    [House Hearing, 113 Congress]
    [From the U.S. Government Publishing Office]

                        SOCIAL SECURITY DISABILITY FRAUD

                           CONSPIRACY IN PUERTO RICO

    =======================================================================

                                    HEARING

                                   before the

                        SUBCOMMITTEE ON SOCIAL SECURITY

                                     of the

                          COMMITTEE ON WAYS AND MEANS
                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               SEPTEMBER 19, 2013

                                   __________

                               Serial No. 113-SS8

                                   __________

             Printed for the use of the Committee on Ways and Means

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

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                          COMMITTEE ON WAYS AND MEANS

                         DAVE CAMP, Michigan, Chairman

    SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
    KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
    PAUL RYAN, Wisconsin                 JIM McDERMOTT, Washington
    DEVIN NUNES, California              JOHN LEWIS, Georgia
    PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
    DAVID G. REICHERT, Washington        XAVIER BECERRA, California
    CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
    PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
    JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
    TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
    VERN BUCHANAN, Florida               RON KIND, Wisconsin
    ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
    AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
    LYNN JENKINS, Kansas                 ALLYSON SCHWARTZ, Pennsylvania
    ERIK PAULSEN, Minnesota              DANNY DAVIS, Illinois
    KENNY MARCHANT, Texas                LINDA SANCHEZ, California
    DIANE BLACK, Tennessee
    TOM REED, New York
    TODD YOUNG, Indiana
    MIKE KELLY, Pennsylvania
    TIM GRIFFIN, Arkansas
    JIM RENACCI, Ohio

            Jennifer M. Safavian, Staff Director and General Counsel

                      Janice Mays, Minority Chief Counsel

                                     ______

                        SUBCOMMITTEE ON SOCIAL SECURITY

                         SAM JOHNSON., Texas, Chairman

    PATRICK J. TIBERI, Ohio              XAVIER BECERRA, California
    TIM GRIFFIN, Arkansas                LLOYD DOGGETT, Texas
    JIM RENACCI, Ohio                    MIKE THOMPSON, California
    AARON SCHOCK, Illinois               ALLYSON SCHWARTZ, Pennsylvania
    MIKE KELLY, Pennsylvania
    KEVIN BRADY, Texas

                                C O N T E N T S

                                   __________
                                                                       Page

    Advisory of September 19, 2013 announcing the hearing............     2

                                   WITNESSES

    The Honorable Patrick P. O'Carroll Jr., Inspector General,
      accompanied by the Honorable Paul C. Lillios, Associate Chief
      Administrative Law Judge, Social Security Administration.......     8
    Beatrice M. Disman, Regional Commissioner, New York Region,
      Social Security Administration, New York, New York.............    17

                            QUESTIONS FOR THE RECORD

    The Honorable Sam Johnson........................................    48

                        SOCIAL SECURITY DISABILITY FRAUD

                           CONSPIRACY IN PUERTO RICO

                                  ----------

                          THURSDAY, SEPTEMBER 19, 2013

                 U.S. House of Representatives,
                           Committee on Ways and Means,
                               Subcommittee on Social Security,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 2:30 p.m., in
    Room B-318, Rayburn House Office Building, the Honorable Sam
    Johnson [chairman of the subcommittee] presiding.
        [The advisory of the hearing follows:]

                                   HEARING ADVISORY

                       FROM THE COMMITTEE ON WAYS AND MEANS

    Chairman Johnson Announces Hearing on Social Security Disability Fraud
                           Conspiracy in Puerto Rico

    Washington, Sep 2013
        U.S. Congressman Sam Johnson (R-TX), Chairman of the House
    Committee on Ways and Means Subcommittee on Social Security, today
    announced a hearing on the Social Security Disability Insurance fraud
    conspiracy in Puerto Rico. The hearing will take place on Thursday,
    September 19, 2013, in B-318 Rayburn House Office Building beginning at
    2:30 p.m.

        In view of the limited time available to hear witnesses, oral
    testimony at this hearing will be from invited witnesses only. However,
    any individual or organization not scheduled for an oral appearance may
    submit a written statement for consideration by the Subcommittee and
    for inclusion in the printed record of the hearing.

    BACKGROUND:

        On August 21, 2013, the United States Attorney for the District of
    Puerto Rico announced that a Federal Grand Jury in the District of
    Puerto Rico issued over 70 indictments charging three doctors, one non-
    attorney representative (a former Social Security employee), and 71
    Social Security claimants with fraud in the Social Security Disability
    Insurance (SSDI) program in Puerto Rico.
        Under the alleged scheme, the non-attorney representative would
    help a claimant file an SSDI application and, with the assistance of a
    conspiring doctor, provide fraudulent medical evidence that would
    result in benefits for individuals who did not, in fact, meet the legal
    eligibility standard for disability benefits. The representative would
    collect a fee from the claimant of 25 percent of any past-due benefits
    owed (up to a limit of $6,000). The doctors involved would be paid $150
    to $500 by the claimant for their submission of false reports to the
    SSA.
        The multi-year investigation began when disability medical
    consultants in the Puerto Rico Disability Determination Services
    noticed and reported a suspicious pattern of benefit claims involving
    nearly identical medical evidence. As a result, the SSA and the SSA
    Office of Inspector General (OIG) conducted an extensive analysis of
    medical source documentation in SSDI files. The SSA OIG was joined in
    the investigation by the Federal Bureau of Investigation San Juan
    Office and the Puerto Rico Police Department, and included numerous
    interviews and surveillances.
        As a result of the federal indictments, the SSA was able to
    immediately suspend benefits to the indicted beneficiaries and has
    initiated internal reviews of over 6,000 files of beneficiaries that
    included evidence provided by one or more of the indicted physicians or
    the indicted representative. During the internal review, should the
    remaining evidence not substantiate the disability finding, benefits
    will be suspended and the beneficiary must submit evidence to
    substantiate the disability. Should a beneficiary be unable to
    substantiate their disability without additional evidence, his or her
    benefits will be terminated after proper notice and they will be
    required to repay the Social Security Trust Fund for the benefits they
    improperly received.
        The responsibility for making initial disability determinations is
    shared by the States and the SSA. All 50 States, plus the District of
    Columbia and Puerto Rico, maintain fully federally-funded agencies,
    known as Disability Determination Services, which decide initial and
    continuing eligibility for benefits under rules established by the SSA.
    According to the SSA OIG, approximately 185,000 disabled workers in
    Puerto Rico and their eligible dependents receive about $2.4 million in
    SSDI benefits each year.
        According to the Congressional Budget Office, 10.9 million
    beneficiaries received $135 billion in SSDI benefits in fiscal year
    2012. According to the 2013 Social Security Trustees report, SSDI
    program revenues will only be able to finance 80 percent of benefits
    beginning in 2016, unless Congress acts.
        In announcing the hearing, Social Security Subcommittee Chairman
    Sam Johnson (R-TX) said, ``The widespread disability fraud uncovered in
    Puerto Rico raises serious questions about Social Security's management
    of the disability program. At a time when the Disability Insurance
    program will be unable to pay full benefits beginning in 2016, it is
    deeply troubling that Social Security is doling out millions of dollars
    in fraudulent taxpayer-funded payments. Americans deserve answers. On
    behalf of the American taxpayer, I am committed to getting the answers
    and rooting out waste, fraud and abuse so that we can help keep the
    program strong for those who truly need it.''

    FOCUS OF THE HEARING:

        The hearing will examine the investigation in Puerto Rico resulting
    in the arrest and indictment of individuals for Social Security
    disability fraud, Social Security's oversight of the SSDI program in
    Puerto Rico, and Social Security's overall efforts to detect, prevent
    and prosecute fraud.

    DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

        Please Note: Any person(s) and/or organization(s) wishing to submit
    for the hearing record must follow the appropriate link on the hearing
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    ``Hearings.'' Select the hearing for which you would like to submit,
    and click on the link entitled, ``Click here to provide a submission
    for the record.'' Once you have followed the online instructions,
    submit all requested information. ATTACH your submission as a Word or
    WordPerfect document, in compliance with the formatting requirements
    listed below, by the close of business on Thursday, October 3, 2013.
    Finally, please note that due to the change in House mail policy, the
    U.S. Capitol Police will refuse sealed-package deliveries to all House
    Office Buildings. For questions, or if you encounter technical
    problems, please call (202) 225-1721 or (202) 225-3625.

    FORMATTING REQUIREMENTS:

        The Committee relies on electronic submissions for printing the
    official hearing record. As always, submissions will be included in the
    record according to the discretion of the Committee. The Committee will
    not alter the content of your submission, but we reserve the right to
    format it according to our guidelines. Any submission provided to the
    Committee by a witness, any supplementary materials submitted for the
    printed record, and any written comments in response to a request for
    written comments must conform to the guidelines listed below. Any
    submission or supplementary item not in compliance with these
    guidelines will not be printed, but will be maintained in the Committee
    files for review and use by the Committee.

        1. All submissions and supplementary materials must be provided in
    Word or WordPerfect format and MUST NOT exceed a total of 10 pages,
    including attachments. Witnesses and submitters are advised that the
    Committee relies on electronic submissions for printing the official
    hearing record.

        2. Copies of whole documents submitted as exhibit material will not
    be accepted for printing. Instead, exhibit material should be
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    these specifications will be maintained in the Committee files for
    review and use by the Committee.

        3. All submissions must include a list of all clients, persons and/
    or organizations on whose behalf the witness appears. A supplemental
    sheet must accompany each submission listing the name, company,
    address, telephone, and fax numbers of each witness.

        The Committee seeks to make its facilities accessible to persons
    with disabilities. If you are in need of special accommodations, please
    call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
    business days' notice is requested). Questions with regard to special
    accommodation needs in general (including availability of Committee
    materials in alternative formats) may be directed to the Committee as
    noted above.
        Note: All Committee advisories and news releases are available on
    the World Wide Web at http://www.waysandmeans.house.gov/.

        Chairman JOHNSON. The hearing will come to order.
        This is the first subcommittee hearing since the passing of
    my friend and former subcommittee chairman Clay Shaw. We all
    remember him. Clay was one of the best, a great American, a
    diplomat, and a joy to work with regardless of your politics. I
    sat right next to Clay as he led the subcommittee during the
    106th, 107th and 108th Congresses.
        Through his leadership the committee achieved a number of
    legislative accomplishments for America and its people. Chief
    among them were the Seniors Freedom to Work Act of 1999, which
    repealed the retirement earnings penalty for individuals who
    attained their full retirement age; the Ticket to Work and Work
    Incentives Improvement Act of 1999 to help those receiving
    disability benefits to return to work; and the Social Security
    Protection Act of 2003 to protect vulnerable Social Security
    recipients from representative payees who misused benefits and
    other program protections, including withholding benefits from
    fugitive felons and parole violators. I guess that is similar
    to what we are going to talk about today.
        Chairman Shaw believed in Social Security and worked
    tirelessly to secure its future by authoring legislation to
    keep the Social Security promise, protect Social Security
    finances, and enhance Social Security benefits for women.
        Clay's instincts were to be bipartisan if possible and a
    gentleman legislator always. He joined efforts with then-Ways
    and Means Chairman Bill Archer in developing and promoting
    legislation to save Social Security for 75 years and beyond,
    the Social Security Guarantee Plus Act, a bill his Florida
    constituents and even some Democrats found thoughtful and
    possible. He was one of the earliest Members of Congress to
    lead the fight to protect Social Security numbers.
        Our hearts go out to Clay's beloved wife Emilee and his
    family, and I ask that we bow our heads for a moment of silence
    to honor our former Chairman.
        [Moment of silence.]
        Chairman JOHNSON. Thank you. I appreciate that.
        You knew him, too.
        Mr. BECERRA. I did, Mr. Chairman. If I may say a word?
        Chairman JOHNSON. You may.
        Mr. BECERRA. Mr. Chairman, if I may associate myself with
    every single word that you just uttered with regard to our
    colleague and friend Mr. Shaw. There are people who understand
    this institution and who work hard to try to make it work. Mr.
    Shaw was one of those individuals. He would reach out to his
    friends, Republican and Democrat alike.
        It is tough when you hear about a colleague who passes on
    because you think that you never quite grow that old, and you
    still remember those memories, and it is almost as if it was
    yesterday that Clay was here with us. So I join you in
    remembering a dear colleague and friend, and I hope that we are
    able to see this House continue to make progress on behalf of
    people like Clay Shaw, who gave quite a bit of his life and his
    hard work to make it work.
        So with that, Mr. Chairman, I thank you for yielding some
    time.
        Chairman JOHNSON. Thank you. I appreciate your comments.
        We now turn our hearing to Social Security disability fraud
    conspiracy in Puerto Rico. On August 21st, the United States
    Attorney for the District of Puerto Rico announced the arrest
    and indictment of 75 individuals for Social Security fraud. Let
    me repeat that number. Seventy-five arrested for allegedly
    seeking to defraud Social Security. So we are not talking about
    a few bad apples here. Those arrested include a claimant
    representative who was a former Social Security employee, three
    physicians, and 71 beneficiaries. My understanding is that the
    investigation is ongoing, and there could be additional
    arrests.
        Under the alleged scheme, the former Social Security worker
    would help a claimant file an application for disability
    benefits and, with the assistance of a conspiring doctor,
    provide fraudulent medical evidence that would result in
    taxpayer-funded benefits that should never have been paid in
    the first place. The representative would collect a fee from
    the claimant of 25 percent of any past-due benefits owed up to
    a cap of $6,000. The doctors would receive a kickback of $150
    to $500 by the claimant for their submission of false reports
    to Social Security.
        The investigation began back in November 2009 after medical
    consultants in the Puerto Rico Disability Determination
    Services reported a suspicious pattern of benefit claims
    involving nearly identical medical evidence. Social Security
    and the Office of the Inspector General then began an extensive
    review of the medical information. Later the FBI and the Puerto
    Rico Police Department joined the investigation.
        Social Security has now suspended benefits claimed by the
    indicted beneficiaries. It has also begun reviewing the files
    of over 6,000 beneficiaries that included medical evidence from
    the indicted physicians or representative. Unless beneficiaries
    are able to prove their disability with nontainted medical
    information, they will be required to pay back to Social
    Security the benefits they should not have received in the
    first place.
        So the bottom line is that at a time when the Disability
    Insurance program will be unable to pay full benefits beginning
    in 2016, Social Security has been doling out millions of
    dollars in fraudulent taxpayer-funded payments. This is
    unacceptable. And on the heels of the Puerto Rico case, GAO
    reported last week that Social Security paid $1.3 billion in
    overpayments to disability beneficiaries. Moreover, the debt
    owed to the Disability Insurance Trust Fund from those who need
    to pay back overpayments is now $6 billion. In this particular
    case, the problem occurred before beneficiaries even got their
    first check, so they may have been awarded benefits when they
    shouldn't have, all because Social Security's enforcement
    operations doesn't generate earnings alerts in all cases when
    earnings occur during the 5-month waiting period. In other
    words, in my view, Social Security wasn't doing its job.
        The Puerto Rico case along with GAO's report raises serious
    and troubling questions about Social Security's management of
    the disability program. The American taxpayer is right to
    wonder whether Social Security is fully committed to rooting
    out waste, fraud and abuse.
        Let me be clear that Social Security should not try to
    downplay the Puerto Rico case and the GAO's report by spinning
    the numbers to try to minimize the loss of taxpayer dollars. To
    do so would be an insult to taxpayers. Waste, fraud and abuse
    in the Disability Insurance program cheat honest, hard-working
    American taxpayers and those who truly need benefits. The best
    way to protect the disability program is to prevent waste,
    fraud and abuse before it occurs.
        The American people want, need and deserve answers. Social
    Security's leadership needs to get serious about better
    protecting this program paid for by America's hard-working wage
    earners.
        Chairman JOHNSON. I now will recognize our ranking member
    Mr. Becerra for his opening statement.
        Mr. BECERRA. Mr. Chairman, thank you very much.
        American workers pay for Social Security, and we owe it to
    them to protect their investments by preventing fraud and
    stopping it where we can. Every month over 160 million American
    workers contribute part of their hard-earned paychecks to
    Social Security to prepare for retirement and to protect
    themselves and their families.
        To put it in context, over Social Security's lifetime
    American workers have contributed $14.5 trillion to Social
    Security. During those 78 years, Social Security has
    safeguarded those contributions, it has invested surpluses in
    U.S. Treasury bonds, and it has paid American families their
    benefits on time and in full for 78 years. And in those 78
    years today, there are some $2.5 trillion in reserve that has
    yet to be used to help cover the future benefits of Americans
    who paid into this system. We owe it to Americans, therefore,
    to do everything we can to protect their contributions from
    those looking to defraud Social Security, while still paying
    those honest workers their earned benefits when they need them.
        SSA does a good job of fighting fraud, as evidenced by this
    successful investigation that we will hear about more. Most
    Social Security fraud is reported or prevented by Social
    Security Administration employees, as was this conspiracy. It
    was frontline employees at the Puerto Rico office who first
    detected this conspiracy as part of their work reviewing
    benefit applications. They brought it to the attention of SSA's
    regional leadership, and a referral was then made to the
    inspector general for investigation and potential prosecution.
        But SSA didn't stop there. They continued to track the
    suspicious cases, subjecting them to additional scrutiny. And
    in light of the deepening investigation and the emergence of a
    conspiracy, SSA set up a process to quickly rereview all
    suspicious cases as soon as the Attorney General filed
    indictments. SSA has already suspended benefits to the 71
    individual beneficiaries who were indicted on August 16th.
        The vast majority of disability insurance recipients are
    honest. They are hard-working Americans who became too disabled
    to work, and the disability insurance program has grown in
    recent years because of demographics and the aging population,
    not because of fraud. As Social Security's chief actuary has
    testified, the disability program has grown primarily because
    there is a larger population, the baby boomers are hitting
    their most disability-prone years, and the increase in the
    number of women in the workforce. These are factors that have
    nothing to do with fraud and that the actuaries have actually
    known about and projected for many years.
        Finally, I would note for the record that fraud is not a
    driver of the growth of the DI program in and of itself. Last
    year, in 2012, SSA employees made over 26,000 fraud referrals
    to the inspector general, including disability fraud. Of these
    the inspector general found that 5,300 cases merited
    investigation and, of those, 236 rose to the level of criminal
    prosecution; 236 out of 26,000 fraud referrals. That is less
    than 1 percent. And that doesn't even say that there was a
    conviction. That was a referral for a criminal prosecution.
        By the way, of those 236 cases that rose to the level of
    criminal prosecution, which represents 236 of the 26,000 fraud
    referrals, that is out of the 3.2 million applications that
    were received by the Social Security Administration for
    disability benefits out of the 57 million people who are in the
    Social Security beneficiary population altogether.
        So I think it is very clear that SSA is working very hard
    to root out fraud, because no one wants to see the hard-earned
    benefits of any American used for other than the benefits that
    have been earned.
        A highly trained, well-staffed SSA is our best defense
    against fraud. When SSA's disability examiners noticed this
    problem in Puerto Rico and reported it to the IG, SSA had more
    staff available to it than they have today. So we have to take
    a look. In 2012 reports from Social Security, employees were
    responsible for nearly two-thirds of the fraud investigations
    opened by the inspector general. They are not coming from the
    outside, folks. They are not coming from regular people. They
    are coming from the SSA employees themselves who are detecting
    this fraud.
        Unfortunately, SSA's budget has been cut by about $1
    billion a year since 2011, which has had real consequences for
    taxpayers, beneficiaries and the workers who are counting on
    Social Security in the future. It pains me to say, but this
    House has blocked $421 million that the Budget Control Act
    provided for SSA to fight waste, fraud and abuse, costing
    taxpayers billions of dollars. SSA has lost nearly 11,000
    highly trained employees to budget cuts over the past 2 years.
    As Ms. Disman says in her testimony, that leaves far fewer
    people to ``stand watch over Social Security'' and leaves them
    with far less time to document what they see and to report it
    to the inspector general.
        I am pleased that we have had a chance to come together for
    this hearing to see how SSA combats fraud, to learn more about
    what happened in this particular conspiracy and whether
    additional action is needed. At the same time we must keep in
    mind that in the overwhelming majority of cases, there is no
    fraud involved.
        SSA does a good job overall of detecting and preventing
    fraud, and the inspector general aggressively investigates
    reports of potential fraud. But without adequate resources, SSA
    cannot adequately police fraud while ensuring that individuals
    who have earned their benefits get paid on time and in the
    right amount.
        So we are very much interested in your testimony today, and
    with that, Mr. Chairman, I yield back my time.
        Chairman JOHNSON. I think as a matter of record it took too
    long to get into this. 2009 until today is a long time.
        As is customary, any Member is welcome to submit a
    statement for the hearing record.
        Chairman JOHNSON. Before we move on to our testimony today,
    I want to remind our witnesses to please limit your oral
    statements to 5 minutes. However, without objection, all the
    written testimony will be made part of the hearing record.
        We have one witness panel today seated at the table, the
    Honorable Patrick O'Carroll, Inspector General, accompanied by
    the Honorable Paul Lillios, Associate Chief Administrative Law
    Judge, Social Security Administration; and Beatrice Disman,
    Regional Commissioner, New York Region, Social Security. You
    are the one that has responsibility for Puerto Rico, I guess.
        Mr. O'Carroll, welcome and thanks for being here. Please go
    ahead with your testimony.

    STATEMENT OF THE HONORABLE PATRICK P. O'CARROLL, JR., INSPECTOR
        GENERAL, ACCOMPANIED BY THE HONORABLE PAUL C. LILLIOS,
       ASSOCIATE CHIEF ADMINISTRATIVE LAW JUDGE, SOCIAL SECURITY
                             ADMINISTRATION

        Mr. O'CARROLL. Good afternoon, Chairman Johnson, Ranking
    Member Becerra, and Members of the Subcommittee. It is a
    pleasure to be here today to discuss our ongoing criminal
    investigation in Puerto Rico.
        About 4 weeks ago in the early morning hours, 19 OIG
    special agents with 125 FBI special agents and about 150 Puerto
    Rico Police Department officers successfully executed 69 arrest
    warrants within a few hours. The arrests were meticulously
    planned and accomplished without incident.
        The arrestees were taken to the Morales Basketball Coliseum
    in Guaynabo where the United States Marshals Service was
    standing by to process and fingerprint them. They were able to
    appear immediately before an on-site United States magistrate.
    In addition to the 69 arrested, 6 additional suspects were
    arrested or surrendered to authorities in the days that
    followed.
        These arrests were based on 75 indictments returned by a
    grand jury in Puerto Rico. Our investigation had revealed that
    these 75 individuals took part in a massive scheme to defraud
    Social Security of millions of dollars in disability benefits.
    Seventy-one of the arrestees were disability beneficiaries,
    three were medical providers, and one was a nonattorney
    claimant representative named Samuel Torres Crespo, who was a
    former SSA employee.
        The scheme was simple enough. Word of mouth was all it
    took. Anyone looking to obtain disability benefits
    fraudulently, either because they had recently been laid off or
    because they saw what they thought was an easy mark, would go
    see Torres Crespo. He would, for 25 percent of the claimant's
    accrued benefits, put together an application and send the
    claimants to one of three of the indicted doctors. The doctor
    would charge the claimant a fee between of $125 and $500 to
    produce a false medical report, and then the fraudulent claim
    would go forward.
        Over time, observant disability examiners noticed that
    nearly identical medical reports were coming across their
    desks, and the OIG was notified. Over a period of months, from
    late 2009 to 2010, we received a series of such allegations.
    Each was carefully examined, and many required interviews or
    video surveillance before a decision could be made whether to
    conduct a criminal investigation. Some allegations proved
    unfounded, or, more often, the fraud could not be fully
    established.
        Finally, however, we were able to gain a foothold in early
    2011 thanks to an exhaustive review of records, tireless work
    by SSA analysts and our agents, and the timely cooperation of
    the FBI. Working with the U.S. Attorney for the District of
    Puerto Rico, the FBI and the Puerto Rico Police Department, we
    conducted scores of interviews, covert surveillances and
    undercover visits to doctors' offices. We also executed search
    warrants and used other investigative techniques that slowly
    revealed the breadth and extent of this complex scheme.
        I cannot say enough about the level of cooperation amongst
    these agencies. This was truly government and law enforcement
    at its finest.
        The judicial process in this case will take time to unfold.
    Some of these people will likely go to jail. Many will be
    required to repay the money they stole, and the government has
    already seized about $1.7 million in assets from Torres Crespo.
        Meanwhile, this investigation continues, and other
    investigations are spinning off from it. Calls to the toll-free
    hotline number that we established are generating new leads.
    That number, 1-855-777-0821, is being contacted frequently.
        Our work in Puerto Rico is far from finished, and Puerto
    Rico is by no means the only place where our office is
    investigating doctors, lawyers, representatives, interpreters
    and others who facilitate disability fraud in large numbers.
    This type of fraud has long been a priority of our office. It
    was one of the inspirations for the CDI program, with which
    this subcommittee is very familiar, and the Puerto Rico CDI
    unit is now up and running. It was also the motivation behind
    the recent creation of the disability fraud pilot. We
    specifically designed this program to detect and investigate
    facilitator fraud such as that which we found in Puerto Rico.
        Judge Lillios, who is here with me today, will work with
    one of our deputy assistant inspector generals for
    investigation and audit and investigative staff to mine data,
    review past allegations and beat the bushes for leads. They
    will also be looking for professionals who have abused the
    government's trust as paid participants in the disability
    process. Be they doctors, lawyers or representatives, they
    should know that we are looking long and hard at similar
    schemes.
        Of course, we will continue to advise this subcommittee as
    this work continues, and as always I appreciate your unflagging
    support, and I will be happy to answer any questions.
        Chairman JOHNSON. Thank you, sir. I appreciate that
    testimony.
        [The prepared statement of Mr. O'Carroll follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman JOHNSON. Ms. Disman, welcome. Please proceed.

     STATEMENT OF BEATRICE DISMAN, REGIONAL COMMISSIONER, NEW YORK
                 REGION, SOCIAL SECURITY ADMINISTRATION

        Ms. DISMAN. Chairman Johnson, Ranking Member Becerra,
    Members of the Subcommittee, thank you for this opportunity to
    discuss Social Security's role in uncovering the complex
    disability fraud conspiracy in Puerto Rico. My name is Bea
    Disman. I am Social Security's Regional Commissioner for the
    New York Region. I have direct authority over the agency's
    operations in New York, New Jersey, Puerto Rico and the U.S.
    Virgin Islands. I began my career at Social Security as a field
    office employee in 1965. While much has changed since then, the
    agency's commitment to service and stewardship has never
    wavered.
        Like you, I am outraged whenever anyone attempts to defraud
    the government. I am especially chagrined that a former Social
    Security employee acting as a nonattorney claimant
    representative was an integral part of the conspiracy uncovered
    in Puerto Rico. This individual betrayed his former colleagues
    by violating the public trust, and, frankly, I am incensed by
    his actions.
        We applaud the recent news that law enforcement officials
    indicted the former employee, several physicians, and
    approximately 70 disability claimants for allegedly defrauding
    the disability program. While the Federal grand jury
    investigation continues, evidence suggests that the involved
    parties conspired to submit fabricated or exaggerated medical
    evidence in order to fraudulently obtain benefits. This
    criminal behavior is unconscionable, and we do not tolerate it.
        In this case it was the diligent employees of the Puerto
    Rico DDS, funded and trained by Social Security, who first
    identified the fraudulent medical evidence. The DDS employees
    referred the allegation to us in March 2009 during an on-site
    visit by my regional office staff and the quality reviewers.
        In November 2009, after completing additional analysis and
    case development, we referred the allegation along with
    information about the nonattorney representative to the Office
    of the Inspector General. In addition to referring the case to
    the OIG, we took aggressive steps to identify any additional
    cases and develop a process for reviewing the cases. These
    steps ensured that we could reliably handle any high-volume
    review that might result from the investigation.
        We directed Federal resources to Puerto Rico to assist in
    the investigation, monitor the Puerto Rico DDS operations and
    help decide cases. We also redirected and trained staff on
    medical issues from our Puerto Rico field offices and our
    program service center in New York City. These additional staff
    resources were focused on Puerto Rico cases, including those
    involved in the investigation.
        In addition, we authorized the New Jersey DDS to hire
    bilingual disability examiners to assist with Puerto Rico.
    Other DDSs, both inside and outside the New York region,
    provided workload assistance to the Puerto Rico DDS, which
    added more outside eyes to the cases being filed in Puerto
    Rico. A sustained, multiyear cross-training effort, as well as
    additional quality studies, further strengthened our work with
    the Puerto Rico DDS and ensured their quality continued to
    remain strong and the fraud identified.
        Without question, our antifraud activities in Puerto Rico
    worked. They have shown that our frontline employees are the
    best defense against fraud. Over the years our emphasis on
    their role in the integrity of our programs and
    responsibilities for reporting fraud have strengthened our
    stewardship focus.
        We have suspended over $130,000 in monthly benefits to the
    indicted individuals and their auxiliaries. As of today we are
    reviewing at least 6,600 disability applications in which we
    awarded benefits based in part on the medical evidence supplied
    by the doctors. These reviews will occur in New York City and
    in New Jersey. In redetermining these cases, we will disregard
    the tainted medical evidence. If the remaining evidence does
    not support our original allowance, we will suspend the
    benefits, providing the opportunity to submit additional
    medical evidence prior to a final determination. Beneficiaries
    will receive notification if we terminate their benefits and
    assess an overpayment.
        If we suspect additional fraud of medical providers in any
    of these cases we review, we will refer that to the OIG for
    investigation and possible referral to the U.S. Attorney. Under
    a program we are considering for Puerto Rico based on success
    in other regions, our agency's attorneys may pursue cases not
    accepted for criminal prosecution by the U.S. attorney.
        Looking ahead we know that it is critical that Congress
    fully fund our cost-saving program integrity activities while
    ensuring we have the resources to serve the deserving
    disability applicants who turn to us for help. Investigations
    are time-consuming and labor-intensive. In Puerto Rico it
    required close coordination between Social Security, the Puerto
    Rico DDS, and multiple layers of law enforcement. We need your
    support to keep the disability program strong.
        Thank you, and I will do my best to answer any questions
    you may have, with the understanding that this is still an
    active grand jury investigation.
        Chairman JOHNSON. Thank you for your testimony. I
    appreciate it.
        [The prepared statement of Ms. Disman follows:]

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        Chairman JOHNSON. Mr. O'Carroll, let me ask you a quick
    question. Has there ever been a case as big as this in the
    history of Social Security, in your opinion? Yes or no.
        Mr. O'CARROLL. No, there has not been any one as big as
    this.
        Chairman JOHNSON. Okay. I am glad you and your Acting
    Commissioner are convinced that fraud conspiracy is not limited
    to Puerto Rico since you have set up disability fraud pilot
    programs here in the United States focusing on third-party
    facilitators, claimant representatives and medical providers.
    It seems like everybody wants some of our money.
        Ms. Disman, with respect to the Puerto Rico case, what is
    the total amount of fraudulent taxpayer-funded benefits paid
    out by Social Security? I expect it will reach millions of
    dollars.
        Ms. DISMAN. At this point in time, Mr. Chairman, I do not
    have that figure because we are rereviewing all these cases,
    and our initial review of the 6,600 cases, which we have
    already started, shows a number of these people will continue
    to receive benefits because there is other medical evidence in
    the file even after we remove the tainted evidence. So we will
    be able to--after we finish the review be able to tell you what
    was involved with the tainted medical evidence and the amount
    of the benefits.
        Chairman JOHNSON. Well, I know it is Social Security's idea
    to get payments out as fast as they can. Do you think we are
    doing it too fast without checking what the status of the
    claimant is?
        Ms. DISMAN. In this situation it shows our frontline
    employees did their job and did the checking. What they
    uncovered was looking at template medical evidence, and they
    didn't stop there. They went ahead and followed the procedures
    that we have and the operating procedures that we have trained
    them on.
        Chairman JOHNSON. Yes, but you already paid them.
        Ms. DISMAN. Right, because based on other evaluation of the
    medical evidence in file and other factors--remember, this was
    fabricated medical evidence--it appeared that these people were
    eligible to meet the definition of disability.
        Chairman JOHNSON. Do you think our taxpayers will be made
    whole? Yes or no.
        Ms. DISMAN. I think our taxpayers will be made whole for
    those people we determine that are no longer eligible to
    receive disability.
        Chairman JOHNSON. In other words, all that money that we
    put out is going to be paid back?
        Ms. DISMAN. We are going to be charging overpayments if
    those decisions were based on fabricated medical evidence and
    cannot be supported, and they will be required to pay back the
    overpayments.
        Chairman JOHNSON. How do you go about getting that?
        Ms. DISMAN. Well, basically you ask them to pay the money
    back. You go through a process that gives them their due
    rights. But ultimately there is a request for the money.
        Chairman JOHNSON. Okay. And how much is Social Security
    spending to deal with this fraud?
        Ms. DISMAN. Well, during the review itself we are in the
    midst of determining what we will be spending on the review. I
    can tell you right now that the medical evidence in Puerto Rico
    is in Spanish, so that in order to start this review and to
    have it done by people that are not just bilingual and
    biliterate, we have had to translate a number of the medical
    documents, and that is hard to do because you have to be more
    than bilingual, you have to be biliterate in medical. So we
    have already spent $3 million in a contract to do the
    translation. We are right now factoring all the costs, and I
    will provide that for the record as soon as we finish putting
    that together.
        [Transcript Insert 1 follows:]

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        Chairman JOHNSON. So usted no hable espanol?
        Ms. DISMAN. It is not just speaking Spanish, it is reading
    complex medical terms. And I do agree with you, because I know
    you have spent, Chairman Johnson, some time in Puerto Rico.
        Mr. BECERRA. But he is a Texan. He knows everything.
        Chairman JOHNSON. Ms. Disman, I want to turn to the
    findings of a GAO study released last week on overpayments. It
    found that Social Security paid out $1.3 billion in disability
    that were wrong mostly because the individuals earned over the
    legal limit during the 5-month waiting period before they
    received their first check. The problem was simple: Social
    Security did not catch the earnings if they occurred the year
    before the year benefits were first paid.
        Now, this seems like a problem that ought to be able to be
    solved by a high school computer student. Why hasn't this been
    addressed, and can you give me an assurance it will be, and
    when?
        Ms. DISMAN. Well, Mr. Chairman, I read the GAO report as
    you did, and I have been involved in the enforcement operation
    as being Regional Commissioner for years. I can tell you that
    the enforcement operation is very complex, and it requires
    complicated work by our program service center employees as
    well as our field employees.
        In reading the GAO report, and also talking to our policy
    people, I know that we are going to have to go look behind the
    cases because GAO did not do any analysis. If someone has
    worked during a waiting period, it may be an unsuccessful work
    attempt, there needs to be a look at the cases itself.
        However, we agreed to look at those cases. We also agreed
    to look at GAO's recommendation, that we take a look at what
    the cost would be and the resources for us to obtain this
    information during the waiting period, understanding that if we
    did this, we may not be able to do something else given our
    budgets and what we are dealing with.
        Also, there are two proposals in the President's budget to
    deal with exactly this issue. One deals with going to a
    quarterly wage reporting. You know now it is yearly, so that by
    the time the data come to us, enforcement is already late. And
    the second is to continue and redelegate our demonstration
    authority to go ahead and experiment with different ways of
    counting earnings for the disability beneficiaries. And we have
    been experimenting with different demonstrations to see if we
    can simplify the program and still get at the heart of the
    issue of enforcement.
        Chairman JOHNSON. Have you been down there yourself?
        Ms. DISMAN. Where?
        Chairman JOHNSON. Puerto Rico.
        Ms. DISMAN. Oh, I have been down to Puerto Rico over the
    years. I must admit I go in August when it is 100 degrees. But
    having said that, you have very dedicated Social Security
    employees in Puerto Rico. They are really dedicated to the
    mission. I can tell you that this fraud investigation and this
    conspiracy, if you talk to my employees on the frontline, they
    are incensed and upset, and a number of them knew the retired
    Social Security employee, and they are beside themselves.
        Chairman JOHNSON. Well, GAO says it urged Social Security
    to use other verification sources since 2004, but you didn't.
    In responding to the GAO report, Social Security referred to
    the, quote, ``strategic plan goal of preserving the public
    trust and improving payment accuracy'' as one of your highest
    priorities. Is that true?
        Ms. DISMAN. Well, our highest priority is to ensure the
    public trust. I take stewardship responsibility personally. I
    have over the years been one of the foremost supporters of
    antifraud activities within Social Security. As a matter of
    fact, the inspector general and I set up antifraud committees
    in the regions, which are chaired by both of us.
        Chairman JOHNSON. When did you do that?
        Ms. DISMAN. We set that up a good 10 years ago that we have
    been working on that. We bring in line management. We identify
    various trends.
        So I will tell you, for a while I was the operations lead
    on anti-fraud--I want to say antifraud, not fraud--and I take
    this seriously and to heart, because when I was trained as a
    claims representative, that motto, we get the right check to
    the right person on time, is our foundation.
        Chairman JOHNSON. Well, you need to do both, and I am told
    that, you know, some people think you are more interested in
    cutting checks than trying to prevent fraud, and I hope that is
    not true.
        How can we believe the agency's statement that payment
    accuracy is the highest-step priority when the actions here say
    something different?
        Ms. DISMAN. Well, Mr. Chairman, I think you can see the
    actions here were a complex conspiracy, and if you actually
    look at the information of our accuracy of the data of Puerto
    Rico, they are equal or better than the national average, and,
    you know, we have an independent quality organization that
    looks at that.
        Chairman JOHNSON. Well, as the New York Regional
    Commissioner, you are responsible for overseeing the Puerto
    Rico Disability Determination Program; is that correct?
        Ms. DISMAN. That is correct.
        Chairman JOHNSON. And I would like to get your attention to
    the slide, if they can put it up on the screen. I think the
    staff gave you a hard copy of that.
        Ms. DISMAN. I don't have it, and let me see if I can see
    it. I can't see it, but I understand what it is showing.
        Chairman JOHNSON. Okay. You understand it just shows that
    the allowance rates in Puerto Rico are way above the national
    average anywhere else, like double and triple, and it was
    pointed out in a Wall Street Journal article from March of
    2011, which we will insert in the record without objection.
        [The Wall Street Journal article follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman JOHNSON. And show the next slide, please.
        That table shows the percent of beneficiaries nationwide,
    and the percentage of beneficiaries diagnosed with a mental
    disorder in Puerto Rico is at least 10 percent higher than the
    national average for all years. The percentage with a mood
    disorder is more than double the national average. And this is
    important since we have been told back problems and affective
    disorders, including mood disorders, were alleged by most of
    the beneficiaries who were arrested. Assuming you saw both the
    award rate and the diagnosis trends when they happened, what
    action did you take and when, and what was the result?
        Ms. DISMAN. Well, we have taken multiple actions in Puerto
    Rico. We have actually had a multipronged approach. We have had
    our quality reviewers and my own disability staff visit Puerto
    Rico and do extensive training. As a matter of fact, when we
    found out about the allegation of the doctors, we were there
    training them on the medical documentation of the file, how to
    identify suspect medical evidence, going over the risk factors
    for fraud and similar faults. Two of the categories in those
    risk operations for operations deals with affective disorders
    as well as back disorders, going through what the factors are
    for them to look at.
        We did more than that. We did very special training in July
    of 2011 where we brought together the ALJs and our DDS
    examiners. We had headquarters, we had our own people from the
    region, we had quality, going over again the characteristics of
    affective disorders, similar fault, and actually going through
    how you deal with the files for inconsistency when you see the
    types of trends. We do have very specific operating procedures
    for them to follow, and they have continued to do the
    referrals.
        But I do have to say allowance rates make up a total--a
    composite of a number of factors. It is not just what you are
    seeing with this conspiracy. It really does depend on the
    demographics of a population, it depends on the age, it depends
    on the education, it depends on the poverty level that exists,
    it depends on the jobs and the economy.
        So you can't draw a conclusion just by looking at the
    allowance rate, but you have to look behind it. We also asked
    for a special study where they did a 1,000-case analysis of
    what the Disability Determination Service was doing, and when
    they looked at those cases, they also made special referrals to
    the OIG, but at the same time they determined that the quality
    and accuracy of the decision making was equal to or better than
    the national average.
        In addition, as I have said before, we have had help from
    outside my region as well as within the region. So I really
    established eyes and ears to look at these cases to see if we
    could pick up any special trends and analysis and continue with
    the reporting of fraud.
        In addition to that, I have taken my own Federal resources
    from my field offices in Puerto Rico, and I could ill afford
    it, to devote them to training them on medical decisions and
    looking at specific cases.
        So I actually looked at, in working with the OIG, cases
    from specific areas in Puerto Rico to try to identify patterns.
    We would move it to ZIP codes and establish information that
    the OIG could use.
        Chairman JOHNSON. When did she first inform you of this
    effort?
        Mr. O'CARROLL. Well, Chairman, we have been working in
    conjunction with Regional Commissioner Disman and her office
    right from the beginning in 2009 when we heard about this. From
    there on we started referring cases to her for review. So we
    have been pretty much working united on this thing for the last
    few years.
        Chairman JOHNSON. Were you satisfied with what the answers
    were that you were getting?
        Mr. O'CARROLL. Yes. As we keep going with this, it is so
    complicated on it, and there are so many different tentacles to
    this situation, it has taken a lot of interaction back and
    forth and education on the part of our agents in terms of
    reviewing files, and I have got to say it has been a very good
    cooperation on this one.
        Chairman JOHNSON. Well, you know, if the Federal quality
    reviewers are saying the decisions are right, either we have
    got more fraudulent evidence out there, or we really need to
    take a good look at the statute defining disability.
        Mr. Becerra, do you wish to question?
        Mr. BECERRA. Yes, Mr. Chairman, thank you.
        And I think the admonishment that the Chairman just made
    is, I think, something all of us would agree with at this dais,
    and that is that we have to hunt this stuff down as quickly as
    we can. No one wants to see any kind of report of fraud,
    because it is what undermines the confidence that the people
    have that when they pay these Social Security contributions,
    these taxes to Social Security, that they will be used for the
    right purposes.
        So we appreciate, Ms. Disman, everything that your people
    have done, especially the line workers who often times don't
    get to be here to explain exactly what they have done. Please
    tell them that we appreciate that they were the ones that
    detected this, and that we hope they have the resources they
    will need to continue to be able to continue to do that. By the
    way, I also hope that you are able to keep those experienced
    staff, who probably have the knowledge it takes to sort of
    understand when something looks a little fishy on those
    applications.
        So I think you answered the first question I was going to
    ask, and that is what are you doing today to try to make sure
    you can prevent this type of fraud from occurring again when
    the Chairman asked some questions.
        So let me ask this: It all seems to hinge on this former
    employee who knew how the office operated, who sort of
    understood what your reviewers are looking for to determine if
    an application passes that bar so that it goes to the next step
    of getting closer to being approved.
        I agree with you and your line workers that if you could
    descend on this guy with every tool you have, we should,
    because he breached a trust. He learned the system, and then
    once he left and probably took a decent retirement with him, he
    still went ahead and shafted the very system that helped him.
    Those kind of guys don't even belong behind bars.
        Anyway, I would say that what you should do is give us a
    sense. There are probably several other people who have learned
    the system, understand what your disability reviewers are
    looking for, and therefore could tailor this fabricated
    evidence to look like they qualify. And unless you are really
    good--it is like when Sam, the chairman, and I talk about these
    fake IDs that are used to do all sorts of things including
    getting employment, an employer looks at this thing, and this
    looks like a real Social Security or a real driver's license,
    and, lo and behold, it is fake.
        How do you get to the point where you can prevent that from
    occurring? Because there are a whole bunch of former Social
    Security employees who are probably doing great work defending
    a lot or representing a lot of future beneficiaries or
    beneficiaries today. We don't want to indict everyone who just
    happens to have done good work and knows the system, but how do
    you make sure that those who know how they might be able to
    game the system aren't doing that?
        Ms. DISMAN. Well, I have to agree with your comments about
    the former employee, and one of the things that I hope is that
    this indictment and what has taken place in Puerto Rico serves
    as a notice to any former employee and anyone that we will find
    the fraud, we will investigate it, and you will face criminal
    charges and perhaps imprisonment.
        I will tell you we used this opportunity of the indictment
    to send out a message throughout Social Security to talk about
    what took place, to remind people about reporting it, how to
    report it, what to look for, and to continue to do it. How we
    really save this--and this hotline that the inspector general
    mentioned is bringing in information as to some other
    nonattorney reps that may exist. We do not know yet if they are
    former employees or just nonattorney reps.
        Having said that, I can't say a lot more because there is a
    grand jury investigation, but I will tell you that we are
    looking very closely at cases. We are trying to come up with
    patterns. It takes resources. I can tell you my regional office
    that helped do all this analysis and is working with the
    inspector general is down 22 percent in the last 3 years.
        I have moved resources from doing other work that Social
    Security requires to focus on this investigation. And this
    investigation will take place, and others, by doing on-the-
    ground work, analytical work, hard work. But I do want to send
    a message to anyone that is out there: If you commit fraud
    against our programs, we will find it, and the Inspector
    General will find it, and you will serve the appropriate
    sentence.
        Mr. BECERRA. Well, I hope you can communicate to the U.S.
    attorney who is handling the prosecutions in this case that we
    hope that they throw not just the book, but the kitchen sink at
    these guys, including the doctors, because the doctors made it
    possible for this medical evidence to look real. And this
    former employee should be severely punished however the law
    allows it, but those doctors as well. Too often these
    professionals who abuse their own license to practice get off
    very easily, and before you know it, they are out there
    practicing again.
        I hope you can send a very clear message, especially, Mr.
    O'Carroll, as you said, this is the worst case of conspiracy
    and fraud that we have seen under SSA, that you will descend on
    these individuals as aggressively as you can. And if there is
    anything we can do to help by contacting the Department of
    Justice or the U.S. attorney to say, we need you to set an
    example so you don't have to come and testify in the future
    about these kinds of fraud cases, let us know, because this
    is--and I think this is a small, minute fraction, but it does
    spoil it for all those hard-working Americans who ultimately do
    qualify, are truly eligible for the benefit that they have paid
    for.
        So we urge you to continue to work. We thank you for what
    you are doing. And know that you have the support of, I think,
    this Congress to try to really go aggressively at any fraud
    that may occur out there. And I hope that we heed your guidance
    about resources; that you can only do so much and stretch a
    dollar so far in trying to get this done. And it is pound
    foolish to cut your resources and then find the fraud occurred
    because you don't have the personnel available to sort of catch
    it, and then have to spend lots of money and a lot of your
    personnel resources to now try to go after the bad guys who
    defrauded the system.
        But thank you very much for being here and for all your
    testimony.
        Chairman JOHNSON. Thank you, Mr. Becerra.
        Mr. Renacci, would you care to question?
        Mr. RENACCI. Thank you, Mr. Chairman, and I thank the
    witnesses for their testimony.
        Ms. Disman, you sound sincere, and I heard you say one of
    your mottos was ``right check to the right person,'' and
    clearly there was some systematic failures that occurred. So
    let's not talk about Puerto Rico as much as maybe you can help
    me with your office and other offices in the country.
        I guess I am concerned about uniform qualifications for DDS
    examiners. Can you tell me the qualifications of the examiners
    in the facilities that you oversee? And what I am asking is I
    understand some have high school educations, all the way to
    graduate school. What is their background and experience,
    because these are the frontline people.
        Ms. DISMAN. Well, I think to understand it, the DDSs are
    State employees or Commonwealth employees, and so they are not
    actually employed by Social Security. We pay the freight for
    it, the costs of it, and we train them. The States have
    different standards as to the qualifications for the employees.
    In most places it is a college graduate. For example, in the
    State of New York they have even nurses that are already come
    up and be disability examiners.
        So it varies by State. But we also do a very extensive
    disability training program for them. So they are not really
    considered proficient for about a 2-year period. They go
    through stage training. And we also--they are tested, they are
    mentored. So it is a very, very intense program for it.
        And, again, qualifications vary, but we have been looking
    at this on a national level in Social Security. There has been
    a task force looking at what type of standards should we try to
    set. And since I am not responsible for policy, there is a task
    force working on it, and I can get more information for the
    record for you.
        Mr. RENACCI. I would appreciate that.
        [Transcript Insert 2 follows:]

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        Mr. RENACCI. But you do agree there could be a high school
    graduate and a graduate student, and they are making some of
    the up-front decisions?
        Ms. DISMAN. It could be from high school through graduate
    or postgraduate.
        Mr. RENACCI. They have the training--you said they have a
    2-year training, but they could be making decisions during that
    training process, correct?
        Ms. DISMAN. They make decisions, but there is a quality
    control in the DDSs. There is an internal quality. They don't
    function on their own. They also have to pass a number of tests
    in order to succeed. So they are not left to their own devices,
    because we all collectively know that the medical decision that
    they make is a gateway, and we want to make sure that that
    medical decision is appropriate.
        Mr. RENACCI. Mr. O'Carroll, can you tell me, were video
    hearings used in some of the Puerto Rico cases?
        Mr. O'CARROLL. Mr. Renacci, no, I am not familiar with
    whether videos were used in those hearings.
        Mr. RENACCI. Do you know, Ms. Disman?
        Ms. DISMAN. I do not know, but I will tell you in looking
    at the universe of cases, very few of the 6,600 cases that we
    are looking at that are involved actually were made at the ALJ
    level. So it is a small amount. It is about 100.
        Mr. RENACCI. Do you know how much use we have of video
    hearings? Across the country I am talking about.
        Ms. DISMAN. Since that is not my area of responsibility, if
    I can get the information for the record, I would be glad to
    provide it.
        [Transcript Insert 3 follows:]

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        Mr. RENACCI. Mr. O'Carroll, do you know? Is there a
    backlog, and is there a reason we are using, or how many we are
    using? I am just trying to get systematic.
        Mr. O'CARROLL. I don't have a number. I will get it to you.
    But we have done some work, and we are supportive of it.
        Mr. RENACCI. Mr. O'Carroll, can you tell me a little about
    the hurdles OIG has to overcome in order to prosecute those
    that defraud SSA?
        Mr. O'CARROLL. Yes, and this is--probably a good example of
    it is that in order to do a prosecution, it requires a lot of
    criminal evidence and a lot of background on it. And I guess,
    again, in this case here where we had the cooperation of the
    U.S. Attorney's Office, and we were working with them, it was
    probably a little bit easier than we have it in any other
    districts on it in terms of that when we are making our
    presentations to U.S. Attorney's Offices, we are kind of in
    line with all the other Federal agencies, and oftentimes the
    fraud against SSA is usually in smaller amounts of money than
    what U.S. Attorney's Offices are looking to do their
    prosecutions on.
        So I guess the long answer to this thing is that it is very
    difficult to get prosecutions when you are competing against,
    you know, bank robbers or whatever on it, but we do do a lot.
    We use the State, we use local prosecutions as well as Federal,
    and we also use civil monetary penalties, again, to assert
    fines and penalties on people.
        Mr. RENACCI. I would just say in conclusion, and I am
    running out of time, that in the private sector--and, of
    course, I was in investigations from a CPA standpoint, many
    financial institutions--even though one person may have caused
    the problem, there are usually systematic issues that allowed
    that one person to cause that problem. So I am hoping that we
    are looking across the board at all our systems. And I thank
    you for your testimony.
        I yield back.
        Chairman JOHNSON. Mr. Kelly, do you care to question?
        Mr. BECERRA. Why don't we just reduce the time for each of
    the two so that way we can make sure we make votes.
        Chairman JOHNSON. I will give you a minute.
        Mr. KELLY. All right. Just very quickly. Thank you.
        I think my concern is because when you look at the amount
    of money that we are talking about, and are we talking about
    very small percentages, but a very small percent on a very
    large sum is great. And I think the integrity of the program
    always does come down to there are certain people that just
    find a way, as Mr. Renacci said, with these systemic
    opportunities.
        I look at Puerto Rico that has an unemployment somewhere
    beyond 13, 14 percent, so they are going to find a way to make
    money somewhere or get revenue somewhere. So you look to where
    the low-hanging fruit is, and apparently they found a way to
    gain revenue.
        I know this is tough, and I know you are trying to do an
    awful lot of things, but I see you have done a good job of
    redeploying some of your funds and looking at prioritizing your
    spending, and in a time when things get tough and coming out of
    the private sector, sometimes you don't have a choice, you just
    have to prioritize. I think what you have done is quite wise,
    although the amount of this is staggering.
        The chances of us ever getting that money back, slim to
    none? I mean, seriously, how much--what is the total amount? I
    mean, it runs into the billions, right, in overpayments or
    fraudulent payments?
        Ms. DISMAN. At this point I cannot tell you that because we
    are reviewing our 6,600 cases, and from our initial review of
    some of the cases, we just started this review, people have
    other medical evidence that would sustain it. So, for example,
    I am seeing medical evidence from the Veterans Administration
    and other places. So you can't make the assumption because we
    identified 6,600 cases that had these medical providers, that
    ultimately it was based on that that made the decision.
        Mr. KELLY. But in my own business, having dealt with when
    you get to the situation of accounts payable and them being
    overdue, the longer they are overdue, the less chance you have
    of recovering. So the recovery process on this--and we are
    talking in the billions of dollars in overpayments; is that
    correct?
        Ms. DISMAN. I don't think you are talking about billions.
        Mr. KELLY. Okay. All right. The chances of getting any of
    that money back?
        Ms. DISMAN. I think there is a good chance, because we have
    a very good debt process. And ultimately, remember, these
    people came on our rolls when they age. There is such a thing
    called retirement. There is offsets. There is a lot of other
    things we can do.
        I think the bottom line is we have to finish this rereview
    to see how many people really are involved and would no longer
    be eligible for benefits. And we intend to take the full action
    in recovering these overpayments.
        Mr. KELLY. My concern is always that, you know, there is a
    way of running out the clock on this stuff, and after a point
    the cost of recovery is greater than what you can possibly
    recover, because usually the recovery amount is very small.
        But I am going to yield back, Mr. Chairman, because we are
    running out of time, and I think Mr. Thompson has a question.
    Thank you all for being here.
        Chairman JOHNSON. Thank you all for your questions.
        Mr. Thompson, do you care to question?
        Mr. THOMPSON. Thank you, Mr. Chairman, and thank you to all
    of you for being here. Just a couple of things.
        You had mentioned, ma'am, that there is a policy part of
    this, and as you figure out what sort of policy is needed or
    needed to be changed, I would hope that you would consider our
    subcommittee so we can help facilitate that if any of that has
    to be done statutorily.
        In regard to getting the money, first, I couldn't agree
    more with Mr. Becerra and his comments on the fact that there
    is a special place in hell for people who would cheat this
    critical system, a system that is important to so many people.
    So I would hope that you would take every effort to make sure
    that whatever punishment is available, that it is doled out,
    because that sends a strong message to other folks. And we have
    all seen too many times when people who perpetrate this type of
    foul behavior walk. It is not right. So I hope you would do
    that.
        In regard to getting the money back, I think there is two
    kinds of money that we are talking about. There is the money
    that was paid out that shouldn't have been paid out, and I
    trust that your comments about getting that back, that you are
    going to do everything you can. But how about the money that it
    is costing us to go after this? You have had to rearrange
    priorities. We are spending a lot of dough to track these guys
    down, to investigate this. Is there a policy in place that
    allows us to go back and capture that?
        Ms. DISMAN. Well, I think I would have to yield to that to
    the Inspector General since he is involved with the U.S.
    attorney on recovery of assets.
        Mr. O'CARROLL. Mr. Thompson, in fact we have been in touch
    with the U.S. Attorney's Office a number of times over the last
    few weeks. But one of the issues that happened when we made the
    arrest on, in fact, the former SSA employee was we seized $1.7
    million worth of assets from him. Those assets were turned over
    to the Justice Department as assets, and eventually what will
    happen is that if a judge in the case assesses that he has to
    repay money to SSA, SSA can petition Justice Department to get
    at those seized assets.
        Mr. THOMPSON. But what I am talking about is not just the
    money they took inappropriately, but the cost of figuring this
    out and trying to get that. Can we get payment for that?
        Mr. O'CARROLL. I would like to see a way that we can
    penalize them that way, and I think that we can probably put
    that before the judge.
        Mr. THOMPSON. I think we should look at that. I think that
    would be important to do.
        Mr. O'CARROLL. We will do that.
        Mr. THOMPSON. Thank you.
        Chairman JOHNSON. We have got votes going on. Mrs. Black, I
    am sorry. Have you got a quick question?
        Mrs. BLACK. They can get back to me on this. I am just
    curious about when we look at recovery, not in this particular
    incident, but in recovery across the board, I am very
    interested in what percentage--looking over maybe a 10-year
    period, what percentage do we actually recover? And in that I
    would also like the figure what is the cost of the recovery?
    That should be one area. And then the other is the actual
    dollars that were inappropriately committed to the client, how
    much of that do we actually get back? So two different areas.
        Thank you, Mr. Chairman. I appreciate it.
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        Chairman JOHNSON. You know, we have got to get serious
    about better protecting this program which is paid for by
    America's hard-working wage earners, and Americans want, need
    and deserve no less.
        I thank you all for being here today. And we have votes, so
    we are going to call it a day. With that, the subcommittee
    stands adjourned. Thank you for being here.
        [Whereupon, at 3:30 p.m., the subcommittee was adjourned.]
        [Questions for the record follow:]

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