[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


                       STOPPING DISABILITY FRAUD:
                    RISK, PREVENTION, AND DETECTION

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

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 OF THE

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

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 26, 2017

                               __________

                          Serial No. 115-SS02

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]         


                  U.S. GOVERNMENT PUBLISHING OFFICE                    
33-390                  WASHINGTON : 2019                   
          



                      COMMITTEE ON WAYS AND MEANS

                      KEVIN BRADY, Texas, Chairman

SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
DEVIN NUNES, California              SANDER M. LEVIN, Michigan
PATRICK J. TIBERI, Ohio              JOHN LEWIS, Georgia
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
VERN BUCHANAN, Florida               JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska               EARL BLUMENAUER, Oregon
LYNN JENKINS, Kansas                 RON KIND, Wisconsin
ERIK PAULSEN, Minnesota              BILL PASCRELL, JR., New Jersey
KENNY MARCHANT, Texas                JOSEPH CROWLEY, New York
DIANE BLACK, Tennessee               DANNY DAVIS, Illinois
TOM REED, New York                   LINDA SANCHEZ, California
MIKE KELLY, Pennsylvania             BRIAN HIGGINS, New York
JIM RENACCI, Ohio                    TERRI SEWELL, Alabama
PAT MEEHAN, Pennsylvania             SUZAN DELBENE, Washington
KRISTI NOEM, South Dakota            JUDY CHU, California
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
TOM RICE, South Carolina
DAVID SCHWEIKERT, Arizona
JACKIE WALORSKI, Indiana
CARLOS CURBELO, Florida
MIKE BISHOP, Michigan

                     David Stewart, Staff Director

                 Brandon Casey, Minority Chief Counsel

                                 ______

                    SUBCOMMITTEE ON SOCIAL SECURITY

                      SAM JOHNSON, Texas, Chairman

TOM RICE, South Carolina             JOHN B. LARSON, Connecticut
DAVID SCHWEIKERT, Arizona            BILL PASCRELL, JR., New Jersey
VERN BUCHANAN, Florida               JOSEPH CROWLEY, New York
MIKE KELLY, Pennsylvania             LINDA SANCHEZ, California
JIM RENACCI, Ohio
JASON SMITH, Missouri


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of April 26, 2017, announcing the hearing...............     2

                               WITNESSES

Sean Brune, Assistant Deputy Commissioner, Office of Budget, 
  Finance, Quality and Management, Social Security Administration     9
Seto J. Bagdoyan, Director, Forensic Audits and Investigative 
  Service, Government Accountability Office......................    21

                        QUESTIONS FOR THE RECORD

Question asked in testimony by The Honorable David Schweikert, of 
  Arizona, to Sean Brune, Assistant Deputy Commissioner, Office 
  of Budget, Finance, Quality and Management, Social Security 
  Administration.................................................    58
Questions submitted by The Honorable Linda Sanchez, of 
  California, to Sean Brune, Assistant Deputy Commissioner, 
  Office of Budget, Finance, Quality and Management, Social 
  Security Administration........................................    59
Questions submitted by The Honorable Sam Johnson, of Texas, 
  Chairman, Subcommittee on Social Security, to Sean Brune, 
  Assistant Deputy Commissioner, Office of Budget, Finance, 
  Quality and Management, Social Security Administration.........    62

                       SUBMISSION FOR THE RECORD

Shannon Benton, Executive Director, The Senior Citizens League...    64

 
                       STOPPING DISABILITY FRAUD:
                    RISK, PREVENTION, AND DETECTION

                              ----------                              


                       WEDNESDAY, APRIL 26, 2017

             U.S. House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Social Security,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 2020, Rayburn House Office Building, Hon. Sam Johnson 
[Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]

                                  ADVISORY

                      FROM THE COMMITTEE ON WAYS AND MEANS

                          SUBCOMMITTEE ON SOCIAL SECURITY

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
Wednesday, April 26, 2017
SS-02

                 Chairman Johnson Announces Hearing on

              Stopping Disability Fraud: Risk, Prevention,

                             and Detection

    House Ways and Means Social Security Subcommittee Chairman Sam 
Johnson (R-TX), announced today that the Subcommittee will hold a 
hearing entitled ``Stopping Disability Fraud: Risk, Prevention, and 
Detection.'' The hearing will focus on the agency's ability to identify 
and manage fraud risk, and the status of the Social Security 
Administration's antifraud initiatives. The hearing will take place on 
Wednesday, April 26, 2017 in room 2020 of the Rayburn House Office 
Building, beginning at 10:00 a.m.
      
    In view of the limited time to hear witnesses, oral testimony at 
this hearing will be from invited witnesses only. However, any 
individual or organization may submit a written statement for 
consideration by the Committee and for inclusion in the printed record 
of the hearing.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
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which you would like to make a submission, 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 document, in compliance 
with the formatting requirements listed below, by the close of business 
on Wednesday, May 10, 2017. For questions, or if you encounter 
technical problems, please call (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
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call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four 
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    Note: All Committee advisories and news releases are available at
    http://www.waysandmeans.house.gov/

                                 
    Chairman JOHNSON. Thank you all for being here. Welcome to 
today's hearing on how Social Security is preventing and 
identifying fraud in its disability program.
    Last month Eric Conn, a lawyer from Kentucky, pled guilty 
to fraud that would have caused Social Security to pay $550 
million in lifetime benefits due to fraudulent submissions. 
Back in Texas, we would say that Conn is as crooked as the 
Brazos River. And it is pretty crooked. In his plea, Mr. Conn 
said he worked with doctors to submit false medical evidence 
and that he paid Social Security administrative law judges 
around $10,000 every month to approve claims. Conn was at this 
since 2004.
    Sadly, this isn't the only major fraud case to hit the 
disability program in recent years. There is New York, where 
New York City police officers and firefighters claimed 9/11-
related injuries, when many of them never even worked at Ground 
Zero, in order to get disability benefits they didn't deserve.
    And Puerto Rico, where a former Social Security employee 
was in cahoots with a dirty doctor, who provided fraudulent 
medical evidence that resulted in taxpayer-funded benefits that 
should never have been paid in the first place.
    Like organized crime, these recent scandals reveal fraud 
rings made up of doctors, lawyers, and even Social Security's 
own employees. It is a get-rich-quick scheme worth tens of 
thousands of dollars for every person who illegally benefits. 
These fraud cases show how Social Security hasn't always been 
able to stop disability fraud.
    Now, while the Bipartisan Budget Act of 2015 included many 
commonsense ideas from this Subcommittee that try to address 
the problem, these cases have brought to light the reality is 
that it is like playing catchup. Bottom line, Social Security 
has to be one step ahead of the fraudsters.
    At today's hearing, we are going to take a hard look at 
Social Security's efforts to fight fraud in its disability 
programs and stop it before a single dollar of benefits is 
paid. Social Security has a number of antifraud initiatives, 
but without any way to judge their effectiveness, we don't know 
if they are working or not.
    Today the Government Accountability Office will release its 
first report looking at agency efforts under its new fraud risk 
management. This report looks at how well Social Security is 
assessing and managing fraud risk in its disability programs. 
As we will hear today, in recent years, while Social Security 
has taken some steps in the right direction, there is still 
important work to do to prevent fraud. Social Security pays 
hundreds of billions of dollars in benefits each year, and if 
left undiscovered, fraud rings like those uncovered in 
Huntington, West Virginia, New York City, and Puerto Rico, have 
the potential to cost hardworking taxpayers billions of 
dollars.
    I know stopping fraud is a goal that we all share, and 
although Social Security has increased its efforts to fight 
fraud, we need to be sure it is doing all it can to do so.
    I thank our witnesses for being here today, both of you, 
thank you so much, and look forward to hearing your testimony.
    I will now recognize Mr. Larson for any opening statement 
he cares to make.
    Mr. LARSON. Thank you, Mr. Chairman. And let me further 
underscore what the Chairman had to say with respect to the 
work of this Committee, and I would like to applaud his 
efforts, and particularly that of my predecessor on this 
Committee, Xavier Becerra, who worked extraordinarily well 
together.
    We owe the 61 million Social Security beneficiaries 
efficient administration and our most robust efforts to combat 
fraud, waste, and abuse wherever it exists. And while the 
actual number of fraud and erroneous payment cases is 
relatively small, those who seek to defraud the Social Security 
Administration, and the beneficiaries they serve, deserve 
nothing less than the harshest punishment. I don't know about 
that crooked river in Texas, but certainly we ought to make 
sure that is the case.
    And, again, I want to applaud this Chairman and my 
predecessor, and the continued work I know that this Committee 
will do. Many of the important actions the Social Security 
Administration has already taken to combat fraud were the 
results of the efforts here by this body.
    The Social Security Administration, as the Chairman 
established already, uncovered fraud and went after fraud that 
existed in West Virginia, in New York City, and in Puerto Rico, 
as the Chairman has indicated. For persons who abuse the public 
position of trust, such as doctors, attorneys, and current and 
former SSA employees, the law increased the penalties to 10 
years in prison. I think in everyone's estimation on this 
Committee and in the public, anyone who messes with the sacred 
trust of the American people in the program and government that 
they rely on the most deserves the maximum amount of punishment 
that the law can provide. And, again, I want to compliment our 
Chairman and the work of this Committee.
    I also want to point out, though, that what we need to do 
as well is to take a look at the current funding levels. And 
while there has been a very focused area on fraud, abuse, and 
waste, we have noticed that while the increase of recipients 
with the baby boomers, coming through the process right now, 
has risen dramatically, the cuts in the overall Administration 
have dropped. This is problematic. Many of the frontline people 
in Social Security are actually the people that are out there 
recognizing and preventing the fraud, abuse, and waste.
    They are the ones that pick up on the patterns. They are 
the ones that, along with the Inspector General, are working on 
the kinds of reforms and processing that we need to catch this 
at the early stage. Further compounded by this issue, the very 
people we are sworn to serve then find themselves in longer 
waiting lines, in trouble that is reached in the disability 
areas, the worst it has ever been at a wait that exceeds 18 
months, and in large part because there isn't the capacity 
there for us to reach out and serve these very deserving 
people.
    And so I think it is important that we catch up on the 
fraud and we continue, as this Committee and this Chairman has 
led, to do so.
    We also must recognize the very dire needs of the large 
group of people that are coming through this system while we 
are experiencing even further cuts, who are also disadvantaged 
by the fact that the technology that we have at our disposal 
has not been fully modernized within the Social Security 
Administration so that we can use both technology and the very 
human services that are required in the face-to-face contacts 
throughout our country and in all of our districts by the 
Social Security Administration. It is my sincere hope that we 
can do that.
    Also, Mr. Chairman, if I might, I would like to submit for 
the record an LA Times article on the Trump proposal to 
eliminate the Social Security payroll tax and why that could be 
extraordinarily problematic in terms of our ability not only to 
fight fraud, but also, I think, jeopardizes the ability of the 
fund itself.
    And as this Committee in general--in the Subcommittee, but 
also the Committee in general--considers tax reform, I believe 
that this and other articles are salient, and I would ask 
permission to submit for the record.
    Chairman JOHNSON. Without objection.
    [The submission of the Honorable Mr. Larson follows:]
    
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    Mr. LARSON. Thank you, Mr. Chairman.
    I also would like to thank our witnesses, and we look 
forward to hearing from them and the ensuing questions that 
will come.
    Chairman JOHNSON. Thank you.
    As is customary, any Member is welcome to submit a 
statement for the hearing record.
    Before we move on to our testimony today, I want to remind 
our witnesses, please limit your oral statements to 5 minutes. 
We get fidgety up here. However, without objection, all of the 
written testimony will be made a part of the hearing record.
    We have two witnesses today seated at the table. They are 
Sean Brune, Assistant Deputy Commissioner, Office of Budget, 
Finance, Quality and Management, Social Security 
Administration. That is a long title.
    Seto Bagdoyan, Director, Forensic Audits and Investigative 
Service, Government Accountability Office, is also with us.
    Mr. Brune, welcome and thanks for being here. Please 
proceed.

STATEMENT OF SEAN BRUNE, ASSISTANT DEPUTY COMMISSIONER, OFFICE 
  OF BUDGET, FINANCE, QUALITY AND MANAGEMENT, SOCIAL SECURITY 
                         ADMINISTRATION

    Mr. BRUNE. Chairman Johnson, Ranking Member Larson, and 
Members of the Subcommittee, thank you for inviting me to 
discuss how the Social Security Administration works to detect 
and prevent fraud in our programs. I am Sean Brune, Assistant 
Deputy Commissioner for Budget, Finance, Quality and Management 
at Social Security Administration.
    We appreciate your leadership on this important topic. In 
particular, we appreciate the support the Congress provided in 
passing recent legislation, which included provisions that have 
already enhanced and strengthened our ongoing antifraud 
efforts.
    Even with those new tools, we must remain constantly 
vigilant to protect the agency's benefit programs from fraud.
    It is despicable that some people will try to take 
advantage of our programs, which serve the most vulnerable 
members of society. Our message to those who attempt to defraud 
Social Security is clear: We will find you, we will seek the 
maximum punishment under law, and we will fight to restore the 
money you have stolen from the American people.
    Today I will give you an overview of our antifraud efforts 
since we last discussed this issue with the Subcommittee in 
2014. We would like to thank the Government Accountability 
Office for recognizing the progress we have made and their 
acknowledgement that we have established an organizational 
culture and structure conducive to fraud risk management.
    In 2014, we established the Office of Anti-Fraud Programs 
to centralize oversight and accountability for our antifraud 
efforts. This office leads our ongoing work to maintain 
policies and internal controls to detect and prevent fraud 
before we make a benefit payment.
    We agree with GAO's recommendations to complete a 
comprehensive fraud risk assessment of our disability program. 
We will complete this assessment by the end of the year, and we 
are moving forward to integrate ongoing risk assessments into 
our antifraud efforts.
    Next I would like to discuss a few important aspects of our 
antifraud program.
    We are excited to expand our use of data analytics 
technology to combat fraud, including use of the Anti-Fraud 
Enterprise Solution, or AFES tool. AFES is a multi-year, multi-
phase initiative that will replace and expand our current 
antifraud systems. The tool will provide advanced data 
analytics to help us identify and investigate high risk 
transactions across all of our programs. It will run in real 
time to identify situations that look similar to known fraud 
schemes or are otherwise unusual, and score cases for their 
relative fraud risk. The tool will integrate with the fraud 
referral form to improve our coordination and information 
sharing about alleged fraud with the Office of Inspector 
General, OIG.
    We continue to expand our Cooperative Disability 
Investigations, or CDI, program. The CDI program places our 
partners in OIG and law enforcement in a position to stop 
people who attempt to fraudulently receive benefits. Chairman 
Johnson and this Subcommittee have long championed the CDI 
program, and we thank you for that support. In particular, 
recent legislation requires the agency to expand the CDI 
program to cover all States and territories. We currently have 
39 units that cover 33 States, the Commonwealth of Puerto Rico 
and the District of Columbia. We will continue to work within 
available agency funding to secure law enforcement partners to 
cover the remaining 17 States and territories.
    In another important effort, for more than a decade our 
Fraud Prosecution Project has sent our attorneys to the 
Department of Justice to act as Special Assistant U.S. 
Attorneys. These attorneys have increased the number of 
prosecutions of violations of the Social Security Act. They 
obtain criminal sanctions, including imprisonment, and recover 
funds for the agency through criminal restitution and 
forfeiture.
    Before concluding my statement, I would like to acknowledge 
the contribution of our frontline employees. In all our 
antifraud efforts, our frontline employees remain an important 
line of defense in detecting and preventing fraud. Our 
employees prevent fraud by promptly referring allegations to 
the OIG for investigation and by assisting the OIG in 
developing case information for fraud investigations.
    As I have discussed today, we have a comprehensive and 
integrated antifraud program. We use a risk-based framework to 
manage our fraud risk and we are working to increase prevention 
through advanced predictive analytics. We will measure our 
progress and continue to keep you informed as we move forward.
    As an important reminder, everyone can play a role in 
protecting our investment in Social Security. If you suspect 
fraud, report it online to the OIG at oig.ssa.gov/report or by 
phone through the OIG's Social Security Fraud Hotline at 1-800-
269-0271.
    I would be happy to answer any questions you have.
    [The prepared statement of Mr. Brune follows:]
    
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    Chairman JOHNSON. Have you seen any decrease in it lately?
    Mr. BRUNE. Decrease in fraud? I think our efforts are 
positioned to mitigate the evolving fraud risk.
    Chairman JOHNSON. Good.
    Mr. Bagdoyan, you are recognized.

 STATEMENT OF SETO J. BAGDOYAN, DIRECTOR, FORENSIC AUDITS AND 
    INVESTIGATIVE SERVICE, GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. BAGDOYAN. Thank you, Mr. Chairman. Chairman Johnson, 
Ranking Member Larson, and Members of the Subcommittee, I am 
pleased to appear before you this morning to discuss GAO's new 
report on SSA's antifraud activities in its disability 
insurance programs, whose expenditures total over $200 billion 
a year to about 19 million recipients.
    Given their scope and scale, these programs are inherently 
risky and vulnerable to fraud, and recent cases, like the ones 
you mentioned, Mr. Chairman, highlight schemes through which 
individuals fraudulently obtained hundreds of millions of 
dollars in disability benefits.
    Today I will highlight three key takeaways from this 
report. First, SSA has taken some steps to establish an 
organizational culture and structure conducive to fraud risk 
management in its disability programs. Specifically, SSA 
instituted mandatory antifraud training, established a 
centralized antifraud office to coordinate and oversee the 
agency's fraud risk management activities, and communicated the 
importance of such efforts.
    These actions are generally consistent with GAO's fraud 
risk framework, a copy of which is right by my side here, a set 
of leading practices intended to guide Federal program managers 
when developing antifraud activities in a strategic way. 
However, SSA's antifraud office, the Office of Anti-Fraud 
Programs, or OAFP, faces challenges establishing itself as the 
coordinating body for the agency's antifraud initiatives. For 
example, the OAFP has had multiple acting leaders, though SSA 
recently appointed a permanent leader to provide accountability 
for the agency's antifraud activities.
    Second, SSA has taken initial steps to identify and address 
fraud risks in its disability programs, but has as yet to 
comprehensively assess these risks or develop a strategic 
approach to help ensure its antifraud activities effectively 
mitigate these risks. Over the last year, SSA gathered 
information about fraud risks, but these efforts generally have 
not been systematic and did not assess the significance, 
likelihood, or impact of all risks that were identified.
    SSA also has several prevention and detection activities in 
place to address known fraud risks in its disability programs, 
such as fraud examination units, which review disability claims 
to help detect fraud perpetrated by third parties. Further, SSA 
has not developed and documented an overall antifraud strategy 
that aligns its antifraud activities to its fraud risks. 
Leading practices call for Federal program managers to conduct 
periodic fraud risk assessments and develop a strategy to 
address identified fraud risks.
    Without conducting a fraud risk assessment that aligns with 
leading practices and developing an antifraud strategy, SSA's 
disability programs likely remain vulnerable to new fraud 
schemes, and the agency will not be able to effectively 
prioritize its risks and related antifraud activities.
    Third, SSA monitors its antifraud activities through the 
OAFP and its advisory body, the National Anti-Fraud Committee, 
but the agency does not have effective performance metrics to 
evaluate the impact of such activities. The OAFP has 
responsibility for establishing performance and outcome-
oriented goals for them. It collects metrics to inform reports 
about its antifraud initiatives, and the NAFC receives regular 
updates about antifraud initiatives.
    However, the comprehensiveness and relevance of the metrics 
varies across initiatives, and some initiatives do not have any 
metrics. Of the 17 initiatives listed in SSA's 2015 antifraud 
report, ten had metrics that did not focus on outcomes and four 
did not have any metrics. For example, SSA lacks a metric to 
help monitor the effectiveness of its fraud examination units. 
Leading practices in fraud risk management call for managers to 
monitor and evaluate antifraud initiatives, with a focus on 
measuring outcomes.
    Without outcome-oriented performance metrics, SSA may not 
be able to evaluate its antifraud activities, review progress, 
and determine whether changes are necessary.
    In closing, I would underscore that it is essential for SSA 
to place a high policy priority on deploying effective 
preventative processes and controls to help narrow the window 
of opportunity for fraudulent activity in its disability 
insurance programs and safeguard the government's substantial 
investment in these programs. Fully and timely implementing the 
four recommendations in our report would be essential in this 
regard.
    Chairman Johnson, that concludes my remarks. I look forward 
to the Subcommittee's questions.
    [The prepared statement of Mr. Bagdoyan follows:]
    
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Chairman JOHNSON. Thank you, sir. I appreciate that.
    As is customary, for each round of questions, I will limit 
my time to 5 minutes and will ask my colleagues to also limit 
their questioning time to 5 minutes as well.
    Mr. Brune, a longstanding frustration of mine is how hard 
it has been for Social Security to get some of its fraud cases 
prosecuted. What is Social Security doing to make sure that the 
cases get prosecuted and what role do Social Security Special 
Assistant U.S. Attorneys play?
    Mr. BRUNE. Chairman Johnson, thank you for the question. 
For over a decade, in partnership with the Department of 
Justice, we have placed dozens of our attorneys from the Office 
of General Counsel in several United States Attorney's Offices 
around the country to bring Federal criminal charges against 
individuals who defraud Social Security.
    These Special Assistant U.S. Attorneys (SAUSAs) are 
dedicated to Social Security fraud cases, and they have 
increased the number of prosecutions. During fiscal year 2017 
in the first 6 months of the fiscal year, our SAUSAs, as was in 
my written statement, obtained at least 119 guilty pleas, 
leading to over $10.3 million in restitution. I believe those 
are the outcome-oriented metrics that Mr. Bagdoyan is 
encouraging us to employ. We look to advance more outcome-
oriented metrics. We agree with the GAO recommendation.
    In addition to the SAUSA program, the Special Assistant 
U.S. Attorney program, our Office of Inspector General refers 
fraud cases to the U.S. Attorney's Office, even in 
jurisdictions without fraud prosecutors, and is able to obtain 
convictions in those jurisdictions when the cases meet the 
Office's criteria for prosecution.
    Chairman JOHNSON. It is up to the U.S. Attorney if they 
want to have a Special Assistant U.S. Attorney, and it sounds 
like you are offering up free labor to U.S. Attorneys. Why 
don't all of them take you up on it?
    Mr. BRUNE. Well, I would defer to the Department of Justice 
on that question. We believe the partnership has been very 
successful. We are committed to continuing the Special Fraud 
Prosecution Project.
    Chairman JOHNSON. Thank you. Mr. Brune, it sounds like your 
new antifraud software should quickly identify fraud so we 
don't have more of these multimillion dollar fraud schemes, and 
that is a good thing, but when the time comes to get DOJ to 
prosecute, is it going to be harder to get them to take on a 
case when the dollars aren't as big? In my view, even $1 of 
fraud is a dollar too much.
    Mr. BRUNE. Chairman Johnson, we agree. One dollar of fraud 
is a dollar too much. Our stated position for a long time has 
been we have a zero tolerance for fraud.
    Relative to your question, we believe that fraud 
prosecution is important. It occurs after the fact. Our efforts 
are interested in continuing the prosecution of folks who 
defraud the program, but to increase our preventative 
activities. In that regard, in my written statement I mentioned 
the Anti-Fraud Enterprise Solution. This tool will help us to 
focus our limited resources on the cases that have the highest 
risk, that are, in fact, those third-party facilitator cases, 
and hopefully we will be able to identify them both quicker and 
take more prompt action because of the analytics that we run.
    Chairman JOHNSON. Is there anything you need from the 
Congress to make sure DOJ is prosecuting fraud cases that you 
identify?
    Mr. BRUNE. At this point, I think we have an excellent 
ongoing rapport with the Department of Justice. We are 
committed to maintaining our program and making sure that the 
Special Assistant U.S. Attorneys are positioned to prosecute 
the cases.
    Chairman JOHNSON. Thank you.
    Mr. Larson, you are recognized.
    Mr. LARSON. Thank you, Mr. Chairman.
    Mr. Brune, the Social Security Administration has about 
61,700 employees right now, which is down from over 67,000 in 
2010. That is approaching a 10 percent loss. Is that correct?
    Mr. BRUNE. Approximately, yes.
    Mr. LARSON. Social Security has many more beneficiaries 
today than it did in 2010. Right now there are about 61 million 
people receiving their earned benefits, roughly 7 million more 
than in 2010. That is about a 13 percent increase. Would you 
agree with that?
    Mr. BRUNE. With my quick math, yes, that is about accurate.
    Mr. LARSON. Yeah. My quick math and yours are about the 
same, so, yes.
    Mr. BRUNE. The numbers are the numbers.
    Mr. LARSON. And at the same time, the Social Security 
Administration's basic operating budget has fallen by 10 
percent since 2010 after adjusting for inflation. So you have 
less money, but have to serve more people. Is that a fair 
statement?
    Mr. BRUNE. Our beneficiary rolls have grown, yes.
    Mr. LARSON. So, Mr. Chairman, I would like to submit for 
the record this analysis of SSA's budget numbers by the Center 
on Budget and Policy Priorities, with the Chairman's 
permission.
    Chairman JOHNSON. Without objection.
    [The submission of the Honorable Mr. Larson follows:]

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Mr. LARSON. Does the Social Security Administration or the 
actuaries have projections about how the number of 
beneficiaries will grow in the next few years and in the 
decades facing the large number of baby boomers coming through 
the process?
    Mr. BRUNE. Yes, Congressman Larson. The actuary updates 
those projections regularly.
    Mr. LARSON. And so it is only going to continue to grow.
    My point here is that I think the Chairman needs to be 
applauded, as does the Committee, for addressing the whole 
issue of fraud, but we can't continue, and I don't think we 
give enough credit to the frontline people, and I am going to 
ask Mr. Bagdoyan questions about the culture that has been 
established there, but I don't think we give them enough 
credit, and we can't continue to shrink them and see our 
waiting lists go up while we face this large number of baby 
boomers, like Mr. Pascrell, that are coming through the 
process. So I just wanted to make sure that we had those items 
for the--that data for the record.
    And, Mr. Bagdoyan, you talked at length about the culture 
of antifraud. Could you describe that more, about how--when you 
did your findings that this was embedded within the Social 
Security Administration? And you mentioned different metrics 
that they are not performing up to. And my question would be, 
would they be performing them better if they had the staff and 
the capability and the technology to do so?
    Mr. BAGDOYAN. Well, sure, I would be happy to respond, Mr. 
Larson.
    The culture, we did notice that there are multiple efforts 
underway. Training is one, 97 percent of staff had received 
antifraud training, for example, for fiscal year 2016, so that 
is an important number to hit.
    The establishment of the OAFP as the central unit for 
antifraud activities is also a step in the right direction, and 
it also permeates a cultural shift, if you will.
    And in terms of the resourcing question, that would be 
driven by strategy, which we referred to in our report and also 
I made a couple of remarks about. You have to have a strategy 
that will dictate to you what you exactly need, where, and 
when, and how to deploy it, in order to have a sense of the 
dollars and numbers and technology that you would need.
    Mr. LARSON. Even with this built-in culture, with the 
growth rate of Social Security, there are over 61 million 
beneficiaries now, and the projections are up to 10 years it 
will increase by 28 percent to over 78 million.
    Do you think that is going to require better staffing and 
an increase in staffing or do you think that we can continue at 
the current rates that we are at?
    Mr. BAGDOYAN. Well, again, the level of staffing will be 
dictated by what needs to be done. Right now I think OAFP has 
approximately 60 or so staff to oversee a rather enormous 
portfolio of benefits that are paid out, so that will have to 
be looked at as part of the strategic planning effort, but I 
can't really give you a number or even a guess as to how many 
people they would need.
    You would also have to add processes and procedures as well 
as technology, coordination with stakeholders, and other 
factors to arrive at a whole.
    Mr. LARSON. Acting Social Security Commissioner Carolyn 
Colvin testified to Congress in 2012 about what was happening 
with the error rate and accounts of both overpayments and 
underpayments to beneficiaries. It was well below 1 percent, 
but she noted that back then, it was at 0.36 percent. What she 
observed then is that if Congress wished to reduce errors, the 
error rate further, it needed to stop squeezing the budget of 
the Social Security Administration. Would you agree with that?
    Mr. BAGDOYAN. Well, that was outside the scope of my work, 
but clearly resourcing would have to be looked at going 
forward.
    Mr. LARSON. Thank you.
    Chairman JOHNSON. Mr. Kelly, you are recognized.
    Mr. KELLY. Thank you, Chairman.
    I know both of you come from a lot of experience in the 
private sector. And I think we are all concerned with funding 
and how things get funded, but in the private sector, we have 
seen pretty much the same evolution; as technology has 
developed, we have found out that we can do actually more 
sometimes with less and we have seen people pivoting to 
different ways of making a living.
    What I am trying to understand, in 1990, there were fewer 
than 2\1/2\ percent of working age Americans actually on the 
check. By 2015, the number stood at 5.2 percent. How did that 
change--with all the technology, with all the changes, with all 
the things that we look at in lifestyles, what is driving that 
number? I mean, do either of you have an answer to that?
    And then going through your private sector experience, what 
happens in the private sector when you experience these type of 
things, increasing money is usually the first thing people say, 
but then after that, you say, well, wait a minute, how much 
money can we continue to throw at a problem with the technology 
we have today, the ability we have today to cross-reference and 
data collect and analyze? That does bring a degree of 
effectiveness and efficiency that you have to have in the 
private sector in order to stay in business.
    So just from the perspective that you are both in in the 
private sector, not the government, where people actually have 
to pay for things out of their own pocket and actually make a 
dollar stretch farther by being more effective and more 
efficient, what do you see that is taking place right now?
    Quite frankly, I don't mind spending money as long as it is 
a positive return on the investment for taxpayers. Spending 
money for the sake of spending money is saying the answer is we 
have to have a bigger government with more people involved and 
spend more money. To me, that is not the answer. It doesn't 
work in the private sector.
    So if you can just give me your experience in the private 
sector and what you would see differently about what you are 
doing right now as opposed to what you did before?
    Mr. BRUNE. Thank you, Congressman Kelly. I think that the 
efforts that we are undertaking right now align well with the 
GAO's framework, which is, I believe, inclusive of both Federal 
risk management as well as private sector risk management best 
practices.
    Our interest is to move more of our analytical resources 
earlier in the process so that we are preventing rather than 
chasing after, the fraud that has been perpetrated. It is 
important to continue prosecutions. The convictions and 
restitution orders serve as a good deterrent for folks who 
think they may want to rip off the American public. However, 
the best action, we believe, is prevention upfront. Our 
employees do that through identifying anomalies or suspect 
transactions.
    Technology is going to aid us substantially. The amount of 
data that an individual can review and analyze is much less 
than what our software can analyze. The package we procured has 
12 distinct technology capabilities, helping us analyze, 
report, manage those cases better so that we identify earlier 
and take quicker actions.
    Mr. KELLY. Okay. If you can, any explanation for the 
growth, because a lot of the work that people do today is less 
stressing on them physically because of the development that we 
have seen on on-the-job actual work that has really relieved a 
lot of the stress on people physically. How did it grow? How 
did it double from 1990? How in 20 some years, 27 years did we 
see this growth that should have been--I think we should see it 
going down in working age people, not going up.
    Mr. BRUNE. Right. Our actuary has reported that growth in 
the program number of beneficiaries is largely attributable to 
demographic factors, the aging of the baby boomers, as well as 
the growth of participation in the workforce by women.
    Indeed, some of the nature of work has changed, and that 
has allowed folks to both enter and exit the workforce more 
readily as well as stay in the workforce longer, but the 
primary factor is the aging of the baby boomers.
    Mr. KELLY. Mr. Bagdoyan, we are almost out of time.
    Mr. BAGDOYAN. Yes, Mr. Kelly. I would echo much of what 
Commissioner Brune just mentioned. This document is all about 
prevention. You have to front load your controls, predictive 
data analytics, which are widespread in the private sector.
    I know from one of my credit card companies that always 
flags me for things that look out of the ordinary with a quick 
phone call to say, is this you making this rather large 
purchase. So they have ways of flagging these things that 
really don't look quite right, and that is definitely one of 
the items in the toolbox for Social Security Administration 
that is absolutely needed.
    But I will also go back to my original point about an 
overall strategy driving all these things, so that is important 
to get upfront and get it right.
    Mr. KELLY. I appreciate you both coming, but it is hard in 
5 minutes to get to some of these things. I think we are all 
concerned that Social Security stay solvent, but participation 
in the workforce, we all know where the revenue comes from, but 
I am still concerned. I don't know how things would have 
doubled. With the advancements we have had for on-the-job 
people, why they would be experiencing these trends, it doesn't 
make sense to me. But thank you both for being here.
    Thank you, Chairman.
    Chairman JOHNSON. Mr. Pascrell, you are recognized.
    Mr. PASCRELL. Thank you, Mr. Chairman. And thank you to our 
panelists. Both of you have terrific backgrounds, and we are 
honored to have you before the Committee.
    I would like to start by asking a question to Mr. Bagdoyan.
    Mr. BAGDOYAN. Yes.
    Mr. PASCRELL. Can you describe further, I know you started 
to do this before, what it means to have an antifraud culture 
at any agency, particularly the one we are talking about now, 
and how the GAO found this to be embodied in the Social 
Security Administration? Could you be as brief as possible, but 
direct as possible?
    Mr. BAGDOYAN. Yes. Absolutely. Well, the culture is the 
sense of importance that would permeate the agency to take this 
issue very seriously. It comes from the tone at the top and it 
is embedded throughout the organization at its multiple levels.
    Mr. PASCRELL. So your estimation, in other words, is that 
the SSA does have this as a priority? No question in your mind 
about that?
    Mr. BAGDOYAN. I think they have taken a lot of significant 
steps in that direction. It is going to take a long-term effort 
to sustain that, which is as important, if not more important. 
Absolutely.
    Mr. PASCRELL. Thank you. I want to reiterate the statements 
made by my colleagues, on both sides of the aisle, that the 
integrity of Social Security, that program, is crucial. I mean, 
somehow folks got the idea that if we stop fraud, which is 
critical, that we will be able to sustain Social Security. No 
one is saying that here today. We know, however, it is an 
intricate part of what we are doing and a very important part. 
So maintaining vigilance is the responsible way to govern and 
the right thing to do for our constituents.
    I am proud of the enhanced funding that we have been able 
to secure to combat fraud, but as a new Subcommittee Member 
here on this Committee, I know a trend over the years. This is 
the eighth hearing on fraud since 2012. We need oversight, to 
be sure, but I want to make sure we are keeping the entirety of 
the Social Security program in perspective.
    We need to continue to push to ensure that the Social 
Security program is strengthened for years to come, which is 
why I am proud to support Congressman Larson's efforts in the 
Social Security 2100 Act. It is the only in depth proposal that 
has really been made about Social Security.
    The SSA's mission is not just to make sure that the wrong 
people don't get benefits, but that the right people get their 
benefits, and this is why we need to keep an eye on the budget. 
And you have heard some things today that are pretty alarming 
to me in terms of the increase in population that you serve.
    Do you have a dollar amount, Mr. Brune, in your mind of 
estimate of fraud in the general program we call Social 
Security?
    Mr. BRUNE. Congressman Pascrell, thank you for the 
question. I do not have a dollar amount of the general amount 
of fraud. As GAO has recommended, we are looking to be data 
driven. What we are doing is assessing the program for risk. We 
are going to make that risk assessment with our disability 
prevention units, our disability examiners that actually 
adjudicate claims that involve fraud. They are our agency 
experts. We are going to base our actions on their experience, 
what they have seen in actuality both as far as frequency and 
types of incidents.
    Mr. PASCRELL. You do have data for the last 10 years, 
obviously, and you looked at that data. You certainly can begin 
to extrapolate some things as to where we are going. Is it 
worse than we thought in that direction too, so that it helps 
you in prospective budgets in the future, I would think.
    Mr. BRUNE. Well, Congressman Pascrell, as I said, any 
amount of fraud is too much, and----
    Mr. PASCRELL. Well, of course.
    Mr. BRUNE. Yes. And we are take----
    Mr. PASCRELL. I am not trying to minimize fraud. What I am 
tying to do is--are we doing what we are supposed to be doing 
to help you do your job, because we do not know the massiveness 
of the fraud. I had no idea.
    Mr. BRUNE. This Subcommittee has been extremely helpful in 
providing new tools to the agency, the stiffer penalties, the 
updating of the civil monetary penalty amounts, the expansion 
of the CDI program, all in recent legislation have provided us 
tools that we need to ensure that the program is safe from 
fraudulent activity.
    Mr. PASCRELL. Which part of Social Security has most of the 
problems of fraud, disability, SSI, general programs, children?
    Chairman JOHNSON. Your time has expired.
    Mr. PASCRELL. I am sorry?
    Chairman JOHNSON. Your time has expired, sir.
    Mr. PASCRELL. Can I get that one question in, sir?
    Chairman JOHNSON. All right.
    Mr. PASCRELL. Thank you.
    Mr. BRUNE. Our strategy covers all of our programs, 
retirement, survivors, and disability insurance.
    Mr. PASCRELL. I know that, but which one is the worst?
    Mr. BRUNE. We are vigilant on all programs because we have 
found issues in each type of program.
    Mr. PASCRELL. Thank you, Mr. Brune.
    Thank you, Mr. Chairman.
    Chairman JOHNSON. You bet.
    Mr. Renacci, you are recognized.
    Mr. RENACCI. Thank you, Mr. Chairman.
    I want to thank the witnesses for their participation in 
today's hearing.
    Additionally, I want to thank Chairman Johnson for holding 
this hearing. Hearings have become somewhat novel these days, 
but it is a great way for us to listen and hear from witnesses.
    I am encouraged to hear that in recent years the SSA has 
been proactive in taking steps to reduce fraud, I am pleased to 
see the collaborative efforts that have been implemented 
through the National Anti-Fraud Committee, and the recent 
installation of the IBM counter-fraud management software. 
These are positive steps in the right direction. However, I 
think that more can be done, and that we owe it to our 
constituents to continue working to stay ahead of criminals and 
further reduce fraud. As I have heard already, $1 of fraud is 
$1 too much, so I appreciate your efforts.
    Throughout my business career, I found that my employees 
and I were most successful when we set achievable goals and 
identified the appropriate steps to accomplish our goals. That 
ensured that every member of our team knew the desired outcome 
and could be held accountable when target goals were not met.
    Mr. Brune, I found it interesting that the GAO report had 
found that the SSA does not track many of its antifraud 
initiatives through outcome-oriented metrics. It was on page 6 
of the GAO testimony. Can you discuss the steps that the SSA is 
taking to evaluate the effectiveness of the antifraud 
initiatives that are being led by the SSA?
    Mr. BRUNE. Thank you. Yes, Congressman. The GAO report did 
also note that we do have some metrics. We just need to improve 
them, and we are working hard to do so. You are correct, and we 
agree, we have more important work to do, as the Chairman said.
    Part of what we are doing is in the software that you 
mentioned, the counter-fraud management tool, that tool will 
improve our reporting capability. It has inherent case 
management and reporting functionality, which is an improvement 
over what we use right now, which is largely manual counts and 
special runs from our databases, special queries into our 
databases.
    In addition, we have already consulted with our Office of 
Inspector General to get their input on which outcome-oriented 
metrics they believe would be most helpful for us. We have 
started the process of doing the fraud risk assessment of the 
disability program as GAO recommended. That, as I said in my 
statement, will be complete by the end of the year.
    That will inform our efforts. I want to underline this 
point in response to a question Mr. Pascrell raised, we are 
taking a risk-based approach; we are going to devote our 
attention first to the highest risk wherever those risks lie, 
at the initial claim level, at the reconsideration level, or at 
the appellate level. We are taking an entire focus on the 
program and focusing on the biggest problems first.
    Mr. RENACCI. I appreciate that. And, again, that gets back 
to the business model Mr. Kelly talked about. I mean, I was in 
business as well. And as I travel my district, I continue to 
hear about businesses who are doing more with less, and they 
are using more analytical tools to do more of the job that 
needs to be done, so I appreciate that we are looking toward 
that, because I think that is important. We need to use those 
tools. And it is just not about throwing more money or more 
staff; it is about using the tools we have. So I appreciate 
your work in moving in that direction.
    Mr. Brune, in your testimony, I think you accurately 
described the employees who work in the field offices around 
our country as the front line in protecting against potential 
fraud and abuse. I think that is important too. You have to get 
it in the beginning. It is a lot more costly at the end.
    You mentioned that starting in 2004 there was now annual 
training for all agency and DDS employees on antifraud 
measures. What has been the result of that increased training?
    Mr. BRUNE. I think this gets to the question of relative 
importance of the priority. It has increased at all levels of 
the organization, the awareness that our antifraud 
responsibilities are a significant responsibility, that every 
one of us plays a role in identifying an issue, reporting it, 
and making sure that the Inspector General has the information 
they need to properly investigate the allegation.
    We also support our employees throughout the country, not 
only in our fraud prevention units, but in addition to our 
field offices and hearing offices. We support the investigation 
process by providing the Inspector General information that 
they think would be valuable for them as investigative leads.
    So as they are investigating cases, we help them develop 
that information.
    Mr. RENACCI. One last question, I know I am running out of 
time. There are bad guys in every one of these agencies. There 
are bad lawyers working with every one of these agencies. Are 
we working with the other agencies so if they know the bad 
attorneys that are causing some of these issues we can cross-
reference them? What are we doing with that?
    Mr. BRUNE. That is a great question, and the answer is yes. 
We are part of an interagency working group with Federal 
benefit-paying agencies. We use that working group to share 
information about proven practices as well as to explore data 
sets that would be of high-value interest to us. The more data 
we have to look at, the more our software tool can identify 
these anomalies, and so we are working with all Federal 
benefit-paying agencies to coordinate our efforts.
    Mr. RENACCI. Thank you.
    I wasn't picking on my attorney colleagues or friends, but 
I yield back.
    Chairman JOHNSON. Thank you.
    Mr. Schweikert, you are recognized.
    Mr. SCHWEIKERT. Thank you, Mr. Chairman.
    Forgive me, is it Bagdoyan?
    Mr. BAGDOYAN. Yes, Bagdoyan, Mr. Schweikert.
    Mr. SCHWEIKERT. Can you walk me through just a couple 
things. I am sure it is in here somewhere, I just haven't been 
able to find it. First off, in bad acts, fraud, how many are 
being found in the requests for benefits and what is being 
found when someone is already receiving benefits? What have you 
found differently?
    Mr. BAGDOYAN. Well, for me, it is a hard question to answer 
because that was not in our scope of work. I think from what I 
have seen, it is distributed fairly even.
    Mr. SCHWEIKERT. Okay.
    Mr. BAGDOYAN. The risk assessment that we are talking about 
is what would get to those kinds of things, whether you are 
talking about the bread and butter type of fraud schemes versus 
the big black swans, you know, low probability but high 
consequence type of things that I think the Chairman alluded to 
in his examples.
    So it is--where the paperwork comes in, it is evaluated, it 
is signed off by a physician, for example, adjudicated by an 
administrative judge, that is a continuum. So where it starts 
is obviously with the bad paperwork that, as part of the 
conspiracy in this case, runs throughout the process of 
benefit.
    Mr. SCHWEIKERT. But you could appreciate the elegance of 
finding that there is a bad act in the initial part of the 
process and not, you know, a year or two into payments being 
received?
    Mr. BAGDOYAN. Correct.
    Mr. SCHWEIKERT. Can I walk you through--and I was trying to 
make notes to myself to try to find an elegant way to say this, 
but----
    Mr. BAGDOYAN. Sure.
    Mr. SCHWEIKERT [continuing]. There is a difference between 
an algorith----
    Mr. BAGDOYAN. Algorithmic.
    Mr. SCHWEIKERT [continuing]. Algorithmic mechanism that 
says, hey, these attributes tie into these attributes, these 
attributes where this person goes up on the risk profile, and a 
data capture model. And my fear is building algorithms is 
wonderful except for there is a small problem: In some ways it 
is a couple decades out of date in the way we find fraud.
    The fact of the matter is you used your credit card 
example, the credit card example is capturing a data capture at 
that second. That second says, hey, he is buying sky diving 
equipment, except we----
    Mr. BAGDOYAN. He doesn't skydive.
    Mr. SCHWEIKERT [continuing]. We have never seen him being a 
really big outdoors person. And in today's world, 
particularly--let's say I come and make an application. There 
are the commercial databases, but the ability to even touch, 
say, green light, red light on my income model, how much was 
passive, how much is active, you know, I mean, these databases 
now know what type of ice cream I eat, how many of us here use 
a Safeway shopping card or that type and--you know, when we are 
buying something, and the levels of data even down to the value 
of my home, the value of my income, the value of my activities, 
the analysis of what I have been buying on my credit card.
    Do we see any movement to use data capture to immediately 
say, hey, there is something here that does not line up with 
the types of application, instead of saying, let's build an 
algorithm and look for outliers?
    Mr. BAGDOYAN. Right. Yeah, I think the system that 
Commissioner Brune mentioned, which came into being after our 
audit work was completed, so I don't have much insight into it, 
but it sounds like, if you would care to explain that a little 
bit more----
    Mr. SCHWEIKERT. And so the simple question is are you 
reaching out and tagging, capturing data from commercial and 
private databases?
    Mr. BRUNE. That is in our plan, Congressman. As I said in 
my statement, we wish to have an integrated, multi-faceted, 
realtime approach, and I think that is what you are describing.
    Integrated meaning multiple data sources, including the 
information that our employees observe and that they enter into 
the system.
    Multi-faceted meaning internal, external data sets 
possibly. And realtime meaning when the data is entered into 
the system.
    Mr. SCHWEIKERT. And forgive my instinct, and maybe I am 
excessively data-centric, I believe you are doing it backwards, 
absolutely backwards.
    Has there been a calculation done on what the cost per 
prosecution, you know, successful prosecution has been----
    Mr. BAGDOYAN. I am not aware of it at GAO.
    Mr. SCHWEIKERT [continuing]. Where you can do the all-in 
costs of the cost of staff, the cost of office, the cost of--
you know, everything that has gone into that, and saying we 
have had these many prosecutions that are successful? I am just 
very curious right now in the model that is being used, because 
it sounds very human centered in a world of data. I am just 
curious, what is our cost per bad actor caught?
    Mr. BAGDOYAN. Yeah. I would--I would not know, and I don't 
think GAO has looked into that, sir.
    Mr. SCHWEIKERT. Any?
    Mr. BRUNE. Congressman, as I stated in response to a prior 
question, we are very interested in moving from a pay and chase 
into a prevention model. And I believe our expansion of the 
cooperative disability investigation units, which this 
Subcommittee has supported----
    Mr. SCHWEIKERT. Do you know your cost per prosecution right 
now, successful prosecutions, your all-in cost?
    Mr. BRUNE. I would defer to our Office of General Counsel, 
but I think we could provide you that----
    Mr. SCHWEIKERT. Could you make a note----
    Mr. BRUNE. We could provide you an answer for the record.
    Mr. SCHWEIKERT [continuing]. And find that for me?
    And with that, Mr. Chairman, I yield back.
    Chairman JOHNSON. Mr. Rice, you are recognized.
    Mr. RICE. Thank you, Mr. Chairman. And very interesting 
hearing. I always learn a lot at these hearings.
    Mr. Brune, you said earlier that, and it goes really to 
what Mr. Schweikert was just asking you about, in 2015, I may 
be quoting the numbers wrong, 113 convictions and you recovered 
$14 million. And you said you were putting people in the U.S. 
Attorneys Offices around the country. What kind of people? Are 
these lawyers you are putting in the U.S. Attorneys Offices?
    Mr. BRUNE. Yes, sir. They are fraud prosecutors, they are 
general counsel employees who are on loan to the Department of 
Justice, U.S. Attorneys Office.
    Mr. RICE. Have you found that--you know, in South Carolina, 
I was a tax lawyer for 25 years, and for the first 10 years of 
my practice, the local solicitors, local district attorneys 
were the people who were responsible for prosecuting tax fraud, 
and they weren't interested in doing that, so it was hard to 
get somebody to pursue it, so the State appointed a special 
attorney general that oversaw tax fraud, and all of a sudden, 
the prosecution of these cases mushroomed.
    Is that the same kind of thing with U.S. attorneys? Are 
they hesitant to pursue these Social Security fraud cases? Is 
that why you are putting people in their offices?
    Mr. BRUNE. We have a successful partnership with the 
Department of Justice. They have, you know, vast 
responsibilities, but there are prosecutorial thresholds in 
different jurisdictions, and that is one of the reasons why we 
have partnered with them for the fraud prosecution project.
    Mr. RICE. How many lawyers--these people are lawyers? How 
many people are you putting in--how many have you----
    Mr. BRUNE. A couple dozen.
    Mr. RICE. A couple of dozen? So you have 24, let's say, 25, 
and they have 113 convictions in 2015 and they recovered $14 
million. So that kind of gives you a little cost-benefit 
analysis right there.
    Do you know, these people who are getting these 
convictions, I am sure a lot of them are guilty pleas, are they 
going to jail? I mean, are they suffering real consequences 
from this?
    Mr. BRUNE. Real consequences, yes. I would say there are 
cases which have included imprisonment. Restitution is 
significant in most of these convictions, or plea agreements.
    Mr. RICE. Now, I know that, you know, a lot of these are 
just individuals who are defrauding the government, but in some 
of these cases, there are massive conspiracies that involve 
government employees. And what really, really just bothers the 
heck out of me, it is like this thing with the veterans in 
Phoenix, you know, these government employees lie on these 
forms and kill people, yet they remain government employees, 
because the Federal employees unions are so strong and they 
have so many protections, that we can't fire them, and they 
still get their pensions even though they are killing people.
    So what I am curious about, these two massive frauds that 
are listed in our materials here, the thing in New York where 
there were 134 indictments, $14 million recovered, is that 
judge, is he still a judge, is he still getting paid, is he 
still----
    Mr. BRUNE. The judge was involved in the West Virginia 
case.
    Mr. RICE. Okay.
    Mr. BRUNE. And, no, he is no longer a judge.
    Mr. RICE. You know, I read in these materials anecdotally 
that he lives in Myrtle Beach, South Carolina, now, which is 
where I live. That is my district. That is the city I live in. 
Interesting. I need to look this guy up, this David Daugherty. 
It was said that there were 1,700 claimants, and that--the 
attorney now has pled guilty, but apparently this fellow, he is 
out fine, living in Myrtle Beach. I wonder if he has an 
oceanfront house.
    Is he still drawing a Federal pension?
    Mr. BRUNE. Congressman, as you rightly observed, we do not 
have, under current statute, the authority to revoke his 
pension. However, if a Federal employee is involved in a fraud 
conspiracy, as you just described, a court order could require 
restitution, and so, therefore, the pension would be offset 
until Social Security is restored.
    Mr. RICE. Let me ask you, if we put forth a legislative fix 
for that, I mean, would that be something that you would 
support, that people who are found guilty of these massive 
fraud type things, they would lose their Federal benefits, all 
of them?
    Mr. BRUNE. We would be happy to talk to you about that.
    Mr. RICE. I yield back my time.
    Chairman JOHNSON. Thank you. And Mr. Larson, you are 
recognized for 1 minute.
    Mr. LARSON. Thank you again, Mr. Chairman.
    I just wanted to point out a couple of things. Number one, 
I agree with my colleagues, you learn an awful lot just by 
sitting and listening to the questions that your colleagues 
have.
    I, too, was in the private sector, I ran a business myself 
and know what it is like to meet a payroll, and really do 
appreciate the fact that you can oftentimes do more with less, 
especially, you know, if you have the right tools than if you 
have the right technology available to you.
    But I just note here for the record, Mr. Chairman, that I 
believe as of 2016 the Social Security Administration has 
already instituted its own hiring freeze. Is that correct?
    Mr. BRUNE. Yes, sir.
    Mr. LARSON. It is not replacing employees due to loss, due 
to attrition, has severely restricted overtime, closed offices 
and reduced the hours that remaining offices are open to the 
public, cannot fulfill the statutory mandate to mail Social 
Security statements to taxpayers and has cut back substantially 
on other expenditures, most notably for example, IT spending, 
which is 30 percent lower than it was in fiscal year 2015.
    Now, as any good businessman would understand in the face 
of this, and especially if you are in a service-oriented 
business, which I happened to be when I had my small business, 
you have to make adjustments.
    And this culture that Mr. Bagdoyan was talking about, and I 
think the points that my colleagues made about what we need to 
do in terms of conviction, in terms of the actual penalties and 
actually, in fact, poster child for that if you abuse this 
system, what are the consequences, what are the results? And 
for any Federal, any employee or any conspiracy that exists, 
they deserve the maximum amount of punishment. And we should do 
everything we can to make an example out of that.
    By the same token, the very thing we are trying to create 
this culture within, which would save us money by making sure 
that we are dropping, you know, by dropping the frontline 
members who are actually carrying out these functions, it just 
seems to me that, you know, doing more with less is great, 
unless you are overwhelmed by the numbers and it just seems 
apparent that with the large number of baby boomers coming in, 
I don't know if there has been any metrics that say, Mr. 
Bagdoyan, how we are going to be able to deal with this large 
increase given both the attrition, and the hiring freeze, and 
everything that is currently going on.
    Mr. RICE. Would the gentleman yield?
    Mr. LARSON. Sure.
    Mr. RICE. If there were 24 of these special prosecutors and 
they recovered $14 million that is what, about a half million 
dollars apiece? I will tell you what, they pay for themselves.
    Chairman JOHNSON. I want to thank my colleagues for being 
here. And we all agree that disability fraud is a serious issue 
and we need to make sure that fraudsters don't continue to 
benefit at the expense of hardworking taxpayers.
    While Social Security has taken important steps to prevent 
fraud, there is still work to be done. And I am committed to 
working with Social Security and all of my colleagues to make 
sure the agency has all the tools it needs to stop fraud.
    I want to thank our witnesses for their testimony and thank 
you also to our Members for being here. With that the Committee 
stands adjourned.
    [Whereupon, at 11:04 a.m., the Subcommittee was adjourned.]
    [Questions for the Record follow:]

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