[Senate Hearing 116-721]
[From the U.S. Government Publishing Office]
S. Hrg. 116-721
COVID-19 FRAUD: LAW ENFORCEMENT'S
RESPONSE TO THOSE EXPLOITING THE PANDEMIC
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HEARING
before the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
JUNE 9, 2020
__________
Serial No. J-116-54
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
www.judiciary.senate.gov
www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
63-175 WASHINGTON : 2026
COMMITTEE ON THE JUDICIARY
LINDSEY O. GRAHAM, South Carolina, Chairman
CHARLES E. GRASSLEY, Iowa, DIANNE FEINSTEIN, California,
JOHN CORNYN, Texas Ranking Member
MICHAEL S. LEE, Utah PATRICK J. LEAHY, Vermont
TED CRUZ, Texas RICHARD J. DURBIN, Illinois
BEN SASSE, Nebraska SHELDON WHITEHOUSE, Rhode Island
JOSH HAWLEY, Missouri AMY KLOBUCHAR, Minnesota
THOM TILLIS, North Carolina CHRISTOPHER A. COONS, Delaware
JONI ERNST, Iowa RICHARD BLUMENTHAL, Connecticut
MIKE CRAPO, Idaho MAZIE K. HIRONO, Hawaii
JOHN KENNEDY, Louisiana CORY A. BOOKER, New Jersey
MARSHA BLACKBURN, Tennessee KAMALA D. HARRIS, California
Lee Holmes, Republican Chief Counsel and Staff Director
Phillip A. Brest, Democratic Chief Counsel and Acting Staff Director
C O N T E N T S
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OPENING STATEMENTS
Page
Graham, Hon. Lindsey O........................................... 1
Feinstein, Hon. Dianne........................................... 2
Prepared statement........................................... 35
WITNESSES
Carpenito, Craig................................................. 3
Prepared statement........................................... 38
Questions submitted with no response returned................ 63
D'Ambrosio, Michael.............................................. 7
Prepared statement........................................... 51
Responses to written questions............................... 75
Hughes, William.................................................. 2
Prepared statement........................................... 38
Questions submitted with no response returned................ 105
Shivers, Calvin A................................................ 5
Prepared statement........................................... 56
Questions submitted with no response returned................ 124
COVID-19 FRAUD: LAW ENFORCEMENT'S
RESPONSE TO THOSE EXPLOITING THE PANDEMIC
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TUESDAY, JUNE 9, 2020
United States Senate,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:08 a.m., in
Room SD-106, Dirksen Senate Office Building, Hon. Lindsey O.
Graham, Chairman of the Committee, presiding.
Present: Senators Graham [presiding], Grassley, Hawley,
Tillis, Ernst, Blackburn, Feinstein, Durbin, Whitehouse,
Klobuchar, Blumenthal, Hirono, and Booker.
OPENING STATEMENT OF HON. LINDSEY O. GRAHAM,
A U.S. SENATOR FROM THE STATE OF SOUTH CAROLINA
Chairman Graham. Good morning, everybody. Thank you very
much for attending the hearing, and I am sure we will have more
come in throughout the morning.
We have got four witnesses: Mr. Craig Carpenito, is that
right? U.S. Attorney for the District of New Jersey; Bill
Hughes, Associate Deputy Attorney General; Calvin Shivers,
Assistant Director of the Criminal Investigative Division, FBI;
Michael D'Ambrosio, Assistant Director of the Office of
Investigations, United States Secret Service.
So we talked about this before, fraud related to the CARES
Act, scams out there against seniors selling masks that don't
work, trying to play on people's fears. Unfortunately, when you
try to do some good in the country, people take advantage of
it, and we are going to hear from our folks today about what's
going on out there and some ideas about how to make sure it
stops, if we can.
Phase 4 will be coming. There's a need, in my view, for a
Phase 4, so I would like to learn as much as we can about the
Paycheck Protection Program, the economic impact for
individuals, and supplemental unemployment benefits, how those
programs are sometimes being abused, and generally about what
people are doing out there to scam Americans, particularly our
seniors, and that's the purpose of the hearing.
And, with that, I will turn it over to Senator Feinstein.
OPENING STATEMENT OF HON. DIANNE FEINSTEIN,
A U.S. SENATOR FROM THE STATE OF CALIFORNIA
Senator Feinstein. Thank you, Mr. Chairman. I will put my
statement in the record so you can proceed. Thank you.
[The prepared statement of Ranking Member Feinstein appears
as a submission for the record.]
Chairman Graham. Thank you.
Anything from anybody?
[No response.]
Chairman Graham. Okay. Let us start with Mr. Hughes.
STATEMENT OF WILLIAM HUGHES, ASSOCIATE DEPUTY ATTORNEY GENERAL,
U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC
Mr. Hughes. Good morning, Mr. Chairman, Ranking Member
Feinstein, and Members of the Committee. Thank you for inviting
me to appear before you today with several of my colleagues to
discuss Federal law enforcement efforts to deter, detect, and
prosecute those who violate Federal law by exploiting the
COVID-19 pandemic and the economic dislocation it has caused.
Before I focus on the topic of the day, I want to take a
moment to address the tragic killing of George Floyd. As
Attorney General Barr and Deputy Attorney General Rosen have
previously said, the video images of the police conduct in this
instance are incredibly disturbing. As the Attorney General
previously announced, the Department is conducting a parallel
and independent investigation into this incident in
collaboration with the FBI to determine whether Federal civil
rights laws were violated. We intend to conduct that
investigation as swiftly as possible and are not sparing any
resources.
We know that George Floyd's death was not the first of its
kind, and it exposes concerns that reach far beyond this
specific incident. The outrage that Mr. Floyd's death has
triggered is real, legitimate, and deeply rooted. While the
vast majority of police officers do their job honorably and in
accordance with the law, we see instances like this one that
erode confidence in the American criminal justice system.
America takes great pride in the rule of law being a bedrock
principle, and as the Nation's leading Federal law enforcement
agency, the Department of Justice is committed to doing its
part to seek justice for Mr. Floyd and his loved ones and to
secure the confidence of all Americans and law enforcement.
I know these issues are important to you. They are
important to us. We welcome the opportunity to have discussions
on this subject in the days ahead. But for today, for this
hearing, our subject is the pandemic, the related economic
disruption, and those that wish to exploit others for their own
gain during tremendously challenging times. The Attorney
General has made clear that, notwithstanding the operational
challenges the pandemic presents, it is critical that the
Department is vigilant in detecting, investigating, and
prosecuting wrongdoing relating to the crisis. It has become a
high priority for us.
Since the early days of the pandemic, we have been
receiving reports of individuals and businesses using the
crisis as an opportunity to exploit both Americans and
Government programs designed to assist Americans that have been
hard hit. Leveraging the public's concern about the pandemic,
fraudsters utilize many schemes to separate Americans from the
money in their bank accounts, from their Government benefits,
and from their personally identifiable information.
Other fraudsters and unscrupulous opportunists have gotten
into the personal protective equipment trade, looking to
defraud and price gouge health providers, first responders, and
other essential workers who have no choice but to pay
astronomical prices for protective equipment that their health
depends on.
We are also seeing schemes that target taxpayer-backed
relief programs that provide Americans and American businesses
financial help as they weather a disrupted economy. In
particular, fraudsters are targeting the Payroll Protection
Program, the Economic Impact Payment Program, and State
unemployment benefit programs.
The pandemic has also changed the cyber threat landscape.
Child predators on the internet see widespread closing of
schools, stay-at-home orders, and reliance on internet
platforms as the primary means of communication as an
opportunity to prey on children. Cyber criminals also see the
widespread work-from-home posture of many American businesses
as an opportunity to attack and infiltrate business computer
networks, to disable systems or steal or hold hostage valuable
data.
As I am sure you will agree, it is reprehensible that
anyone would use this crisis as an opportunity to profit at
another person's expense or otherwise prey on the public. The
Department of Justice will not tolerate it, and our resolve is
demonstrated by our efforts to coordinate across Department
offices and components, to collaborate with other Government
agencies, and to engage with industry and the public.
We are already bringing cases to hold fraudsters
accountable and to disrupt their schemes, and we will be doing
so for the foreseeable future.
I thank you again for the invitation, and I look forward to
your questions.
[The prepared statement of Mr. Hughes and Mr. Carpenito
appears as a submission for the record.]
STATEMENT OF HON. CRAIG CARPENITO, UNITED STATES ATTORNEY,
DISTRICT OF NEW JERSEY, U.S. DEPARTMENT OF JUSTICE, NEWARK, NJ
Mr. Carpenito. Good morning, Chairman Graham, Ranking
Member Feinstein, and Members of the Committee. I am Craig
Carpenito, the United States Attorney for the District of New
Jersey. I was appointed by Attorney General Barr to lead the
Department's Hoarding and Price Gouging Task Force. We are
grateful for the privilege of appearing before you today to
discuss the Department's efforts to detect and prosecute those
who, for their personal financial gain, seek to exploit the
COVID-19 pandemic and the economic dislocation it has caused.
The Attorney General and the Deputy Attorney General are
leading those efforts, and we are honored to help them in that
vital task. We want to thank the Committee for its attention to
these issues and for the good work of the Department of Justice
to protect the safety and security of our Nation during this
unprecedented crisis.
Before I answer your questions today about price gouging,
hoarding, and COVID-19 fraud, however, I would like to take a
moment to acknowledge the senseless and tragic death of George
Floyd at the hands of the Minneapolis police. I am proud of the
people of New Jersey who have raised their voices in peaceful
protest, seeking justice and reform in the name of Mr. Floyd
and the other victims like him. I hear and appreciate their
call for change. In New Jersey, we have witnessed productive
community and law enforcement partnerships in cities like
Newark and Camden. These partnerships have lowered crime and
restored trust. While we in New Jersey are proud of these
efforts, we recognize that we must and we will do more.
Now let me turn to the reason I am here today. We've seen a
broad range of illegal conduct throughout the country in these
past few months. Our strategies and responses have evolved to
meet new challenges as they arise, but our core philosophy has
not. The Department will investigate and prosecute those who
seek to treat COVID-19 as an opportunity to defraud the public
and the Government.
The Department has received many reports of individuals and
businesses using the crisis to seek windfall profits at the
expense of public safety and the health and welfare of the
American people. These reports range from the sale of fake
cures of COVID-19 online to hoarding and price gouging of
critical medical supplies, to defrauding the CARES Act economic
programs. The Department is aggressively investigating those
reports and has already commenced prosecutions.
The Department's attorneys work side by side with our
partners at the Federal Bureau of Investigation and the United
States Secret Service, as well as other Federal, State, and
local agency partners.
Make no mistake. The fight against COVID-19 is a fight to
save precious lives every day. Our medical professionals and
first responders put their own lives at risk to stand between
the virus and each of us. The personal protective equipment
that they wear is the only shield they have to protect
themselves as they bravely go face to face with the virus each
day. It helps ensure our heroes do not fall victim to the
disease. It also helps ensure that they do not bring it home to
their families and their broader communities.
Hoarding and price gouging in particular have inhibited
front-line health care professionals, essential workers, and
the public from acquiring the supplies they need to protect
themselves from contracting the virus. Hospitals, first
responders, and retail consumers have been targeted by
individuals who view the scarcity of critical medical materials
as a path to get rich quick. This conduct has disrupted our
supply chains and markets and jeopardized the safety of our
communities.
In response, Attorney General Barr and Deputy Attorney
General Rosen assembled the Department's Hoarding and Price
Gouging Task Force to combat and prevent hoarding and price
gouging. The task force is comprised of over 100 experienced
Federal prosecutors throughout the Nation's 93 U.S. Attorney's
Offices and Department components here in Washington. The task
force's primary mission is to identify, investigate, and
prosecute illegal hoarding and price gouging of crucial medical
supplies, including personal protective equipment such as face
masks that are essential to preventing the spread of the virus.
We do so in the larger context of the current public health
crisis. The decisions the Department makes to open
investigations or to bring charges are intended to help the
public health response. Accordingly, the task force is focusing
on profiteering, especially by market participants who sell
scarce materials for excessive prices that far exceed their
reasonable cost.
The task force also is investigating counterfeit,
misbranded, and defective medical supplies imported into the
U.S. from abroad. These flawed products are entering our stream
of commerce and creating safety hazards. We will use all of our
tools at our disposal to identify these products and those who
transact in them here and abroad and hold them accountable.
The Department's efforts are ongoing, but they have already
yielded substantial results. We have brought several Federal
criminal cases across the country alleging price gouging fraud,
misbranding, and other charges. Just last week, the task force
commenced the Department's first criminal prosecution against a
foreign manufacturer for sending defective and misbranded N95
respirator masks into the United States during the pandemic.
Instead of protecting our medical professionals, these
materials would've silently put them in harm's way. We have
also seized hoarded materials and worked with agency partners
to distribute them to those on the front lines to fight COVID-
19.
Thank you again for inviting us to address these important
topics, and I look forward to answering your answers.
[The prepared statement of Mr. Carpenito and Mr. Hughes
appears as a submission for the record.]
Chairman Graham. Mr. Shivers.
STATEMENT OF CALVIN A. SHIVERS, ASSISTANT DIRECTOR, CRIMINAL
INVESTIGATIVE DIVISION, FEDERAL BUREAU OF INVESTIGATION,
WASHINGTON, DC
Mr. Shivers. Good morning, Chairman Graham, Ranking Member
Feinstein, and Members of the Committee. My name is Calvin
Shivers, and I am the Assistant Director of the FBI's Criminal
Investigative Division. Thank you for the opportunity to appear
before you today to discuss the FBI's response to COVID-19-
related fraud.
As head of the FBI's Criminal Investigative Division, I
oversee the FBI's financial crimes and fraud against the
Government programs. In my role as the Assistant Director of
the Criminal Division, I also oversee civil rights, color of
law, and hate crime investigations. I believe it's important
that I take a moment to address the recent events which have
grabbed our Nation's attention before I focus on the issues
surrounding today's hearing.
I along with my colleagues at the FBI offer our sincerest
condolences to the family and friends of George Floyd. The
FBI's Civil Rights Program has a long and proud history of
protecting the rights of the American people. As the primary
Federal agency responsible for civil rights investigations, we
at the FBI are committed to utilizing our full set of
investigative and intelligence capabilities to address
violations of Federal civil rights laws. In pursuit of justice,
we are conducting a thorough investigation into the actions
that led to George Floyd's death.
The FBI recognizes the rights of citizens to exercise their
First Amendment rights, and we will continue to work to protect
our citizens and their ability to exercise those rights free of
violence.
Now I will shift back to the topic at hand.
These are unprecedented times for most Americans. Due to
COVID-19, people are understandably worried about their health
and their livelihood. Although we are coming together in
various communities and throughout the country, unfortunately
there are individuals who seek to exploit our anxieties and
fears by selling fake COVID-19 cures or vaccines. They are also
peddling fraudulent investment opportunities in companies
purportedly working to develop cures or vaccines for COVID-19.
These were some of the earliest COVID-19 fraud schemes that the
FBI identified.
When the Attorney General issued a memorandum on March 16
of this year directing U.S. Attorneys to prioritize COVID-19-
related fraud investigations and prosecutions, the FBI was
ready. Within days, all 56 FBI field offices began working a
wide range of investigations related to COVID-19 fraud schemes.
As we began our investigations, we saw a number of
different criminal schemes. We saw subjects hoarding personal
protective equipment, or PPE, and attempting to sell it at
exorbitant prices. We also saw people selling counterfeit or
substandard PPE. The FBI worked closely with the Department of
Justice and other law enforcement partners to conduct price-
gouging investigations or seize counterfeit PPE.
The CARES Act was designed to provide fast and direct
economic assistance to families, American workers, and small
businesses. However, there are individuals who seek to steal
money from the people the CARES Act was designed to help. With
the passage of the CARES Act, we began to see fraudsters shift
their efforts toward exploiting the various programs created to
relieve the severe economic effects of COVID-19. To effectively
target this growing threat, the FBI formed a Payroll Protection
Program Fraud Working Group in coordination with the Department
of Justice's Fraud Section and the Small Business
Administration's Office of Inspector General. Through this
effort, 116 investigations have been initiated, and over $126
million in potential fraud has been identified.
We're also beginning to see health care fraud. We are
seeing fraudulent billing for services not received, charges
for unnecessary procedures, and fraud related to telemedicine.
In addition to fraud schemes, we are seeing crimes
targeting our children. School closures have increased the
presence of children online. In addition, social distancing
restrictions and the isolation of children at home may afford
criminal actors with an opportunity to sexually exploit
vulnerable children. We are proactively countering this threat
through active investigations. We're also working to educate
the public regarding the warning signs and the danger of online
sexual exploitation.
Although these threats are numerous and evolving rapidly,
the FBI has and will continue to be vigilant in addressing
these crimes and holding the individuals who commit these
crimes accountable. We rely heavily on public education and
awareness. When the general public is made aware of fraudulent
schemes and criminal activity, they are better situated to
report them. For that reason, I am incredibly appreciative of
the opportunity to speak with you today.
I thank you, Chairman Graham and Ranking Member Feinstein,
for bringing attention to these issues, and I am happy to
answer any questions you might have. Thank you.
[The prepared statement of Mr. Shivers appears as a
submission for the record.]
Chairman Graham. Mr. D'Ambrosio.
STATEMENT OF MICHAEL D'AMBROSIO, ASSISTANT DIRECTOR, U.S.
SECRET SERVICE, DEPARTMENT OF HOMELAND SECURITY, WASHINGTON, DC
Mr. D'Ambrosio. Thank you, Chairman Graham, Ranking Member
Feinstein, and distinguished Members of this Committee. Before
I begin, like my colleagues, I'd like to express my deep
sadness and frustration with the tragic events of recent weeks.
Having served in Government for nearly 29 years, nothing
troubles me more than police misconduct. It severely erodes the
essential trust necessary for law enforcement to effectively
protect and serve our communities. Law enforcement must be held
to the highest standard. Racism and discrimination in any form
is totally unacceptable. The Secret Service is committed and,
indeed, oath-bound to ensuring that all Americans are afforded
their constitutional rights to equal treatment under the law
and to freedom of speech and assembly. Those rights are
inalienable, and no duty is higher for a law enforcement
officer than to protect them.
Returning to the subject of this hearing, thank you all for
inviting me to speak about the current wave of COVID-19-related
crime and the work of the United States Secret Service to
counter it.
As early as February of this year, the Secret Service
identified individuals and groups seeking to exploit the
pandemic for illicit profit. We quickly took action to build
the capacity and strategy necessary to combat what we
anticipated would be a surge of criminal activity.
Major disasters have long invited fraud. From the terrorist
attacks on 9/11 to Hurricanes Katrina and Maria and, indeed,
well before, criminals throughout history have viewed public
emergencies as opportunities to defraud the public. However,
the fraud associated with the current COVID-19 pandemic
presents a scale and scope of risks we have not seen before.
Enabled by the internet, criminals all over the world are
defrauding anxious citizens, distressed businesses, and
Government stimulus programs alike.
Since we released our first alert on March 4, we have
observed a significant proliferation of criminal schemes. In
particular, we have seen a surge in crimes targeting various
economic relief programs such as those provided by the CARES
Act. Countering this fraud has become a core focus of our
investigative work, and I expect our investigative efforts will
continue for years.
The Secret Service, in addition to our protective mission,
is responsible for the investigation of criminal violations of
U.S. law pertaining to the U.S. financial system. As the
Assistant Director of the Office of Investigations, I lead the
over 160 field offices of the Secret Service, which includes
our network of Electronic and Financial Crimes Task Forces,
which conduct specialized investigations of cyber and financial
crimes.
The immediate investigative focus of the Secret Service is
to disrupt and deter criminal activity that could hinder an
effective response to the pandemic by assisting organizations
at risk of fraud and by working to recover any funds stolen
from Americans. Longer term, we will ensure that those who have
criminally exploited this crisis are arrested and successfully
prosecuted.
I am pleased to report that the Secret Service has already
seen tremendous success emerge from our investigative efforts
to date. We have initiated over 100 criminal investigations and
prevented approximately $1 billion in fraud losses. Among other
law enforcement actions, the Secret Service has successfully
disrupted hundreds of online COVID-19-related scams, halted the
illicit sale of stolen COVID-19 test kits online, and is
leading a nationwide effort to counter a vast international
scheme to defraud U.S. State unemployment systems. We have also
released regular threat intelligence and alerts to provide
industry, consumers, and our law enforcement partners with best
practices to defend themselves from the latest criminal
threats.
However, we are not achieving these results by ourselves.
We can credit much of our success to the close partnerships we
have built with a range of Government and industry partners. In
particular, we are working closely with the various agencies of
the Department of Treasury, with the Cybersecurity and
Infrastructure Security Agency and Homeland Security
Investigations, as well as various offices of the Inspector
General, particularly from the Department of Labor and Small
Business Administration. And, of course, my colleagues to the
right within the Department of Justice, their COVID-19 Task
Force, and the Federal Bureau of Investigation have all been
essential partners.
I am committed to ensuring the Secret Service is doing our
part on behalf of the American people to counter criminal
activity exploiting this pandemic. I look forward to answering
your questions on how we can work together to address this
threat.
Thank you.
[The prepared statement of Mr. D'Ambrosio appears as a
submission for the record.]
Chairman Graham. Thank you all.
I will start with the Secret Service. Can you give me some
examples of how people are taking advantage of the Paycheck
Protection Program?
Mr. D'Ambrosio. We primarily right now are focused on the
unemployment insurance.
Chairman Graham. Okay. I am sorry. Tell me about
unemployment.
Mr. D'Ambrosio. So right now it is a mainly stolen identity
theft investigation in which criminals are utilizing stolen
PII, things that they have acquired on whether it be the dark
web, whether it be network intrusions, and they are using that
stolen information to apply for Social Security benefits, and
probably across right now about 29 States across the country
that we have seen. It's not a very complex fraud. It's the
availability of PII out in public----
Chairman Graham. Got you.
Mr. D'Ambrosio [continuing]. That allows for this to occur.
Chairman Graham. Is there anything this Committee can do to
help you in this endeavor? Do you have all the tools you need
in current law?
Mr. D'Ambrosio. We have the tools right now that we need
for this particular----
Chairman Graham. Do you have the resources?
Mr. D'Ambrosio [continuing]. We have the resources with the
partnerships that we've created, whether it be the----
Chairman Graham. Okay.
Mr. D'Ambrosio. The Department of Labor as well as the----
Chairman Graham. The answer is yes, right? Okay.
Mr. D'Ambrosio [continuing.] The answer is yes.
Chairman Graham. Mr. Shivers, I appreciate what you all are
doing at the FBI. When it comes to consumer fraud, what are you
seeing most of?
Mr. Shivers. Sir, on the consumer fraud----
Chairman Graham. Your mic, please. Thank you.
Mr. Shivers [continuing]. All right. So as I mentioned in
my opening, on the consumer fraud, initially private citizens
were targeted through a number of schemes. Many of those
schemes included offers to sell counterfeit COVID-19 cures or
vaccines and, as I mentioned in the opening, also investment
opportunities. And so what we see is a wide range of citizens
being targeted through a number of means----
Chairman Graham. Is that problem getting better or worse,
or is it about the same?
Mr. Shivers [continuing]. I think COVID-19 obviously has
shined a light on an opportunity for criminals to take
advantage of a specific type of scheme, and so what we see is a
number of ways that they are reaching individuals, through
unsolicited phone calls or through unsolicited emails. So
there's a wide range. And what we ask the public to do is to
make reports to ic3.gov, and that gives us greater visibility
on the nature of threats and the number----
Chairman Graham. Is there anything the Committee can do
to--do you have the tools you need to deal with the problem?
Mr. Shivers [continuing.] We do, sir.
Chairman Graham. Okay. Thank you.
Mr. Carpenetti--is that right?
Mr. Carpenito. Carpenito, sir.
Chairman Graham. Carpenito. I am sorry. Tell us about the
fraudulent sales going on out there. What's going on in terms
of overseas activity?
Mr. Carpenito. So what we have been seeing, sir, with
regards to hoarding and price gouging is the trends have
indicated to us that initially what we had was fraud relating
to a spike in the prices of the materials. In this country we
essentially had a supply chain that consisted of six major
suppliers of these masks, the N95 masks, three-ply masks just
like these, that were a commoditized product that were sold at
relatively cheap prices, pennies, to our first responders and
our medical professionals. They were easy to obtain, and they
were something that I think were taken for granted as part of
our system.
What happened was, just like any scenario we've seen in our
country's history, where we have a national crisis, there is
always going to be that dark underbelly that rises to the top
and tries to profit illicitly from the fears of folks that are
most impacted by the pandemic. And what happened here was a
bunch of interlopers in the market came in, obtained mass
quantities of these materials, and held onto them, raised the
prices, and price gouged. These masks went from being 50, 60
cents apiece to selling for $7, $8, as high as $25 in some
cases.
What we've done is we've gotten the word out about the
invocation of the Defense Production Act, the fact that it
makes it illegal to do that, to price gouge, and we've opened
up a series of investigations. So we've been getting out there
to try and find any stockpiles if they exist and get that
material back into the supply chain.
Chairman Graham. Do you have the tools you need to continue
down this path?
Mr. Carpenito. We do, sir. The Defense Production Act gives
us the ability to bring this conduct to light and to remedy it.
Chairman Graham. Mr. Shivers, very quickly, can you tell us
a little bit about the Paycheck Protection Program? What kind
of problems have you seen there?
Mr. Shivers. Yes, what we've seen are fraudulent filings
from individuals who are either exaggerating the number of
employees that they may have within their business or perhaps
they don't have any employees. And so what they are doing is
taking advantage of----
Chairman Graham. How do you find out about these cases?
Mr. Shivers [continuing.] It's a wide range. Part of it is
outreach that the FBI conducts with the banking sector and with
the private sector. And one of the things that we do is we've
formed relationships with financial institutions and provided
them with training, having an idea of what to look for, some of
the fraud indicators. So part of it's a relationship.
The other part of that relationship is with the Small
Business Administration's Office of Inspector General, and so
through coordination with SBA's OIG, we are also receiving
information that helps us open cases.
Chairman Graham. Okay. Mr. Hughes, finally--and I am sorry
to go over here--we are looking at a Phase 4, and I'm sure we
will do one. If you could get back to the Committee--you don't
have to do it now in 30 seconds, but if there is anything you
don't have in terms of being able to deal with this, let us
know. If you need more resources, let us know. But, generally
speaking, how do we stand? Do you have the resources and tools
necessary to oversee these programs at this point in time?
Mr. Hughes. I think the answer is yes, and, Chairman
Graham, we really appreciate the Committee's support. There are
a number of legislative proposals that have been in discussion,
one of which is increasing deterrence by increasing sentencing
guidelines for fraud committed during national emergencies. We
look forward to continuing to discuss that----
Chairman Graham. Well, you give us a list of things you
think would help.
Chairman Graham. Senator Feinstein.
Senator Feinstein. In my 26 years on this Committee, Mr.
Chairman, I've never seen anything quite like this. If I
understand it, the Federal Trade Commission has reported that,
as of June 7, consumers have lost nearly $48 million due to
coronavirus-related fraud. And this includes scam offers for
vaccines, test kits, cures, air filters that were falsely
advertised. That there's been unacceptable price gouging on
basic items like hand sanitizer, sophisticated schemes
targeting State governments.
I understand in Washington State, for example, criminals
used stolen personal information to file fraudulent
unemployment claims. And it goes on and on.
And then you have the Nigerian fraud ring known as
Scattered Canary that's used personal information likely
obtained through prior consumer data breaches to fraudulently
obtain millions of dollars. And it's bizarre.
Why is this so unique to have all of this? What is there in
this program that attracts this kind of fraud effort?
Mr. Hughes. Thank you, Senator, for your question. I think
there are two things going on here. One, you have a pandemic
which is rightfully a major concern and basically every
American's life--there is a lot unknown still about COVID-19.
And you also have an economic disruption which rightfully
sparked serious response from the Federal Government in the way
of economic relief. And so those two events simultaneously
created a situation where you have many consumers out there who
are anxious about their own health----
Senator Feinstein. But you're so broad-based in your
comments. Nothing is specific. Let me ask you a specific.
Apparently, Washington State was able to recover the $300
million that it had paid for fraudulent claims related to one
scheme. What other big fraud cases are out there? And what is
being done to stop it?
Mr. Hughes [continuing.] We are doing several things. First
is that we have hundreds of investigations open all over the
Department of Justice. We're working with every single law
enforcement agency in the executive branch. We are pursuing
separate courses, investigations, monitoring trends about the
criminal conduct regarding each one of these programs. And some
of the cases----
Senator Feinstein. Well, talk to me for a minute about
Scattered Canary, this Nigerian fraud ring.
Mr. Hughes [continuing.] So, Senator, I am unable to
discuss the specifics of any particular matter or any
particular potential target. What I will say is that,
especially with respect to unemployment benefits fraud, there
is strong indication that some of the perpetrators are overseas
entities or organizations and that they're using money mules
and other standard mechanisms to transfer money outside of the
country.
Senator Feinstein. Is this a Nigerian fraud ring? Is
Scattered Canary a Nigerian fraud ring?
Mr. Hughes. So, Senator, I am not personally knowledgeable
as to that organization. I am happy to take that----
Chairman Graham. Does anybody know about this?
Mr. D'Ambrosio. Yes, Senator.
Chairman Graham. Well, tell us about it.
Senator Feinstein. Thank you.
Mr. D'Ambrosio. There has been some reporting on Scattered
Canary being Nigerian, but I have no specific information to
confirm those particular activities.
Senator Feinstein. Could you tell us what you know?
Mr. D'Ambrosio. What I do know is that the fraud, again, as
you stated, Senator, is essentially stolen PII that is out
already in public or whether it's particularly bought off the
dark web for these particular crimes, and then they're utilized
to file fraudulent unemployment insurance claims. And that
money has been seen transiting through money mules, as has
already been said.
Senator Feinstein. Well, have these consumer data breaches
fraudulently obtained hundreds of millions of dollars in
unemployment benefits from State governments? Could you
gentlemen answer the question yes or no?
Mr. D'Ambrosio. I can't answer the exact amount, Senator,
that has been obtained. I can tell you that the Secret Service,
based on an alert that we published in late May, the
information that we received back from working with over 100
financial institutions, that it mitigated the loss of about
$500 million in payments. And so that's anecdotal information
that we've received from the financial institutions.
Senator Feinstein. So how did Washington State recover the
$300 million that it had paid in fraudulent claims related to
one of these schemes? Can anybody answer that question?
Mr. Hughes. Senator, I don't think we have that information
at our fingertips. We can take it back and discuss with our
colleagues.
Senator Feinstein. Because, you know, I've been here for a
while, and, Mr. Chairman, I've never seen anything like it.
It's a program riddled with fraud.
Chairman Graham. Well, here's what I believe. If you put $3
trillion out there, people will take advantage of it. And we
had to do it. And I'll share your frustration. It's been a lot
of generalities here. We would like to know what can we do,
what's going on, who's doing it, and how widespread is it.
Senator Feinstein. That's right.
And could any of you gentlemen summarize what is going on
and what it's going to take to stop it?
Mr. Hughes. Senator, that's an incredibly broad question.
If you are talking just about CARES Act fraud, there is
targeting of the Payroll Protection Program by fraudsters
misrepresenting their small business or the characteristics of
their small business or misrepresenting that there is a small
business at all. There are fraudsters who are using PII that
they've accumulated or bought on the internet to apply for
unemployment benefit programs that are State-sponsored. And
there are a number of schemes relating to economic impact
payments, again, relying on PII to apply for these payments or
to defraud recipients of those payments, to hand those over to
the fraudsters.
Senator Feinstein. Well, let me ask you this. The FTC
reported that as of June 7 consumers have lost nearly $48
million due to coronavirus-related fraud, and that includes
scams for vaccines, test kits, miracle cures, air filters that
were falsely advertised as capable of removing COVID-19 from
the air in people's homes.
So there're all these fraudulent business practices out
there, apparently. What is being done to stop them, to arrest
and convict?
Mr. Hughes. I think we're vigorously investigating and
using the tools that we have, both criminal and civil. When you
bring a prosecution, you have forfeiture powers should there be
a guilty plea and or a verdict at trial of guilty. On the civil
side, you have a number of different statutes which allow you
to to make the fraudster forfeit his ill-gotten gains. In order
to disrupt, we have a statute that allows us to seek a TRO, a
preliminary injunction, and ultimately an injunction. That is a
quicker solution to stopping some of these schemes, many of
which involve an online website which is the major marketing
mechanism of some of these fraudsters.
Senator Feinstein. The information I have before me I've
never had before me in any program in 26 years, and I wonder if
it's worth continuing. How do you stop this fraud?
Mr. Carpenito. So, Senator, maybe I can help respond by
what the Department of Justice has done to try and police these
programs.
First, I can tell you----
Senator Feinstein. Could you indicate to us how many cases
have been brought, convictions sought, and convictions
obtained?
Mr. Carpenito [continuing.] What I can tell you is we've
received thousands of referrals through the network of task
forces that have been put up. Right away, right when the
pandemic came to be, Attorney General Barr I think showed very
swift leadership in forming two task forces specific to COVID-
19--one relating to general fraud related to COVID-19; the
other, my task force, relating to the hoarding and price
gouging, which was meant to stand up very quickly to try and
get the valuable PPE to the individuals who needed it as
quickly as possible.
Those programs each have approximately 100 prosecutors in
each of them that are focusing on the COVID-related crime. It
takes some time to work a white-collar case, and it has to be
done covertly because we don't want to do anything to disrupt
the network of criminals before we can get a hold of where the
money is, we can trace everything, especially for overseas
cases. So we're working them expeditiously.
I can tell you there are hundreds of investigations in my
task force alone and thousands nationally related to COVID
fraud in general. We've also formed partnerships with our State
Attorney Generals to share information. Sharing information in
white-collar cases like this is critical to being able to get
to the money, because at the end of the day that's what this is
about. We want to prevent individuals from sending payments or
from having their bank accounts pillaged. We want to prevent
Government programs from the same. And where it's already
happened, we need to cooperate with law enforcement to work
with financial institutions to trace those transactions.
And I know it can be frustrating at times that we can't get
into specifics, but one of the reasons we can't is, you know,
our network operates through the ability to stay covert and
find these resources, this money. Before we pounce and we go
into court and go public on it, we have to have everything
locked down if we are going to be successful.
Chairman Graham. Senator Feinstein, we will have a Round 2,
but I think, Senator Grassley, you are next, sir.
Senator Grassley. Thank you.
I've heard thus far that you've got the resources you need
and you've got the tools that you need. I hope that that is
right. Time will tell. If that's true, that's very nice.
I want to start out with a compliment to the Justice
Department in some things that are related to the pandemic and
some things that might not be related. But I want to compliment
the people that have filed price-fixing suits against Pilgrim's
Pride and Claxton Poultry, because I've always felt there is
not enough competition in the agriculture industry. And also
last week, the Department of Justice announced that it had
issued what they refer to as ``civil investigative demands'' to
the Nation's four largest meatpackers, and those four largest
ones have about 80 percent of all the packing industry and
slaughter industry in the country as a whole. And there's
plenty of reason to believe that there might not be things
right there. When a month ago the price of beef to the farmer
went down about 60 percent, the price to the consumer went up
about 25 percent.
I sent a letter on March 31 to the secretary or to General
Barr, and I've done that over a period of 20 years under both
Republican and Democrat administrations, hardly getting any
results whatsoever. So you can imagine how surprised I am but
thankful for this Administration taking those moves to make
sure that the marketplace is working in that industry, because
farmers are very depressed by some of the things that are
happening in that industry.
So let me go to questions. On April the 7, Senator
Klobuchar and I sent a letter to the Attorney General Barr
expressing our serious concern about price gouging and hoarding
of essential medical supplies. We asked for information from
the Department's implementation and enforcement of the
President's Executive order. We've not received a response from
the Justice Department, so I hope we'll get it soon. It's
important that Congress have this data as we figure out how to
best address the problems we face.
We appreciate when agencies are quick to share information
with us on our requests for that information. For example, the
Secret Service has been very good about giving us periodic
updates on the COVID-19-related fraud efforts. I encourage the
Justice Department and the FBI to follow that example.
So to any one of the three from the Justice Department that
can respond, can you tell me when Senator Klobuchar and I will
get a response to our April 7 letter?
Mr. Hughes. Senator, thank you for your question. I do not
know the answer to that question. All I can assure you is that
when we receive letters, they're reviewed, and work starts on
replies promptly. Replies have to go through a rigorous
process, so sometimes it can take longer than we would all
like.
I defer to Mr. Carpenito on any substance that that letter
was seeking to elicit. But we have your letter, and I
understand it is being worked on, and I can check with OLA
after this hearing as to the status.
Senator Grassley. Also, to anybody from the Justice
Department and/or the FBI witnesses, I am interested in what
difficulties or obstacles have you encountered when
investigating and prosecuting these cases.
Mr. Carpenito. Thank you, Senator. As I said previously,
thankfully, because of the invocation of the Defense Production
Act, it has given us the tools that we need to investigate and
prosecute price gouging. As you know, the act is what made the
act of hoarding with the intent to sell materials that were
designated as scarce by the Department of Health and Human
Services at exponentially higher prices than pre-pandemic
prices criminal. Without that act, we would not be able to
operate.
The challenges that we have are the same challenges that
you have in any sort of a disaster relief-related fraud
situation. We faced it in New Jersey after Hurricane Sandy.
As Senator Graham correctly stated, when you put this kind
of money out into the ether, because you have to take care of
society and, you know, take care of those who are desperately
in need of it, the cockroaches are going to come out of the
dark and into the light. There is always some underbelly that
is going to try and defraud these programs.
We are using our traditional tools and our traditional
partners to root out those frauds. It takes a little bit of
time, because what you see there is there is a delay in the
exposure, right? We have to follow trends, follow the money, to
be able to root it out.
With regards to hoarding and price gouging, I think that we
showed a very aggressive stance. We brought our first
prosecution within a week of the invocation of the Defense
Production Act. The President put it into play on March 23. On
March 25, HHS designated scarce materials. On April 1, we had
arrested the first person for selling exponentially higher
priced PPE. The charges we filed there were for making false
statements to the FBI, because he was trying to hide his
conduct, and assaulting a Federal officer, because the
individual coughed in the face of the FBI agents who were
looking to interview him and told them he had COVID-19 to back
them away from him. But we were able to recover close to a
million pieces of PPE and distribute them within 48 hours to
front-line medical professionals.
Senator Grassley. Could I ask one more question?
Chairman Graham. Go ahead.
Senator Grassley. I do not know which one of you can answer
this, but I believe that China's decision to halt exports
allowed criminals to sell fake and faulty goods to our
hospitals, putting the health and safety of our workers at
serious risk. Is it reasonable to believe that the increase in
fake and faulty medical supplies were a direct result of
China's decision to stop exports to the medical--of medical
supplies? And if not, why not? Whichever one of you can answer
that.
Mr. Carpenito. Sure. I will take that question, Senator.
So, Senator, we can't talk about any of our investigations that
are nonpublic. What I can tell you is if you--I do not know if
you noticed, but on Friday we filed a criminal complaint
against a Chinese company for the importation of fraudulent N95
respirators. In that case, what we allege is that a Chinese
company sent to the United States knowingly false materials.
How were they false? They purported to be N95 respirators that
were licensed by the FDA and by NIOSH, which is the licensing
body for these materials that make them the most attractive to
medical professionals.
The N95 respirator has been so important here because what
medical professionals say is that you need that 95 percent
filtration to protect our doctors, our nurses, our first
responders from interacting directly with the virus. These
materials were imported into the U.S. with the intent to sell
them to medical professionals, and when we seized them, they
did not look to us as though they were authentic materials. We
worked with the FBI, the FDA, and Customs and Border Patrol. We
had the materials tested. They failed that filtration test. And
we do intend to continue to investigate any importation of
fraudulent materials, and I think you can plan to see
additional cases coming in the future.
Chairman Graham. Senator Durbin.
Senator Durbin. Thanks, Mr. Chairman.
Mr. Carpenito, you talked about putting $3 trillion on the
table and watching the cockroaches come in. In your testimony
you've identified six six prosecutions under the PPP Act so
far. Four and a half million loans have been issued so far.
So let me ask you, are you just getting started? Or is that
it for cockroaches? It strikes me that unless you have a pretty
powerful statement pretty early on, some of the adolescent
efforts being made to qualify for PPP loans are just going to
continue apace.
Mr. Hughes. Senator, if you do not mind, I will address the
PPP. So with that program, there are number of ways that we get
referrals of cases to investigate and potentially prosecute.
One is just walk-ins. As the FBI will tell you, they have field
offices around the country, and complainants will walk in
saying that they're aware of some wrongful conduct with respect
to the program.
A second source is data that we share among Federal
agencies. I can't get into more specifics on that.
Senator Durbin. I have a limited amount of time. How you
collect it and get your leads is important, but not critical to
answering my question. Is this pace of six prosecutions after
several months and 4.5 million loans indicating you are just
getting started, or this is the pace that you think will warn
America not to try to cheat the Government?
Mr. Hughes. I think we're just getting started, and for the
foreseeable future we will be bringing these cases. The
limitation periods on this conduct are anywhere between 5 and
10 years. And we are engaging extensively to ensure that the
public understands the serious consequences of exploiting this
program.
Senator Durbin. I certainly hope whatever you do, you
continue this effort, but do it more publicly with more volume,
calling attention to it. This exploitation that is spelled out
in your testimony of six is almost laughable.
Mr. Hughes. I can assure you, Senator, there are plenty of
investigations currently going on.
Senator Durbin. These are not thoughtful, conniving
individuals. They're just silly efforts to exploit the
Government in the belief that it is an easy thing to do. I
mean, to invent companies, invent payrolls--I mean that seems
to me to be fairly traceable.
So let me go to another aspect. The Chairman just stepped
back in. I am glad he is here because I wanted him to hear
this. When I got briefed a few years ago by major corporations
in the United States, they told me that retail theft was so
massive in this country that products that were made
exclusively by one company were being sold in volume on the
internet by sellers that went unidentified and they had to be
stolen. They were only made by one company. They had to be
stolen from a warehouse or in the chain of commerce somewhere.
They were being sold by the hundreds. It wasn't just a casual
sale. And when these companies went after this theft ring, they
were stopped cold by Amazon, Facebook, and eBay, who said, ``We
have no obligation to disclose the names of our sellers. Even
if they are fencing stolen goods, no obligation to disclose the
names of our sellers.''
You made a reference, Mr. Carpenito, to profiteering online
with marketplace platforms like Amazon and Facebook. On March
25, a group of 34 State attorneys generals wrote to those three
companies and other online marketplaces to urge them to do more
to crack down on price gouging on their platforms, including
urging the companies to create mechanisms to allow consumers to
report suspected price gouging.
The question is simple. What kind of cooperation are you
getting from Amazon, Facebook, and eBay when it comes to those
who are using the internet to sell products that are
misrepresenting their health qualities or their application in
COVID-19?
Mr. Carpenito. Thank you, Senator. I can tell you that from
day one in the formation of the task force, we engaged with
private corporations, including online retailers, to talk to
them about what their policies were with regards to price
gouging, how they identified those instances, and sought to
create a referral relationship with those retailers.
Senator Durbin. How are you doing?
Mr. Carpenito. Without getting into specifics because
there's nothing public, I can tell you that we have been
cooperating and that we have received referrals from those
platforms.
Senator Durbin. So now they are disclosing sellers when you
believe that they have violated the law?
Mr. Carpenito. Again, I feel constrained by Department
policy on talking about nonpublic investigations, but what I
can tell you is that we have had contact with them, we have
engaged, and we are working cooperatively with them on
referrals.
Senator Durbin. They stonewalled us for years on retail
theft, saying--eBay in particular--it's none of your damned
business who's selling what, even if it's clearly stolen goods.
And if you are telling me we have got a breakthrough here when
it comes to this pandemic and national emergency of those who
are trying to sell--misrepresent products on the internet, that
you now have the cooperation of these sales places, these
marketplaces, I think we need to know one way or the other
whether you do or don't.
Mr. Carpenito. What I can tell you, sir, is--I don't know
if I would use the term ``breakthrough.'' What I can tell you
is that we have had contact with these companies, we have
sought their cooperation and asked them to make any referrals
of anyone who is hoarding or price gouging the designated
materials underneath the HHS order, and we have active
relationships with at least some of the companies that you
mentioned.
Senator Durbin. Mr. Chairman, I am going to quit here. I
went a little longer than I should've. But let me tell you,
Senator Cassidy and I have introduced a bill called the
``INFORM Consumers Act,'' and it gets to the bottom line here,
that Amazon, Facebook, eBay have to disclose to law enforcement
when there is the obvious sale in their marketplace of goods
that are either stolen or being misrepresented to the consumers
of America, for example, NIOSH-cleared products and it turns
out it's a big old lie. Some of these places in the past would
not even tell you who the sellers were. They claimed it is
confidential and private.
Chairman Graham. Well, I think it is a good question, so,
Mr. Carpenito?
Mr. Carpenito. Senator, what I can tell you----
Chairman Graham. Would the bill help that he is talking
about? Is it a problem?
Mr. Carpenito [continuing.] In my experience the Department
of Justice can use process, we can send subpoenas; we have
mechanisms to obtain that information, when justified, where we
see indications of fraud or any indications that there has been
wrongful conduct.
Senator Durbin. This is a new development if you do, and I
will tell you, Home Depot came to me, no small company, and
said, ``Stolen goods with our brand, made only by us, sold on
eBay in volume, and they won't tell us who is selling it.'' If
that's changed, this is a breakthrough, and I----
Chairman Graham. Yes, I agree. So see if you can followup.
Mr. Carpenito [continuing.] Will do, sir. Thank you.
Chairman Graham. Senator Tillis.
Senator Tillis. Thank you, Mr. Chairman. Thank you,
gentlemen, for being here and for the work you are doing.
I was actually pleased to hear you all bring up, and a
number of the Members, focusing on counterfeit, the threat of
counterfeit goods. That's something I have focused a lot on as
Chair of the Intellectual Property Subcommittee. This is not
something new to the COVID response. I literally saw a biking
helmet that was marketed as one of the most protective if you
bought it from Specialized, it did the job. I saw somebody just
put their foot on this helmet and it crushed before a Senate
Committee. There are a lot of counterfeit products coming from
China that are clearly a threat to our public health, and now
it's only on steroids in response to the COVID pandemic.
One question or a couple of questions I have. You've talked
about the PPEs and the N95 masks. Other personal protective
equipment is something that we have got to focus on, but I am
also worried about counterfeit medications potential when we
have breakthroughs on therapeutics, counterfeit versions of
those. They may actually fit the bill, but not being
distributed according to licenses. In other cases, they may
just be inadequate or ineffective.
I think the same thing, the same risk, could hold true in
terms of test kits and some of the other materials that we're
putting together for the COVID response.
Can you tell me a little bit about how we're specifically
focusing on that and whether--my suspicion is China is the
greatest threat, but any other jurisdictions that we should be
looking at?
Mr. Hughes. Let me just address briefly pharmaceuticals and
testing, and I'll allow Mr. Carpenito or the rest of the panel
to address PPE.
We're working very closely with the FDA. They've taken a
more flexible regulatory approach to help spur innovation in
the medical device and the pharmaceutical space. The types of
crimes in that area that we are focusing on are the obvious
scams, the clearly fraudulent products or medications. We are
trying to disrupt those quickly, and largely by bringing an
injunction while a criminal investigation is still going. Some
of the cases that we have brought so far stopped a scam selling
ozone gas as a treatment, unregistered pesticides, colloidal
silver, and other treatments that were sold and marketed as
either cures for or effective prevention measures for COVID-19.
Senator Tillis. If others of you want to chime in, is this
a China problem, or do we have other jurisdictions that we have
a similar threat in terms of counterfeit products?
Mr. Hughes. The cases I was referring to are domestic
cases, but I will defer to Mr. Carpenito on PPE.
Mr. Carpenito. Once again, I can tell you what we see
trend-wise, and what we see trend-wise is we have numerous
investigations, and we have seen trends that there is the
importation of materials that are either counterfeit,
misbranded, or just completely fraudulent. Those were the three
buckets that----
Senator Tillis. Primarily from China?
Mr. Carpenito [continuing.] What I can tell you is that we
have one publicly available prosecution that I can talk about
where we have filed a criminal case in the Eastern District of
New York against a Chinese company that we believe
intentionally sent fraudulent materials.
Senator Tillis. And the Chinese company is a government-
owned enterprise?
Mr. Carpenito. I believe that is the case in China, sir.
Senator Tillis. I want to move on to something else. I want
to keep to my time. I have a Committee markup I have to run to.
But, Mr. Shivers--right? I want to make sure I got that right.
I butcher names repeatedly here.
Mr. Shivers. That is correct.
Senator Tillis. First off, I want to thank you for the
work, and I did get to listen to your testimony in my office.
But can you tell me about other things? I was talking about
some of the test kits and other things. Can you see any
patterns specifically from foreign jurisdictions? We talked
about domestic production, and that's important for us to look
at, but foreign jurisdictions that we should be focused on and
potentially create consequences coming out of legislation from
the Senate?
Mr. Shivers. So our investigations are not focused on
importation. We are primarily looking for hoarding and price
gouging of PPE and also counterfeit PPE. So through the course
of investigation, we may discover that the PPE that we've
seized is either substandard or counterfeit.
Senator Tillis. Okay.
Mr. Shivers. And so we would address it after that. So we
work with not just our Federal partners but State and local
partners to develop those investigations. And so, again, what
we've seen is some of the PPE that we've seized has been
counterfeit.
Senator Tillis. Well, I want to keep close to the time.
This is just a request. You don't have to respond to it. But I
want to thank Senators Blumenthal, Cornyn, and Sasse who joined
on a letter to the FBI and CISA to give us a briefing on
hacking. I don't know if you have seen that letter, but I think
it would be very helpful for us to figure out, particularly
with Chinese-affiliated hackers, some of the threats that we
have there. That may be, Mr. Chairman, something we can do as a
Committee, but if not, I know there are a number of Senators
that would like to get together and get a briefing of the
Committee on that and the threats that we should be updated on.
Mr. Shivers. We can coordinate that.
Senator Tillis. Yes, if we can get that done sooner rather
than later, I would like for the FBI and CISA to be represented
in that meeting.
Thank you.
Chairman Graham. Senator Whitehouse.
Senator Whitehouse. Thank you, Chairman. If somebody could
dial down my volume. There we go that's how I like it.
I want to ask about unemployment insurance, but before I
do, I have to react to, Mr. Hughes, your statement about your
policy for answering letters. I do not know what is going on
over at the Department, but I detect a policy of not answering
questions for the record from this Committee and not answering
letters from this Committee. When we had Mr. Rosenstein down in
the hot seat there a few days ago, I pointed out that in 17, I
think it was, hearings with Department of Justice witnesses,
not one question for the record from a Senator was answered
afterwards. Not one. That is not a coincidence. That is a
policy.
When we get questions for the record answered, it is
because it is a nomination hearing and the nominee doesn't go
forward until the QFRs are answered. Outside of that, the
policy seems to be, ``We, the Department of Justice, don't
answer Committee questions for the record.''
I have a similar problem with letters, so I don't believe
what you have said about there being a responsible policy for
getting letters answered. We have letter after letter after
letter to DOJ and FBI that have gone completely unanswered. We
finally got a letter out of the Antitrust Division recently by
putting a hold on a piece of legislation that the Antitrust
Division wanted, and the answer we got from the Antitrust
Division was a blow-off. It was a nonsense answer. It did not
answer the actual questions.
So I would ask you to take back to the Department, what the
heck is going on? Because this exceeds the partisanship that I
see out of the Department. This is a persistent failure of
response to oversight, and it is not always going to be a
Republican Attorney General, it's not always going to be a
Republican Chairman. Something is wrong. There is a policy
someplace about not answering QFRs and not answering letters,
and I am sick to death of it. So please take that back. And I
see the Chairman nodding his head over there, so this is a
bipartisan concern.
The letter that was raised was from Chairman Grassley. This
is a bipartisan concern. This is not the time to get into this.
We are going to get into this further. But somewhere there is a
policy, and I want it rooted out, because it is a wrong policy.
Now, on unemployment insurance, Mr. Shivers, in your
testimony, in the headings of the different elements of your
testimony, you don't even mention unemployment insurance. It's
not one of the topic areas. Mr. D'Ambrosio mentioned briefly
unemployment insurance in his testimony, but described it as
just ``simple fraud.''
I don't know that that is accurate, gentlemen. Just in
Rhode Island, we've had 3,000 fraudulent unemployment insurance
applications. Our U.S. Attorney is looking into it after the
Rhode Island State Police began an investigation because they
seemed to be coordinated. The damages could be in the billions,
the theft could be in the billions of dollars. IP information
links entities to common fraudulent claims and also to
fraudulent common claims in the State of Massachusetts, in the
State of Connecticut, in the State of Washington.
I think you need to step back and take a look at this as a
very significant common scheme, very likely a foreign-led
common scheme, and take a much harder look at this unemployment
insurance fraud than you are appear to be undertaking from your
testimony here today. I think we're dealing with what may prove
to be the crime of the decade, if not the crime of the century
in terms of the amount of money that was stolen through a
common scheme, run very likely by foreign crooks. And I would
ask you also to take the message back that it would be really
helpful if the Department of Justice and the FBI would support
the bill that Treasury supports, that former Chairman Grassley
and Chairman Graham support, that will peel back the ability of
foreign entities to hide behind shell corporations in America,
because what happens, as I think you know, is that they steal
billions of dollars through these schemes, and then they
launder the proceeds through shell corporations. We've seen it
over and over and over again. The Department, the FBI, the
Secret Service have all testified about the role of American
shell corporations in hiding criminal assets. And when you look
at the extent of the theft from our States through this
unemployment insurance problem into which Federal money was
poured in abundance as part of the COVID response, I think it's
a better bet than not that at the end of the day those proceeds
of theft end up behind shell corporations where it's harder for
you to root them out and run them down.
So I'd be eager to have any response to the point about
unemployment insurance and what you're planning to do to ramp
up your response to this.
Mr. Shivers. Senator, there was no ill intent in not
mentioning unemployment insurance.
[Voice heard off microphone.]
Mr. Shivers. I'm sorry. It is on. I will pull it closer.
All right. There was no ill intent in not mentioning the
unemployment insurance. Just with the limited amount of time, I
wanted to give an overview of some of----
Chairman Graham. But here's the question that's got my
interest now. Three thousand, that is a lot.
Senator Whitehouse [continuing.] And that is just Rhode
Island. Massachusetts, Connecticut, Washington--there are a
dozen States that have this problem----
Chairman Graham. But from the Secret Service point of
view----
Senator Whitehouse [continuing.] And probably more.
Chairman Graham. Senator Whitehouse's question, is there
organized effort in the country or outside the country to
exploit this program versus just, you know, a handful of people
misidentifying themselves? I think that is the question. What
do you see from the Secret Service point of view?
Mr. D'Ambrosio. So, Senator, first, to your first comment
where you said it is a simple fraud, that really referred to
the tactics and the techniques as opposed to the scope of this
particular investigation. I can assure you that the Secret
Service is looking at unemployment fraud as a massive amount of
fraud. We do see it as an organized group. We do see
connections when it comes to transnational criminal activity
overseas.
Chairman Graham. Well, you should have said that.
Senator Whitehouse. There you go. That feels better. Thank
you. Now let us make sure that these agencies respond according
to that and not to the not mentioning it or calling it just
``simple fraud,'' because it was potentially billions of
dollars in fraud.
Chairman Graham. Senator Hawley.
Senator Hawley. Thank you, Mr. Chairman. And I would also
be interested in further responses to Senator Whitehouse's
questions, and I am going to come back to that actually in just
a second.
Let me start, though, by asking about the recent
controversy involving 37 Planned Parenthood offices applying
for and receiving funds under the Paycheck Protection Program
despite their ineligibility. Just a quick review of the facts
here. The CARES Act states that nonprofits are eligible for the
program only if they and their affiliate organizations have no
more than 500 employees. Now, Planned Parenthood has 16,000
employees nationwide, which is 37 times the threshold, and
there is no doubt that each of the 37 Planned Parenthood
offices who applied for the funds knew that they were
affiliated because their own documents claim that they are
affiliated. In fact, Planned Parenthood's most recent financial
statement describes it as one national branch with 55 Planned
Parenthood affiliates, 110 ancillary entities that are, and I
am quoting now, ``controlled by those Planned Parenthood
affiliates.''
Despite knowing all this, 37 separate Planned Parenthood
entities applied for and received and, therefore, diverted $80
million from actual small business during this global pandemic.
So let me just ask you, Mr. Hughes--I am not going to ask
you to comment or reveal any details of any ongoing
investigation, but let me just ask you generally, if an
organization that knows it is ineligible for a program
nonetheless applies, falsely certifies its eligibility, and
receives tens of millions of dollars in taxpayer money meant
for somebody else, do we have a criminal conduct issue?
Mr. Hughes. Thank you, Senator, for your question. And,
again, you are right, I am unable to talk about specific
investigations or the existence of specific investigations.
However, the way the Department is approaching these cases is
the application for these loans is pretty simple. In fact, the
part you fill out is literally just two pages. And there are a
number of representations on that about the number of employees
you have and your monthly average payroll and the nature of
your business, and then there are a couple certifications such
as criminal charges and convictions over the last 5 years. I
believe that is the time period.
There is some other information on there, but those inputs
were specifically designed to be objective measures that could
be quickly looked at and scrutinized for the purposes of
determining whether an applicant intentionally misrepresented
something material about their business that would allow us to
proceed with charging and prosecuting swiftly.
So we go where the facts and the law command us to go in
each of our investigations, and so this is just an area that,
like unemployment benefits programs, we are focusing the
Department's law enforcement and prosecutorial resources.
Senator Hawley. What you are telling us is that the
application is designed to be simple, it's designed to be very
factual, right? I mean, it's not supposed to be a matter of
interpretation. Do you comply or not comply? Here are the
standards. Tell us what the facts are. Do you meet the
threshold or not? Have I got that right? I mean, that is the
basic design of the application.
Mr. Hughes. Generally, and it's not an application which
receives a lot--needs to receive a lot of due diligence on the
part of the lender from the beginning. Again, so really all the
misrepresentation, the burden of that is on the applicant.
Senator Hawley. What about executives of the organization
or other decisionmakers who may have known about or signed off
on any fraudulent application? When I say the organization,
again, I am not asking you to talk about any particular
investigation to confirm or deny its existence. But, in
general, if you have an organization where you have top
executives who's signed off on this, would there be potential
liability for them?
Mr. Hughes. I think the traditional the traditional legal
standards that apply to corporate liability and individual
liability for corporate actions apply with equal force in this
with respect to prosecutions of this program.
Senator Hawley. Very good. Well, thank you for that, and I
look forward to seeing the progress of your inquiries over
time.
Let me come back to the unemployment question that Senator
Whitehouse was asking about. Mr. Hughes, I will direct this to
you or Mr. D'Ambrosio. Do you have any sense of how much money
has been lost through fraud in the unemployment insurance piece
of CARES? And has DOJ had any success in recovering any of
those funds to date?
Mr. D'Ambrosio. Senator, I do not have a specific amount of
what essentially has been lost. I can tell you I spoke
previously anecdotally from some of the financial institutions
that we are working it with, over about 100 of them. We have
been told that an alert that we put out in mid-May prevented
over about a $500 million fraud alone. So that just kind of
gives you a sense of the particular scope.
We have been successful in recovering some money. We have--
--
Senator Hawley. You have been, did you say?
Mr. D'Ambrosio [continuing.] We have been. We have been
successful. We returned approximately through an investigation
about $30 million to the State of Michigan. So there are cases
where this has been--we've seen some success, and we are
continuing to work very diligently on these cases, one, to
identify, two, to recover the funds, and then eventually
prosecute these individuals for this activity.
Senator Hawley. Does anybody else have anything to add to
that?
Mr. Hughes. Senator, the only thing I would add is that
this is a big and growing focus for the Department. We're
coordinating in Senator Whitehouse's district, the U.S.
Attorney's Office there, the U.S. Attorney's Offices in other
jurisdictions including Washington, we are coordinating closely
with both the Secret Service, the FBI, and other law
enforcement. We're also coordinating with the financial
industry. As the Assistant Director noted, some of the easiest,
some of the quickest--the quickest tool is to get the financial
institutions where these payments--that are the rails through
which these payments travel to identify this activity and to
work with us and State authorities to stop these payments,
especially when they are traveling overseas.
Senator Hawley. Very good. My time has expired. I have got
some additional questions on this front which I will submit to
the record.
Senator Hawley. Thank you all for your service and being
here.
Thank you, Mr. Chairman.
Chairman Graham. Thank you. Senator Klobuchar.
Senator Klobuchar. Thank you very much, Mr. Chairman. Thank
you for holding this important hearing.
I think what we do know from this pandemic is that this has
brought out the best in so many people that put themselves on
the front lines, but it also has brought out the worst in terms
of the kinds of scams that we are talking about today.
Senator Grassley has already mentioned the letter that he
and I led back in April, April 7, and we are still, Mr.
Carpenito, waiting for an answer to that. And if you could--
that's a long time--convey that, I'll just ask some of the
questions, because we are concerned about what is happening and
what investigations have actually been opened. How many
investigations has the task force opened?
Mr. Carpenito. With regards to hoarding and price gouging,
we have opened several hundred investigations that are ongoing.
Senator Klobuchar. And has the task force brought charges
against violators--in how many cases?
Mr. Carpenito. With regards to hoarding and price gouging,
the task force has already filed eight criminal cases.
Senator Klobuchar. Okay. All right. And there are 100
lawyers assigned? Is that right?
Mr. Carpenito. The way the task force is structured is I
lead the task force with the assistance of Mr. Hughes. We have
three regional coordinators--one for the West out of the L.A.
U.S. Attorney's Office, one in the Central out of the Chicago
U.S. Attorney's Office, and one for the East out of my office.
Each U.S. Attorney's Office has one representative at least. As
obviously--as some district are busier than others, there are
additional lawyers working on it. And each of the Department
components also has a representative.
Senator Klobuchar. Okay. Are they full-time then, the 100
lawyers?
Mr. Carpenito. I would not say they are full-time. Some of
them are. For example, in the early stages----
Senator Klobuchar [continuing.] That is Okay. I have a lot
of other questions. If we got this back in writing, we could
figure it out. Again, we're just trying to push for some actual
results here.
Another way to do this, in addition to what you are doing,
State Attorney Generals, as you know, are doing a lot. Attorney
General Ellison and I have done some work together on this
since the pandemic started. And are you coordinating with them
on the price gouging?
Mr. Carpenito. We have encouraged all of the members of the
task force in each of the 93 U.S. Attorney's Office and
components to coordinate. I can tell you personally in New
Jersey we have a very good working relationship with State
Attorney General Gurbir Grewal. We have formed a joint task
force with the State Attorney General. I know some other
districts have done that as well. And we have had virtual daily
contact about referrals, and we've worked on cases and decided
which cases fit more with the State's purview or the Federal
Government's.
Senator Klobuchar. Okay. Your testimony indicated that the
Department focuses on sellers charging ``substantially higher
prices than traditional market participants.'' I have a bill
that I introduced, and cosponsoring that bill are Senators
Blumenthal, Hirono, and Cortez Masto, and it would prohibit
price gouging during national emergencies and targets price
increases of more than 20 percent above the pre-emergency
services. And States with these kind of price-gouging laws have
saved targets of 10 to 25 percent. Is there a set amount or is
there a minimum amount you are looking at or a target price by
the task force? And would it be helpful to have this Federal
law?
Mr. Carpenito. I think it would be helpful to have that
Federal law, as well as Mr. Hughes----
Senator Klobuchar. That made my day. Thank you.
Mr. Carpenito [continuing.] I am sorry?
Senator Klobuchar. That made my day.
Mr. Carpenito. I think as Mr. Hughes said, too, a
sentencing enhancement for those who try to take advantage of
situations like this, national disasters, I think would also be
a very useful tool.
With regards to thresholds, I think that the target range
you are talking about is the target range that we are talking
about. The State Attorney Generals, the practices that I have
looked at, the State price-gouging laws are usually in the 10-
to 20-percent range. We are certainly looking for markups of
that amount or greater in our investigations.
Senator Klobuchar. Okay. Last, Mr. Hughes, in your written
testimony, you mentioned the Antitrust Division's joint
statement with the FTC on monitoring employer collusion during
the pandemic. I am very focused--I am the Ranking Member on the
Antitrust Subcommittee with Senator Lee, and I am really
concerned about what is going on, like the proposed Uber-
Grubhub merger that there has been some discussion about, I
shall say, and the fact that we're seeing more and more
consolidation during the pandemic.
And on May 1, I sent a letter to the Antitrust Division and
the FTC with a number of other Senators emphasizing the need
for vigorous antitrust enforcement. The letter included a
number of questions, and we received a response from the FTC,
but we have not received anything from the Antitrust Division.
Given the importance of this issue right now, when can we
expect a response?
Mr. Hughes. Thank you for the question, Senator. I do not
know the status of that particular letter. I understand and
agree that the subject of it is important, and I can go back to
my colleagues at the Department and--but I do assure you that
the Department of Justice takes these letters seriously, and we
understand that accommodation is important to the legislative
process.
Senator Klobuchar. It is. Just making sure that we make
this a major, major piece of our consumer work right now,
because it's easy just to turn an eye with these major
companies saying, ``Hey, let us merge. Times are tough,'' when,
in fact, what is happening is that they are squeezing out
smaller and smaller companies, and we are going to have less
competition, which is the whole reason we have the antitrust
laws to begin with.
The last thing, I will ask this for the record--I know my
time has expired; I will ask it later--about this bill that
Senator Moran and I just did on protecting seniors from scams.
And we also know that a lot of seniors are targeted, and I will
ask that later. So thank you.
Chairman Graham. Thank you, Senator Klobuchar. Senator
Blackburn.
Senator Blackburn. Yes, thank you, Mr. Chairman. And I want
to thank our witnesses for being there today.
One of the first cases having to do with price gouging was
two brothers outside Chattanooga and they were buying up hand
sanitizer and then running the price up online from $8 to I
think $70 per container. So if you would, talk to me a little
bit about your participation with local and State officials and
how you work with them. And I think, Mr. Shivers, this probably
is best coming to you, and if you all will talk just a little
bit about how you work with your State and local law
enforcement partners.
Mr. Shivers. So one of the FBI's strengths is working with
our Federal, State, and local partners, and obviously working
in the COVID-19 environment it's been very challenging. But
that has not deterred our ability to coordinate with our State
and local partners.
There are a number of ways, and I think one of the previous
questions is how does the FBI receive information relative to
some of the fraud schemes. Obviously, there's a wide range, but
through coordination with our State and local partners, we are
receiving a lot of information relative to COVID-19 fraud. So
because we operated in a task force environment in many of our
offices, whether that's our Safe Streets Task Force or Violent
Crime Task Force, a lot of our task forces have pivoted to
address the threat of the COVID-19 fraud schemes that we are
seeing.
And so, again, for us, it's just a continual practice of
working very closely with our State and local partners and
addressing whatever crimes are being committed within their
jurisdictions.
Senator Blackburn. All right. That sounds great. And then
when you are working with Big Tech and trying to get the
information for online fraud with some of these companies, and
primarily dealing with China and the fraudulent and inferior
merchandise and PPE that was coming out of there, how are you
working with some of our allies in this virtual space in order
to get this information to shut these entities down? And does
Big Tech respond quickly to your requests to shut down some of
these entities and then to block them off their server systems?
Mr. Shivers. So as previously mentioned, our focus is not
the importation of the PPE. We are primarily dealing with PPE
on the front end as it pertains to hoarding and price gouging.
And through the course of our investigations, we are coming
across PPE that may be substandard or counterfeit.
As it pertains to working with our international partners,
there are a number of fraud schemes that I think we have talked
about today. Some of those fraud schemes are internet-based,
and so, as appropriate, we work with our international partners
to develop information leads that may have a nexus to the
United States or leads that we may disseminate to our
international partners. So the international partnership is
very important in dealing with COVID-19 because, again, a lot
of these fraud schemes are emanating from all across the world.
We have a relationship with various entities in the private
sector, and I spoke a few minutes earlier about our
relationship with the banking industry. We also work with the
tech industry, but, obviously, you know, that requires legal
service in order to receive information that may be relevant to
our investigation.
Senator Blackburn. Thank you. I yield back. Thank you, Mr.
Chairman.
Chairman Graham. Thank you. Senator Blumenthal.
Senator Blumenthal. Thanks, Mr. Chairman.
I would like to ask our two Justice Department
representatives, have you--are you familiar with Project
Airbridge?
Mr. Carpenito. Yes, sir, I am familiar with the fact that
Project Airbridge exists.
Senator Blumenthal. A number of us, Senator Warren and I,
began an investigation some time ago asking questions of the
six major distributors involved in Project Airbridge. And our
inquiry has shown that there was cronyism and political
favoritism that led to tragically misallocated supplies and
Government seizures of equipment that were going to providers
that very much needed it. Cronyism and incompetence that was
exemplified in this program had real-life consequences, and
clearly this Project Airbridge, which was a kind of pet project
of Jared Kushner, was, in effect, a bridge to nowhere for the
health care providers who needed that equipment. At the very
least, there was incompetence, confusion, and even possible
corruption.
Is there any ongoing inquiry within the Department of
Justice relating to Project Airbridge?
Mr. Carpenito. Unfortunately, Senator, I am not at liberty
to discuss any ongoing nonpublic investigations of the
Department.
Senator Blumenthal. Will you commit to reviewing this
inquiry and making it part of your investigation if there is
one underway?
Mr. Carpenito. Unfortunately, Senator, doing that would be
acknowledging the existence of an investigation, and I am just
not at liberty to discuss investigations of the Department.
Senator Blumenthal. Well, you'll at least read the results
of our investigation, correct?
Mr. Carpenito. Once again, sir, I would be remiss to
comment about an investigation. What I can tell you is we are
committed to rooting out fraud with relation to any of the
CARES Act programs and anything related to COVID-19 hoarding
and price gouging.
Senator Blumenthal. Well, Senator Schumer, Senator Warren,
and I will send you the results of this investigation, and
hopefully you will followup on it.
Mr. Carpenito. Thank you.
Let me ask you about the fake cures which are part of that,
I think, $48 billion total number that Senator Feinstein
mentioned, which is an astonishing and appalling number. If
Americans have lost close to $50 billion, we need really
aggressive and proactive law enforcement in this area. I know
you've said that you have enough resources and authority, but I
think that Americans are going to be looking for results at
some point. So I would suggest that maybe you would want to
review whether, in fact, you do have enough authority and
resources, because there can't be too much when you're
investigating this kind of fraud that directly impacts people.
In a recent report, the Center for Science in the Public
Interest found that at least 49 dietary supplements on Amazon
with antiviral claims were making false and misleading
statements. Do you have any such fake cures under
investigation?
Mr. Carpenito. I would yield to Mr. Hughes.
Mr. Hughes. So, Senator, we have several investigations
that relate to misbranded or mismarketed pharmaceuticals----
Senator Blumenthal. Have you brought any actions?
Mr. Hughes [continuing.] We have. We have brought a number
of injunctions to stop the marketing of such conduct. We have
filed criminal complaints against the individuals who have been
marketing----
Senator Blumenthal. Could you provide the details to my
office, please?
Let me move on because my time is limited. In terms of
unemployment insurance, you were answering some questions posed
by Senator Whitehouse. What exactly is the modus operandi of
these potential scams? And are you finding actual criminal
violations in any of these scams impacting Connecticut?
Mr. D'Ambrosio. Senator, as we've seen, what it primarily
is, the scam itself, is acquiring PII, stolen PII, whether it
be purchased on the black market or through network intrusions
and being utilized using that information and applying to the
different States for the unemployment insurance. Yes, we are
finding violations, and we are pursuing those cases.
Senator Blumenthal. How close are you to bringing action?
Mr. D'Ambrosio. I do not have specific information as to
how close we are to prosecution.
Senator Blumenthal. Do you have a dollar amount in terms of
what the impact is?
Mr. D'Ambrosio. I have stated previously, Senator, is that
we published an alert in mid-May, and working with the
financial institutions, because the financial institutions are
the natural choke point for these payments to go, they were
able to prevent, according to them, over $500 million in
payments. We've also been able to recover and return to the
State of Michigan about $30 million of fraudulent payments that
were made.
Senator Blumenthal. Do you have suspects, specific
individuals?
Mr. D'Ambrosio. I do not personally have that information.
I know we have active investigations.
Senator Blumenthal. Well, when I say ``you,'' I do not mean
you personally. I mean your agency.
Mr. D'Ambrosio. I would have to go back and get specific
information.
Senator Blumenthal. Could you provide more details to my
office later today? I am out of time right now, and you need
more information from your agency, so I would appreciate
additional information later today.
Mr. D'Ambrosio. We will provide what we can. These are
ongoing investigations that would be limited, but yes, Senator.
Senator Blumenthal. Thank you.
Thanks, Mr. Chairman.
Chairman Graham. Thank you. Hirono.
Senator Hirono. Thank you, Mr. Chair.
I was very interested in the line of questioning by my
colleague Senator Durbin. Mr. Carpenito, you indicated that you
are now getting cooperation from Amazon, Facebook, and eBay
about the selling of stolen items. So have there been any
prosecutions based on the information that you have gotten from
the cooperation from these three entities?
Mr. Carpenito. I do not have any specifics about any
investigations in front of me. What I can tell you is that we
have done outreach with those outlets, and I am unaware of any
situation where we have sought information and have not
obtained it pursuant to legal process.
Senator Hirono. Well, apparently, according to the way the
situation was described by Senator Durbin, that this goes on in
quite a blatant way. And if you can get information from these
entities that are platforms for the sale of these stolen goods,
that would be a good thing. And so I would suggest that you
look at the INFORM Consumers Act that Senator Durbin referred
to, which is bipartisan, supported by Senators Durbin, Cassidy,
myself, and Senator Perdue. That may give you more tools to go
after these kinds of crimes.
I think all the panelists, you have referred to hundreds of
prosecutions, thousands of investigations as a result of all
the scams and fraud perpetrated because of the opportunities
presented by COVID-19. And I think, Mr. Hughes, you indicated
that there are serious consequences for people who commit these
kinds of criminal acts. So I would like to know. Has anybody
gone to prison? Are you seeking prison time? What kind of fines
are you imposing on the people that you prosecute for these
crimes?
Mr. Hughes. Thank you for the question, Senator. I think
for the frauds, the standard penalty, the incarceration length,
applies that normally applies under non-COVID-19-related
circumstances. With respect to some of the PPP fraud, for
example, again, a lot of factors need to be--need to
necessarily affect how long a particular defendant's prison
time would be. And whether they plead and take responsibility
or are convicted at trial also affects it, as does the
sentencing judge.
Back-of-the-envelope calculation, just for PPP would be
anywhere--the average would be between 50 months and 100
months. And that is, you know, typical for the types of frauds
we are seeing where the proceeds are in the millions of
dollars. Again, there are a number of different tools we bring
to bear to address these problems and disrupt these schemes.
Senator Hirono. Mr. Hughes, I am running out of time, but
do you think that we should create higher consequences or
steeper consequences for people who take advantage during a
national crisis and a pandemic? You referred to the usual fraud
kinds of consequences, but maybe we should be looking at higher
levels of consequences. What do you think?
Mr. Hughes. Senator, I think there is an honest and
important debate as to the level of consequences for offenses
during a national emergency. There have been discussions about
proposed legislation regarding Sentencing Guidelines. Those
discussions, in the Department's view, should continue, and we
would be willing to have discussions about other proposed
legislation in that vein.
Senator Hirono. You have been asked the UI scam involving a
Nigerian entity. So, apparently, a number of these kinds of
frauds are perpetrated by foreign entities, and I'm wondering.
How easy is it for you to effectively prosecute foreign
entities? And do you need more tools, any of you, to go after
these foreign criminals?
Mr. Hughes. I think from a prosecution standpoint I'll
defer to our law enforcement investigative colleagues with
respect to investigations, but from a prosecution perspective,
we have a number of tools, jurisdictional hooks which permit
Federal prosecutors to charge and effectively prosecute foreign
criminal organizations. And those tools in many respects are as
robust as they can given certain jurisdictional and
constitutional limitations. But I will defer to my Federal
investigations colleagues for the investigations piece.
Mr. Shivers. So as I mentioned previously, working with
international partners is very important for us, and so whether
these fraud schemes emanate from a foreign country that touch
our American citizens, we work very closely through our legal
attache offices around the world to develop information, work
in conjunction with our foreign law enforcement partners to
bring charges.
Obviously, one of the potential obstacles that we would
face would be matters of extradition, so those are some of the
things that we have to work through. But, again, these fraud
schemes, because many are internet-based, have a foreign nexus.
And so with the FBI, one of the things that we have done--and
this was through our elder fraud initiative that we worked with
the Department of Justice over the last 2 years--is we have
assigned assistant legal attaches in various countries where we
know some of these fraud schemes emanate. And that gives us
greater visibility, greater connection with our international
partners, and enhances our ability to bring those individuals
to justice.
Senator Hirono. May I just have ask more question, a
followup, Mr. Chairman?
Chairman Graham. Thank you very much, Senator Hirono. We
will make sure you get to do that.
Senator Hirono. Okay.
Chairman Graham. Okay. Thank you. Let us see. Senator
Booker.
Senator Booker. I think Senator Hirono said she wanted to
ask one last question.
Chairman Graham. Oh, I am sorry. I misheard. Senator
Hirono.
Senator Hirono. I am sorry.
Chairman Graham. No, no. I apologize. Ask anything you want
to ask. I apologize.
Senator Hirono. I think it is really hard to prosecute
these kinds of crimes when the perpetrators are foreigners, and
our panel explained the difficulties. And so a lot of this type
of information is stolen information that is already out there,
the personally identifiable information. So is there something
more that States and individuals can do to protect themselves
from the sort of fraud that comes about from stolen identities?
Chairman Graham. Good question.
Mr. Shivers. I would say just kind of a basic 101, there
are a number of services where individuals can have access to
their credit report, and I would imagine that reviewing your
credit report for anything that, you know, you may not have
knowledge of would be important. But I think also taking
preventive measures, and that is, obviously, the internet,
there's a way that the criminals approach individuals, sending
these unsolicited emails. So I would just say just using, for
lack of a better word, basic common sense in how the public
deals with some of these opportunities that these criminal
organizations take advantage of.
So it's obviously a very difficult thing, but, again,
unsolicited emails, unsolicited phone calls, where individuals
are actually providing some of the PII. But, again, as we have
talked about, some of that PII may be stolen. So I would just
say just using some basic preventive measures.
Senator Hirono. Thank you, Mr. Chair.
Chairman Graham. Thank you. Senator Booker.
Senator Booker. Mr. Chairman, I think the rule of the
Committee should be it is better to ask for forgiveness than
permission. I know Senator Hirono knows that rule.
But I am grateful to be here, and if I can, I want to
direct my questions to Mr. Carpenito, not just because he is
from New Jersey, not just because he is bald, not just because
Anthony Ambrose, who is both of those things, has said generous
things about him. But, obviously, these issues are really
impacting our State, and I would love to get some of his
insights.
And so, first of all, we have seen numerous instances of
retailers taking advantage of the global pandemic and gouging,
charging outrageous fees for medical supplies, personal
protective equipment, things that are really--we deem essential
and are critical to the life, safety, and well-being of so many
of our first responders and others. This behavior is immoral,
frankly, and reprehensible.
My team and I have introduced the Prevent Emergency and
Disaster Profiteering Act on May 7. There is no Federal law
against this kind of reprehensible price gouging on essential
items that are deemed critical to the health, safety, and lives
of so many Americans.
And so, Mr. Carpenito, I am curious what you think of the
power of having a Federal law against this kind of gouging, if
you could comment on that, and then talk about the prevalence
of this in New Jersey and how have you, without that law, been
successful in trying to combat these issues.
Mr. Carpenito. Thank you, Senator. So I agree with your
characterization. I think New Jersey is one of the States that
had one of the largest impacts from this type of conduct
because, as everyone knows, New York and New Jersey were two of
the most impacted States in the country by COVID-19.
We also have some of the most vulnerable victims for this
as we have a very large elderly population, and we have a very
large health care system.
So, thankfully, because of the invocation of the Defense
Production Act and the swift movement by Attorney General Barr
to set up the task force to enforce the act, we have had the
tools to address hoarding and price gouging of scarce
materials, those designated by the Department of Health and
Human Services, and that's how we have been able to operate. I
have not felt constrained as a task force leader in our tools
there.
But as you mentioned, there is a--there is really a history
and a record here of folks trying to take advantage of national
disasters like this. We saw it in Katrina. You and I saw it in
New Jersey after Hurricane Sandy. And we've seen it throughout
the country on a scale that we have never seen before with
COVID-19 because it is the largest health crisis we have had
since the Spanish flu.
We have been unable to address certain types of price
gouging because there's not a Federal statute. For example,
things like toilet paper, things like, you know, meat, things
like food, things like other materials that personal consumers
need are better suited under the current statutory scheme to be
prosecuted by State Attorney General's offices.
What we have done is I have worked with Mr. Hughes, Mr.
Shivers, and we have made sure that we make those referrals to
State AGs where we think they have the better tools to
prosecute those individuals, because the most important thing,
as always, is just to make sure that these people are brought
to justice, not who does it.
Senator Booker. I am grateful for that response, and I do
really believe there is an urgency to give on the Federal level
more tools to deal with that.
You know, on March 20 of this year, you announced the
creation of the Federal-State COVID-19 Fraud Task Force with
Attorney General Gurbir Grewal and our Comptroller Walsh. The
task force bridges the prosecutorial efforts of the State and
Federal agencies and the kind of coordination and cooperation I
think is really needed in circumstances like this. And so I
just want to hear a little bit more about the Federal-State
task force, what kind of fraud schemes you guys have uncovered
since its creation and what challenges have you all encountered
in combating that fraud that you see out there.
Mr. Carpenito. Sure, and you--we are very blessed in New
Jersey. I can't speak about every State, but I think that we
have heard--as task force leaders, myself and Mr. Hughes have
heard similar success stories throughout the country in forming
partnerships here. We have had a very good relationship during
my entire tenure with Attorney General Grewal's office and, in
particular, working with his first assistant, Jen Davenport,
and his executive assistant, Andrew Brock. They've been in
almost daily contact with our task force folks in New Jersey,
sharing referrals.
Unfortunately, I cannot get into specifics of referrals
because the cases that I have on my mind are not ones that are
publicly available information at this time. But what I can
tell you is we haven't really seen a lot of hurdles because we
have put egos aside and we have focused most importantly on
making sure these cases are brought.
You know, with regards to the tools, like I said, the
Defense Production Act has been a powerful tool for us, and
it's given us the authority to investigate price gouging and do
so pretty vociferously and quickly.
Senator Booker. I'm over time. I'm going to submit more of
a lot of our pressing questions for the record, for QFRs.
Senator Booker. I do have one last question for you to put
you on the spot, and I apologize for doing this in advance. But
my question simply is, Anthony Ambrose, is he a great police
director or is he the greatest police director?
Mr. Carpenito. He is a national treasure. I've been saying
this since I came into office, and we have seen it during these
riots. The fact that Newark stayed together as a community and
were peaceful in their reaction to the death of George Floyd is
a credit to Director Ambrose for his handling of law
enforcement and a credit to Mayor Ras Baraka for his community
engagement. And I saw firsthand for the past 8 to 10 days as
other cities struggled with these protests, Newark thrived, and
they are doing so because of the work that was done through the
Newark consent decree with the leadership of Anthony Ambrose,
and as I said, the community engagement and support that Mayor
Baraka has shown for his police department and, quite frankly,
the support that both have shown to me since I have been U.S.
Attorney in focusing on violent crime throughout Newark through
not just prosecutions but by education and community
engagement.
Senator Booker. Well, I appreciate your deference to
consent decrees. I wish that the current Attorney General would
actually engage and use them. They were a constructive force in
the city of Newark. I appreciate you saying things about the
extraordinary leadership of Ras Baraka. That is 100 percent
true. And Anthony Ambrose is a treasure. He takes better care
of the city of Newark than he does himself, so I hope that you
will--again, I say this on the record--encourage him to get out
there, exercise, and, you know, be more healthy so we have him
for a few more decades.
Mr. Carpenito. He is down 70 pounds. We are looking good.
Senator Booker. He is, he is, actually, in all truth.
Thank you, Mr. Chairman.
Chairman Graham. Thank you. I need to call him. I am trying
to lose some weight myself.
So here is the deal. We all appreciate you coming to the
Committee. I asked you do you have the tools necessary, the
resources. It seems like there are some tools that maybe we
could utilize that you do not have. So if you can kind of get
your collective wisdom, I think Senator Durbin had a bill,
Senator Klobuchar, I think Senator Booker introduced
legislation. So get back with us about what we can do to help
you. I mean what can the Committee do to change laws or
supplement laws, sentencing enhancing, whatever? Just let us
know.
Thank you all for being on the front lines, and we will
hold the hearing record open for the requisite amount of time
for additional questions. Thank you.
[Whereupon, at 11:58 a.m., the hearing was adjourned.]
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