, very shortly,’’ it’s
next month, by end of next month. And, at that time——
Mr. RASKIN. OK.
Mr. WARE [continuing]. A lot of information——
Mr. RASKIN. OK. Well, I appreciate if you would followup with
me on this. And we would like a way that we can get to your office
the names of our constituents who are having a serious problem
with this. Obviously, we want it prosecuted by the FTC, but we
also want it to stop and make sure that the names of our constitu-
ents are cleared.
Mr. Clyburn, if I could say one final thing—and I’m sorry about
all these technical snafus we’re having. Congresswoman Waters
correctly pointed out that Mr. Jordan’s original provocation in this
hearing was an irrelevant distraction from the matter at hand. But
she shows a lot more patience than me, and I want to address spe-
cifically what he said.
It is true that Republicans and Democrats alike have issued
technical challenges under the electoral college over the course of
the last century. But only one President has incited a violent insur-
rection, a mob, to attack Congress and to try to overthrow the elec-
tion result.And that’s what he’s excusing with that completely false
equation of his.
And, meantime, he also knows that there’s a Federal statute, the
Federal Contested Elections Act from 1969, by which both Repub-
licans and Democrats have brought challenges to congressional
elections. There’s an entire procedure in place guaranteeing due
process to people on all sides.
And if he’s prepared to vote to overturn an election that was de-
cided by 7 million votes, more than 7 million votes, for Joe Biden,
certainly he would accept the regularity of hearing an election con-
test where there was a six-vote difference between the two sides
under a Federal statute. That is regular order.
And I yield back to you, Mr. Chairman.
20
Chairman CLYBURN. I thank the gentleman for yielding back.
The chair now recognizes Mr. Krishnamoorthi for five minutes.
Mr. KRISHNAMOORTHI. Thank you, Mr. Chair. Can you hear me?
Chairman CLYBURN. Yes, I can.
Mr. KRISHNAMOORTHI. Very good.
Well, first of all, I wanted to point out some very interesting as-
pects of the SBA OIG report.
Mr. Ware, I noticed in the report, my staff and I noticed, that
at one point you said almost 320,000 potentially fraudulent
COVID–19 EIDL loans totaling almost $25 billion were disbursed
to people with the same email addresses.
You give one example where one applicant with one email ad-
dress received 10 loans in the name of 10 different bathroom ren-
ovation companies in one city, and when you went back and looked,
you couldn’t find any of those bathroom renovation companies in
that city. Instead, you were able to find that the email address was
for a burrito restaurant which was located in that city.
Just a basic question: What are we doing to make sure that folks
can’t apply for multiple loans from the same email address?
Mr. WARE. Well, that’s one of the things that we’ve been working
hard with the Office of Disaster Assistance to fight against. And
the Office of Disaster Assistance has assured us that they have a
secondary review process in place to make that very assurance.
We have not verified or validated that that is in place and work-
ing as yet, but—they have not provided that information to us as
yet, but——
Mr. KRISHNAMOORTHI. Let me jump in, because I think that’s
really important. I think the American people don’t want multiple
loans to be applied for from one email address or from one IP ad-
dress, meaning probably one computer, or from one physical ad-
dress. And so, these EIDL loans, I think, deserve a lot more scru-
tiny, and I hope that you are going back to check that these EIDL
loans don’t come from the same address, the applications.
Can you rule out, given the staggering potential amount of fraud
in the EIDL Program, that there was any coordination between ap-
plicants and insiders at the SBA?
Mr. WARE. No, I cannot rule that out, because I know for a
fact——
Mr. KRISHNAMOORTHI. OK. I just going to—I’m going to be going
through a rapid-fire series of questions here.
Can you rule out that any foreign actors or entities received
money through the EIDL Program?
Mr. WARE. No.
Mr. KRISHNAMOORTHI. Can you rule out that—I’m from Illinois,
so I have to ask this question. Can you rule out that any deceased
people received money through the EIDL Program?
Mr. WARE. No.
Mr. KRISHNAMOORTHI. Can you rule out that people under the
age of 18 received money from the EIDL Program?
Mr. WARE. No.
Mr. KRISHNAMOORTHI. What claims are being made that you’re
aware of under the False Claims Act, also known as qui tam, re-
lated to the EIDL Program?
21
Mr. WARE. Well, I won’t be able to speak to any of those that’s
active. Many of those are sealed.
Mr. KRISHNAMOORTHI. Let me ask Mr. Horowitz, our expert,
probably, on this issue of whistleblowing and so forth.
Is there anything that can be done to encourage folks that know
about fraud within these programs, maybe even people at the SBA
right now, to come forward and make a False Claims Act claim or
a qui tam claim related to what I perceive to be just staggering
amounts of fraud in the EIDL Program?
Mr. HOROWITZ. Absolutely, Congressman. First, come to our
website, pandemicoversight.gov. They’ll see a link there to report
electronically to us. They can get in contact with us through other
means, but electronically is the best way to do it.
We’ll get on top of it, and we’ll make sure that whatever IG has
jurisdiction over the program they care about, we’ll get it to them
and we’ll work together with them.
Mr. KRISHNAMOORTHI. And just let’s educate people who might
be viewing this. When we refer to False Claims Act or qui tam
claims, the claimant, through a confidential process, if the claim is
validated, could receive between 15 and 30 percent of the recovered
amounts, right?
Mr. HOROWITZ. That’s correct.
Mr. KRISHNAMOORTHI. So, Mr. Horowitz, do you know how much
has been recovered overall through your investigations, your collec-
tive investigations, into fraud in the EIDL Program and then sepa-
rately into PPP program?
Mr. HOROWITZ. I don’t know separately as to those two programs.
I know it’s tens of millions of dollars overall. I could get back to
you on——
Mr. KRISHNAMOORTHI. But that’s an incredibly small portion of
the sizable potential amount of fraud, right?
Mr. HOROWITZ. At this time, it is. But I would just make sure
that the public is aware and assure all of you, obviously, prosecu-
tions take time, and we are using the tools we have, whether it’s
criminal prosecution, civil, forfeiture, and, by the way, suspension
and debarment for entities that are here, that aren’t fraudulent en-
tities themselves. They’re risking their ability to do business with
the government going forward, period.
Mr. KRISHNAMOORTHI. Thank you.
I yield back.
Chairman CLYBURN. I thank the gentleman for yielding back his
time.
I notice that all members who are present have been allowed
time to ask questions and to make comments. There are several
other members who we expected to join us, but the time seems to
have run out, and so we aren’t going to prolong this.
At this point, we usually give the ranking member an oppor-
tunity to make a closing statement, and, in his absence, whoever
he may designate. But I think Mr. Jordan, who made the opening
statement, indicated that he had to go off to other business, and
I don’t see that he’s here with us. So, I’m going to now proceed to
my closing statement, and hopefully we’ll be able to conclude this
hearing.
22
I want to thank all of our witnesses who are here today, and we
appreciate the invaluable expertise that you’ve shared this after-
noon on how we can better identify and eliminate fraud in the pan-
demic relief programs.
This select subcommittee is modeled after the Truman Com-
mittee during World War II. In a speech to the Senate upon the
establishment of that committee, then-Senator Truman said, and I
quote, ‘‘I consider public funds to be sacred funds, and I think they
ought to have every safeguard possible to prevent their being mis-
used and mishandled,’’ end of quote. I wholeheartedly agree with
Truman.
Unfortunately, today’s hearing has made clear that the Trump
administration failed to institute the necessary safeguards to pre-
vent public funds from being misused and mishandled in key
small-business relief programs, leading to the loss of billions of dol-
lars through fraud.
I agree very much with Chair Waters, whose interest it is to go
after what seems to be some pretty sophisticated fraudulent activ-
ity. And hopefully we’ll get to the bottom of the source of all of this
and not pat ourselves on the back for sending small, unsuspecting
businesses out of business or into jail.
Fraud should have real consequences. Diverting funds that were
intended to help Americans struggling to save their businesses,
feed their families, and stay in their homes is just something that
needs to be dealt with.
But it is not too late to act. The Biden administration has al-
ready taken significant steps to reduce fraud by instituting strong-
er controls when using PPP loans. And the administration has en-
couraged Federal agents to work with, not against, inspectors gen-
eral and congressional oversight.
The Biden administration and Congress have also worked to-
gether to ensure that critical oversight bodies like the PRAC, GAO,
and IG community have the resources and tools they need to do
their jobs. The $142 million allocated to the oversight community
in the American Rescue Plan will go a long way toward accom-
plishing that goal.
There is much more to do to prevent fraud and prosecute those
who engage in it. I look forward to using what we have learned
from our witnesses today to make the small-business relief pro-
grams more effective, efficient, and equitable. Those are the stand-
ards that must be met when we are spending sacred public funds.
With that, and without objection, all members will have five leg-
islative days within which to submit additional written questions
for the witnesses to the chair, which will be forwarded to the wit-
nesses for their response.
Chairman CLYBURN. This hearing is adjourned.
[Whereupon, at 1:20 p.m., the subcommittee was adjourned.]
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