[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                          ROOTING OUT FRAUD IN
                      SMALL-BUSINESS RELIEF PROGRAMS

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

                                HEARING

                               BEFORE THE

             SELECT SUBCOMMITTEE ON THE CORONAVIRUS CRISIS

                                 OF THE

                   COMMITTEE ON OVERSIGHT AND REFORM

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 25, 2021

                               __________

                           Serial No. 117-12

                               __________

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


                     Available on: www.govinfo.gov,
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                             docs.house.gov
                             
                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
43-986 PDF                  WASHINGTON : 2021                     
          
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                   COMMITTEE ON OVERSIGHT AND REFORM

                CAROLYN B. MALONEY, New York, Chairwoman

Eleanor Holmes Norton, District of   James Comer, Kentucky, Ranking 
    Columbia                             Minority Member
Stephen F. Lynch, Massachusetts      Jim Jordan, Ohio
Jim Cooper, Tennessee                Paul A. Gosar, Arizona
Gerald E. Connolly, Virginia         Virginia Foxx, North Carolina
Raja Krishnamoorthi, Illinois        Jody B. Hice, Georgia
Jamie Raskin, Maryland               Glenn Grothman, Wisconsin
Ro Khanna, California                Michael Cloud, Texas
Kweisi Mfume, Maryland               Bob Gibbs, Ohio
Alexandria Ocasio-Cortez, New York   Clay Higgins, Louisiana
Rashida Tlaib, Michigan              Ralph Norman, South Carolina
Katie Porter, California             Pete Sessions, Texas
Cori Bush, Missouri                  Fred Keller, Pennsylvania
Danny K. Davis, Illinois             Andy Biggs, Arizona
Debbie Wasserman Schultz, Florida    Andrew Clyde, Georgia
Peter Welch, Vermont                 Nancy Mace, South Carolina
Henry C. ``Hank'' Johnson, Jr.,      Scott Franklin, Florida
    Georgia                          Jake LaTurner, Kansas
John P. Sarbanes, Maryland           Pat Fallon, Texas
Jackie Speier, California            Yvette Herrell, New Mexico
Robin L. Kelly, Illinois             Byron Donalds, Florida
Brenda L. Lawrence, Michigan
Mark DeSaulnier, California
Jimmy Gomez, California
Ayanna Pressley, Massachusetts
Vacancy

             David Hickton, Select Committee Staff Director
                     Russell Anello, Chief Counsel
                   Senam Okpattah, Deputy Chief Clerk

                      Contact Number: 202-225-5051

                  Mark Marin, Minority Staff Director

             Select Subcommittee On The Coronavirus Crisis

               James E. Clyburn, South Carolina, Chairman
Maxine Waters, California            Steve Scalise, Louisiana, Ranking 
Carolyn B. Maloney, New York             Minority Member
Nydia M. Velazquez, New York         Jim Jordan, Ohio
Bill Foster, Illinois                Mark E. Green, Tennessee
Jamie Raskin, Maryland               Nicole Malliotakis, New York
Raja Krishnamoorthi, Illinois        Mariannette Miller-Meeks, Iowa
                         
                         
                         C  O  N  T  E  N  T  S

                              ----------                              
                                                                   Page
Hearing held on March 25, 2021...................................     1

                               Witnesses

The Honorable Hannibal ``Mike'' Ware, Inspector General, Small 
  Business Administration
Oral Statement...................................................     4

The Honorable Michael E. Horowitz, Chair, Pandemic Response 
  Accountability Committee, Inspector General, Department of 
  Justice
Oral Statement...................................................     6

William B. Shear, PhD, Director, Financial Markets and Community 
  Investment, Government Accountability Office
Oral Statement...................................................     8

Written opening statements and the written statements of the 
  witnesses are available on the U.S. House of Representatives 
  Document Repository at: docs.house.gov.

                           Index of Documents

No additional documents were entered into the record during this 
  hearing.

 
                          ROOTING OUT FRAUD IN
                     SMALL-BUSINESS RELIEF PROGRAMS

                              ----------                              


                        Thursday, March 25, 2021

                   House of Representatives
      Select Subcommittee on the Coronavirus Crisis
                          Committee on Oversight and Reform
                                                   Washington, D.C.

    The subcommittee met, pursuant to notice, at 2:05 p.m., via 
WebEx, Hon. James E. Clyburn (chairman of the subcommittee) 
presiding.
    Present: Representatives Clyburn, Waters, Maloney, Foster, 
Raskin, Krishnamoorthi, Jordan, Green, and Miller-Meeks.
    Chairman Clyburn. Good morning. The committee will come to 
order.
    Without objection, the chair is authorized to declare a 
recess of the committee at any time.
    I now recognize myself for an opening statement.
    The Paycheck Protection Program, or PPP, and the Economic 
Injury Disaster Loan Program, or EIDL, have been essential 
lifelines for millions of small businesses harmed by the 
coronavirus pandemic. More than $1 trillion has been disbursed 
by these programs, with good reason given the scale of the 
crisis. With so many tax dollars expended, it is vital that we 
ensure that the money is being used for its intended purposes 
and not diverted to fraud.
    Unfortunately, the Trump administration failed to take 
basic steps to prevent fraud when it implemented these programs 
last year. Thanks to the work of this committee and our 
oversight partners, we now know that this failure led to nearly 
$84 billion in potential fraud, including $79 billion in 
potentially fraudulent EIDL loans and grants and $4.6 billion 
in PPP loans. That means billions in taxpayer dollars may not 
have reached the small businesses that most urgently needed 
support.
    Last October, the SBA Inspector General found that the 
Trump administration--I'm quoting him here--``lowered the 
guardrails'' by removing or weakening controls in the EIDL 
Program. Specifically, the administration ignored flags of 
potential fraud, approved loans in batches with little to no 
vetting, and abandoned a rule that required two SBA employees 
to approve each loan application. According to the IG, these 
actions increased fraud risk significantly.
    In a staff report last year, this committee identified more 
than 22,500 PPP loans worth $4 billion that may have been 
subject to fraud. The SBA Inspector General has since found at 
least $4.6 billion in potentially fraudulent loans because the 
Trump administration refused to implement internal controls 
that--and I quote here again--``could have reduced the 
likelihood of an ineligible or fraudulent business obtaining a 
PPP loan,'' end of quote.
    As a result of the lack of controls, the Inspector General 
uncovered tens of thousands of PPP loans that exceeded the 
maximum loan amount that had been approved to businesses 
registered under the program cutoff date or were mailed to 
businesses that exceeded the program's size standards.
    Earlier this year, GAO added PPP and EIDL to its High Risk 
List, citing the failure to implement adequate controls or make 
recommended improvements.
    Former Treasury Secretary Steven Mnuchin asserted last year 
that, given the need to get relief money out quickly, it was 
inevitable that the programs ran into a lot of issues. Let me 
be clear: That is a false choice. Americans should not have to, 
and did not have to, choose between quickly getting aid during 
a crisis and preventing the theft or waste of billions of tax 
dollars.
    While disbursing PPP and EIDL funds quickly was rightly 
prioritized during the crisis, this committee and the oversight 
bodies before us today all outline simple steps that the prior 
administration could've taken to prevent oversight--or to 
provide oversight and prevent fraud without causing harmful 
delays.
    The Trump administration not only ignored these 
recommendations, but it resisted legitimate oversight by 
removing and bullying Inspectors General and withholding basic 
information from Congress. As The Washington Post reported 
earlier this week, we now know that this was a widespread 
problem in the prior administration. Today, we face the 
challenge of fixing the resulting damage.
    Our committee released a staff memo this morning showing 
just how vast a challenge this is. The SBA has referred a 
staggering 1,340,000 claims of potential fraud concerning EIDL 
loans and advances to the agency's Inspector General. The SBA 
Inspector General has received another 148,000 complaints on 
its fraud hotline. The Inspector General already has more than 
200 open investigations related to PPP and EIDL.
    And it is not just a single inspector general playing a 
role. Given the scope of the problem, 32 Federal and state 
agencies have been pulled into investigations involving the 
small-business relief programs.
    Fortunately, the Biden-Harris administration is taking the 
risk of fraud seriously and investing in oversight. President 
Biden has called for, in his words, fastidious oversight of 
pandemic relief funds and charged his administration to--and I 
quote him here--``make sure the relief arrives quickly, 
equitably, and efficiently, with no waste or fraud,'' end of 
quote.
    The American Rescue Plan will further enhance transparency 
and accountability by investing $142 million to support 
critical oversight by the Pandemic Response Accountability 
Committee, or PRAC, the inspector general community, and the 
Government Accountability Office.
    Today, I am pleased to welcome distinguished 
representatives of these watchdogs who are appearing before the 
select subcommittee. With us this afternoon is Hannibal 
``Mike'' Ware, the SBA Inspector General; Michael Horowitz, the 
Inspector General for the Department of Justice and Chair of 
the PRAC; and William Shear, the Director of Financial Markets 
and Community Investment at GAO.
    I'm also pleased to welcome the select subcommittee's 
newest member, Mrs. Miller-Meeks.
    I look forward to hearing how our panelists plan to use the 
funds provided in the American Rescue Act to combat fraud in 
small-business relief programs and how we can continue to work 
together to ensure that our Nation's response to the pandemic 
is effective, efficient, and equitable.
    In the ranking member's absence, I now yield to Mr. Jordan 
for any public opening statement he may wish to make.
    Mr. Jordan.
    Mr. Jordan. Thank you, Mr. Chairman. Thanks to you and to 
our witnesses for appearing virtually today.
    [Inaudible] we continue to hold only virtual hearings in 
this subcommittee, even though four members of the majority 
celebrated the $1.9 trillion spending bill in person at the 
White House just two weeks ago.
    I want to also welcome our new Republican member to the 
select committee, Representative Mariannette Miller-Meeks from 
the great state of Iowa. We appreciate Mrs. Meeks' hard work on 
behalf of her constituents, especially as Speaker Pelosi and 
the Democrats are currently challenging Dr. Miller-Meeks' 
election.
    Mrs. Miller-Meeks won the general, she won the recount, and 
the state of Iowa certified her results, but her opponent 
skipped the courts and ran straight to the Speaker and 
congressional Democrats to try to overturn the will of the 
people in the state of Iowa. It's wrong, what they're doing. 
It's a dangerous game that the Democrats are playing with this 
election.
    Adding Dr. Miller-Meeks, we now have our second medical 
doctor on the select subcommittee, which I think is a good 
thing.
    Today we're here to talk about fraud. Anyone that commits 
fraud and steals taxpayer dollars from hardworking Americans 
should be punished to the fullest extent of the law, and the 
money should be recouped for the taxpayers.
    The Trump administration harnessed the full force of the 
Federal Government to find and prosecute fraud, particularly in 
the PPP program. In fact, the Trump Department of Justice stood 
up a PPP fraud task force, which brought us its first fraud 
case within one month of the program starting. This enforcement 
pace is unmatched in the history of the Department's white-
collar prosecution efforts.
    So far, the FBI has opened 537 fraud cases, arrested 111 
people, and began the process of recouping millions of stolen 
dollars. This is good. This is how the justice system is 
supposed to work.
    The Democrats will claim that the PPP program is rife with 
fraud, when, in fact, it is just the opposite. Using the 
Democrats' own statistics, over 99 percent of PPP money got to 
the correct recipient and has been used appropriately. This is 
a better rate than the private insurance--or, excuse me, 
private mortgage market.
    The Democrats will also ignore the massive successes of the 
program. PPP supported 51 million jobs, over 80 percent of 
America's small businesses, and saved almost 19 million jobs 
from permanent loss. That is truly unprecedented.
    Of course, it can't go on forever. It's time to reopen our 
states, even the blue states. We must get people back to work 
and get kids back to school. Just this week, the Federal 
Reserve Board Governor in charge of community banking said the 
economy must reopen and lockdowns must be lifted.
    Florida reopened and was vilified. New York and Governor 
Cuomo shut down and were praised. The facts are clear now, 
though: Florida is successful, and Governor Cuomo is under 
criminal investigation. Florida protected seniors, while 
Governor Cuomo sent the virus to seniors. Florida's death rate 
among seniors is 50 percent lower than that of the state of New 
York's. Of course, instead of investigating Cuomo's actions, 
Democrats rewarded him with a $13 billion bailout.
    Contrary to the chairman's own statements, this 
subcommittee remains focused on politics. It is past time we 
hold in-person hearings on getting kids back to school, getting 
vaccines to rural communities, on Cuomo's nursing-home 
disaster, and the health crisis at our southern border. 
Instead, this subcommittee is focused on attempting to tear 
down a bipartisan program that kept the economy afloat during 
the early and toughest days of the pandemic.
    We all agree fraud is bad, but we should all agree that a 
99-percent success record is unprecedented, and we have 
President Trump to thank for that.
    Mr. Chairman, thank you, and I yield back and look forward 
to hearing from our witnesses.
    Chairman Clyburn. Thank you very much, Mr. Jordan.
    The witnesses will now be unmuted so we can swear them in.
    Please raise your right hands.
    Do you swear or affirm that the testimony you are about to 
give is the truth, the whole truth, and nothing but the truth, 
so help you God?
    Mr. Horowitz. I do.
    Mr. Ware. I do.
    Mr. Shear. I do.
    Chairman Clyburn. Let the record show that the witnesses 
answered in the affirmative.
    Thank you. Without objection, your written statements will 
be made part of the record.
    With that, Mr. Ware, you are now recognized to provide your 
testimony.

    STATEMENT OF THE HON. HANNIBAL ``MIKE'' WARE, INSPECTOR 
             GENERAL, SMALL BUSINESS ADMINISTRATION

    Mr. Ware. Thank you very much.
    Chairman Clyburn, Ranking Member Scalise, and distinguished 
members of the subcommittee, thank you for inviting me to speak 
with you today and for your continued support of my office.
    I come before you today in the midst of a historic 
challenge to the Nation, a challenge for which the SBA has a 
pivotal and unprecedented role in stabilizing the U.S. economy. 
The men and women of my office have been working diligently to 
provide oversight of SBA's pandemic response. I am always proud 
to represent them publicly and to speak to you about our 
important work. We share in the Nation's grief for those lost 
to the pandemic and are keenly aware that nothing short of the 
public's trust is at stake in our oversight efforts.
    SBA is managing over a trillion dollars in lending 
authority through the PPP and the EIDL programs, with the most 
recent tranche of lending authority being contained within the 
American Rescue Plan Act. As with my office, the men and women 
of SBA have been running at a sprinter's pace; however, the 
race we are running has been more of a marathon. Nonetheless, 
we have sought to have an aggressive and focused approach to 
our oversight to ensure our work is properly calibrated and 
relevant.
    The Congress recognized that the oversight required of the 
pandemic response was outsized for existing oversight resources 
across government, to include my office, and we have received 
three supplemental appropriations to increase our oversight 
capacity.
    Initially, we focused on the recruitment of a mix of 
auditors, analysts, and criminal investigators to provide 
immediate and timely insight into those programs.
    In December, we received funding directed to oversight of 
the EIDL Program that seeks to address the rampant fraud 
identified by my office. These funds are being used to increase 
our investigative staff and enhance our data analytics 
capacity.
    We received our most recent supplemental increase a couple 
of weeks ago, and those funds will be used to further increase 
our investigative capacity to combat fraud. Fraud 
investigations will be a decade-long effort due to the 
performance of these loans within SBA's portfolios and the 
statute of limitations for fraud.
    Our office will have approximately 40 percent more staff on 
board after our hiring surges for EIDL and ARPA conclude than 
we had before March 2020.
    Even still, we recognized from the beginning that the level 
of oversight required will take a whole-of-government approach. 
We partnered with law enforcement entities across government 
and joined multiple task forces to multiply our reach. Since 
the outset of the pandemic response, our strategy has been to 
prevent and deter fraud, waste, and abuse and to identify and 
combat instances of the same.
    The first step was the issuance of three reports sharing 
risks and lessons learned from our past oversight work, 
principally, that most closely related, which is of the 
American Recovery and Reinvestment Act of 2009. These reports 
as well as a fraud and scam alert were published before SBA 
made the first PPP and EIDL loans.
    Recognizing the speed at which lending was occurring in 
both these programs, we developed innovative report products to 
provide timely insight to our stakeholders. Our first flash 
report was published just a little over 30 days of PPP's 
implementation. Our next report would come out in July, which 
found significant deficiencies in internal controls and rampant 
fraud within the EIDL Program. We have issued 11 reports on 
SBA's PPP and EIDL programs to date, with two more near 
issuance.
    While our audit work was ongoing, our criminal 
investigators were aggressively pursuing fraud. On May 5, just 
a little over a month after the first PPP loans, the first-in-
the-Nation fraud charges were announced against an individual 
fraudulently seeking a PPP loan. We have since initiated over 
420 investigations, and, together with our law enforcement 
partners, the Department of Justice has announced over 100 
charges against individuals committing fraud against the PPP 
and EIDL programs.
    Now, if I may, I would like to clarify a number I mentioned 
at a hearing yesterday before the Senate. Together with our law 
enforcement partners and with SBA and with the financial 
institutions, we have realized approximately $2.5 billion in 
moneys being returned and seized that were associated with 
fraud and suspicious activities.
    We have received nearly 150,000 complaints on our hotline 
since March of last year. This is over 150 years' worth of 
complaints when compared to prior years. We have sought and 
obtained assistance from the PRAC to catalogue complaints being 
received outside of our online complaint submission system. As 
we continue to address our processing backlog, we will employ 
data analytics to further triage and guide these efforts.
    I look forward to discussing our most recent published work 
surrounding implementation of PPP and EIDL, but I must tell you 
that data analytics has made a difference in our office's 
ability to keep our stakeholders currently and fully informed 
in a timely manner.
    Thank you for the opportunity to speak to you today, and I 
am happy to answer any questions you may have of me.
    Chairman Clyburn. Thank you very much, Mr. Ware. That was 
perfect timing.
    The chair now recognizes Mr. Horowitz.

 STATEMENT OF THE HON. MICHAEL E. HOROWITZ, PANDEMIC RESPONSE 
  ACCOUNTABILITY COMMITTEE, INSPECTOR GENERAL, DEPARTMENT OF 
                            JUSTICE

    Mr. Horowitz. Thank you, Chairman Clyburn, Ranking Member 
Scalise, members of the subcommittee. Appreciate you inviting 
me to testify at today's important hearing. And we appreciate 
the strong, bipartisan support for our work from Congress.
    The Pandemic Response Accountability Committee, or PRAC, 
was created by Congress one year ago and is comprised of 22 
Federal inspectors general working collaboratively to oversee 
the more than $5 trillion in pandemic relief emergency 
spending.
    The PRAC's mission is to promote transparency and to work 
with the IGs to ensure that taxpayer money is used effectively 
and efficiently to address pandemic-related public health and 
economic needs. Let me briefly highlight some of our 
independent oversight work to date.
    First, we've advanced transparency of the Federal 
Government's pandemic-related spending through the launch of 
our robust website, pandemicoversight.gov. The website makes 
publicly available a wide range of spending data and is 
currently the only place where certain spending data is 
available to the public. The website also contains 
accountability information, including information about OIG 
audits, inspections, and investigations, as well as GAO 
reports.
    Second, we've issued crosscutting reports on issues that 
transcend Federal agencies. For example, in February 2021, the 
PRAC issued a ``Top Challenges in Pandemic Relief and 
Response'' report highlighting management challenges facing 
Federal agencies during the pandemic, and we recently issued a 
report on COVID-19 testing.
    Third, the PRAC has played an important role facilitating 
coordination and collaboration among IGs and other oversight 
partners, including GAO and state and local auditors.
    Fourth, the PRAC is using the resources and tools Congress 
gave us to enhance shared services across the IG community. For 
example, we have, among other things, provided resources to 
PRAC members to combat fraud in pandemic relief programs, 
including with regard to the PPP and EIDL programs.
    Fifth, the IG community is actively engaged in combating 
fraud and criminal behavior. To date, the community has led or 
participated in investigations leading to over 240 indictments 
or complaints, 190 arrests, and 36 convictions. We're looking 
to use all of the tools available to us--criminal prosecution, 
civil enforcement, and suspension and debarment--to ensure that 
those who engage in fraud and wrongdoing are held accountable.
    Having highlighted some of our work to date, let me briefly 
discuss some of the initiatives we have ongoing.
    First, in order to fulfill the PRAC's mission, we need 
better technological tools for IGs and our oversight partners, 
including the use of advanced data analytics. To that end, the 
PRAC is developing the Pandemic Analytics Center of Excellence, 
or PACE, to conduct data analysis, to provide fraud-fighting 
tools to the IG community, to enable the sharing of data 
analytics and leading practices across our community, and to 
broadly assist the IG community's audit and investigative work.
    Second, the PRAC is continuing to develop crosscutting 
oversight projects. We have three ongoing currently, and we're 
developing more, and you will see more from us in the months 
ahead.
    Third, the PRAC has established a fraud task force to serve 
as a deconfliction and coordination tool to assist IGs in their 
investigative efforts, to serve as a coordinating body with the 
Department of Justice and other law enforcement agencies, and 
to allow IGs to tap into investigative resources from across 
the IG community.
    Fourth, we're working with OMB and Federal agencies to 
address data gaps that we have identified and reported on. 
Having necessary data is critical to advancing transparency and 
accountability and to be able to assess programmatic impacts.
    Fifth and finally, we're looking to use the Program Fraud 
Civil Remedies Act, or PFCRA, to fight pandemic-related relief. 
However, our ability to do so is limited and would be greatly 
enhanced if certain amendments were made to PFCRA. We look 
forward to working with Congress to enact those important 
changes.
    Thank you again for the strong, bipartisan support for our 
work. I would be pleased to answer any questions the committee 
may have.
    Chairman Clyburn. Thank you very much, Mr. Horowitz. That's 
even more perfect with your timing. Thank you very much.
    The chair now recognizes Mr. Shear.
    And let me see how perfect you can be.

STATEMENT OF WILLIAM B. SHEAR, DIRECTOR, FINANCIAL MARKETS AND 
     COMMUNITY INVESTMENT, GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Shear. I'll try my best.
    Chairman Clyburn, Ranking Member Scalise, and members of 
the subcommittee, I am pleased to be here today to discuss our 
work on SBA's PPP and EIDL programs.
    SBA has made or guaranteed more than 17 million loans and 
grants, providing about $910 billion to help small businesses 
adversely affected by COVID-19. Over time, we have found the 
following:
    First, as far as PPP oversight, given the immediate need 
for PPP loans, SBA implemented limited safeguards for approving 
those loans. Because of ongoing oversight--because ongoing 
oversight is crucial, we recommended in June 2020 that SBA 
develop plans to assess PPP risk. SBA has since developed plans 
to review PPP loans and has recently provided us detailed 
information about its oversight process.
    Second, analysis of EIDL data. We reported in January 2021 
that SBA had provided about 5,000 advances totaling about $26 
billion and approved at least 3,000 loans totaling about $156 
million for potentially ineligible businesses. Therefore, we 
recommended that SBA conduct portfolio-level analysis to detect 
potentially ineligible applications.
    Third, assessment of fraud risk. Although SBA has taken 
some steps to mitigate fraud risk to PPP and EIDL, such as 
conducting PPP loan reviews and implementing new EIDL controls, 
the agency has not yet conducted a formal fraud risk assessment 
for either program.
    Suspicious activity reports. From April through October 
2020, financial institutions filed more than 21,000 suspicious 
activity reports related to PPP. From May through October 2020, 
financial institutions filed more than 20,000 such reports 
related to EIDL.
    Department of Justice charges. From May 2020 through 
February 2021, the Department of Justice publicly announced 
charges in over 100 fraud-related cases associated with PPP 
loans and 30 fraud-related cases associated with EIDL loans. 
I'll refer to, I'm glad to be here with SBA's Inspector 
General. And I'll just say that, in October 2020, he reported 
that there were strong indicators of widespread potential fraud 
in the EIDL Program.
    The financial statement audit. In December 2020, SBA's 
independent financial statement auditor issued a disclaimer of 
opinion on SBA's Fiscal Year 2020 consolidated financial 
statements because SBA could not provide adequate documentation 
to support a significant number of transactions and account 
balances related to PPP and EIDL.
    Since June 2020, we have reported on the potential for 
fraud in both programs. Further, as we have reported multiple 
times, SBA's failure to provide us with data and documentation 
on PPP and EIDL in a timely manner has impeded efforts to 
ensure transparency and accountability for the programs. This 
includes delays in our obtaining key information from SBA, such 
as detailed oversight plans and documentation for estimating 
improper payments.
    Results of SBA's most recent financial statement audit are 
consistent with our findings. As a result, we included these 
programs as a new area on our High Risk List in March 2021 
because of their potential for fraud, significant program 
integrity risk, and need for much-improved program management 
and better oversight.
    According to Federal internal control standards and our 
fraud-risk framework, managers in executive-branch agencies are 
responsible for managing fraud risk and implementing practices 
for mitigating those risks. When fraud risk can be identified 
and mitigated, fraud may be less likely to occur. Risk 
management is a formal and disciplined practice for addressing 
risk and reducing it to an acceptable level.
    In addition to our previous recommendations, we anticipate 
making four recommendations on fraud risk in PPP and EIDL and 
one on EIDL oversight in our March 2021 report, to be issued 
next week, on the Federal COVID-19 response. SBA agreed with 
the recommendations, stating it would implement fraud-risk 
assessments for both programs and an oversight plan for EIDL.
    This concludes my statement. I would be glad to answer any 
questions.
    Chairman Clyburn. Thank you very much, Mr. Shear. You did 
it. Thank you.
    Mr. Shear. Thank you.
    Chairman Clyburn. Let me thank all of our witnesses here 
today.
    Now, each member will have five minutes for questions. And, 
with that, I will now recognize myself for my five minutes.
    Now, as I stated earlier, the Trump administration's 
failure to implement robust fraud controls in the EIDL Program 
and PPP has led to nearly $84 billion in potentially fraudulent 
loans.
    We were making all kinds of recommendations as to what 
steps need to be taken, but, instead of taking these steps, the 
Trump administration--and I'm quoting the Inspector General 
here--``lowered the guardrails'' on the EIDL Program, leading 
to $79 billion in potentially fraudulent loans in the program 
alone.
    Mr. Ware, your report found that SBA removed or weakened 
existing controls in EIDL last year. Would you please describe 
how SBA's actions contributed to an increased risk of fraud?
    Mr. Ware. Thank you for that question.
    Well, initially, we knew--we had a feeling that this would 
happen. Or, more than a feeling, we knew this would happen 
based on our prior experience and the prior reports that we had 
done. And that's why we notified SBA up front that, ``Hey, this 
is the time where we have to strengthen our controls.''
    What happened was, when they started doing the batch 
processing, a lot of the controls that should've gone in place 
up front, especially to address very, very early indicators 
that fraud was in place--I mean, almost immediately the banks 
were contacting us. We had over 5,000 contacts from banks 
almost off the bat. And that's where we sat down with the 
executives here at SBA to say, ``We have a problem.'' And 
that's when we started to see what was going on with the 
reduced controls.
    So, definitely, any proper control environment--any type of 
fraud mitigation has to begin with an internal control 
environment. And that was reduced up front to expedite the 
funds going out, which--we understood the need for the funds 
going out, but we were requiring that SBA strike a balance, a 
delicate balance, between the two. Plus, we thought the things 
we were asking to be done, if implemented correctly, would not 
slow the program down at all.
    Chairman Clyburn. Thank you.
    Now, what recommendations did you offer SBA? And please 
share with us what the administration's response was.
    Mr. Ware. So, we made quite a bit of recommendations, and 
they had to do with--I could probably--some specifics off the 
top of my head:
    We wanted them to assess vulnerabilities--right?--for the 
purpose of strengthening and implementing internal controls to 
address the notices of potential fraud that we had.
    We wanted them to create a process or a method for lenders 
to be able to report suspected fraud to ODA and for how to 
recover the funds. That was not in place.
    We wanted them to review all the loans that had--especially 
the ones that had the bank account number changed from what was 
shown on the original application to determine if those changes 
were indeed legitimate or fraudulent.
    And then we wanted their assistance in recovering the funds 
and de-obligating the funds.
    We just needed them to completely strengthen the internal 
control environment. And we offered, I mean, dozens of 
recommendations for how to do that.
    So, initially--well, it depends on what we're talking 
about. For the Paycheck Protection Program, the Office of Cap 
Access, they were on top of it, in terms of putting in these 
controls and getting ahead of things, which is why, to date, 
we've found less fraud, or less potential for fraud, than we 
have in the EIDL Program. Because with the EIDL Program, 
although some of the changes were made up front, many were not, 
mainly because it wasn't taken as seriously.
    Chairman Clyburn. Well, thank you.
    My time has almost expired. I'm going to yield now to Mr. 
Jordan and let him have 17 seconds of my time.
    Mr. Jordan?
    Mr. Jordan. Thank you, Mr. Chairman.
    Mr. Horowitz, are Democrats the only people allowed to 
object to election results?
    Mr. Horowitz. I'm not sure how to answer that, Congressman.
    Mr. Jordan. Well, I mean, you're a--I've worked with you 
numerous times. You do great work. You're a lawyer. You're the 
Inspector General at the Justice Department. You're a guy who I 
know cares deeply about fairness.
    And I'm just wondering--you know, Democrats criticized 
Republicans for objecting to the Presidential electors being 
counted on January 6, 2021, but they objected to every 
Republican Presidential winner this century.
    In fact, on January 6, Mr. Horowitz, the Democrat chair of 
the Rules Committee objected to the counting of Alabama. 
President Trump won--January 6, 2017, they objected--a state 
President Trump won by 30 points. A member of this committee, 
on January 6, 2017, the lead impeachment manager, in fact, 
objected to the state of Florida. And on January 6, 2017, the 
Democrat chair of the Financial Services Committee objected to 
the state of Wyoming--Wyoming, a state President Trump won by 
40 points.
    And now they're trying to kick off the newest member of 
this committee--trying to kick--the newest member of this 
committee they're trying to kick out of Congress.
    And so, I'm just wondering, are they the only ones allowed 
to object, or can Republicans object as well?
    Mr. Horowitz. Well, Congressman, I'm sure anybody of 
whatever political background they want can make an objection.
    I'll just say, I have enough oversight issues at the 
Justice Department. I, fortunately, don't have oversight over 
the election apparatus. So, I'll stick to what I'm doing there 
as well as with the PRAC.
    Mr. Jordan. Yes. Well, I appreciate the work you do. And I 
just find what the Democrats are attempting to do to one of our 
newest colleagues, who is now a member of this select 
subcommittee, I just find this unbelievable, particularly in 
light of the statements they have made over the last several 
months. And so, we just wanted to raise that point.
    I do appreciate the work that you do and you have done for 
our government over the last several years, and appreciate the 
work you do for all the Inspector Generals in our government.
    With that, Mr. Chairman, I appreciate you yielding me the 
17 seconds, but I don't need it. I have to run to another 
engagement. So, I will yield back the balance of my time.
    Chairman Clyburn. Thank you very much for yielding back the 
17 seconds. I'll take that to remind my friend that we might be 
following suit. If my memory serves, he cast a vote against our 
new President.
    Thank you.
    Mr. Jordan. No. The point is, Mr. Chairman, let's be 
consistent. If you're going to criticize Republicans for 
exercising our constitutional duty and doing--and objecting to 
the unconstitutional way some states change their election law, 
let's be consistent with what happened on January 6, 2017, and 
what the Democrats are attempting to do to the newest member, 
Dr. Miller-Meeks, Lieutenant Colonel Miller-Meeks, the newest 
member of this committee. That's my point.
    Chairman Clyburn. I understand your point, and I accept 
service.
    With that, the chair now recognizes for five minutes Ms. 
Waters.
    Ms. Waters. Thank you very much, Mr. Chairman.
    And I'm so sorry that Mr. Jordan, you know, takes up time 
on this committee, where you're dealing with, you know, 
substantive matters, particularly relating to fraudulency in 
the PPP program, with election matters that have no business in 
this committee.
    And so----
    Mr. Jordan. Mrs. Miller-Meeks thinks it's substantive, I 
will tell you that, Madam Chair. Mrs. Miller-Meeks thinks it's 
substantive.
    Ms. Waters. Reclaiming my time, I'm not talking to you. I'm 
addressing the chair.
    Mr. Chairman, I'm going to go on with my question. And I'm 
hopeful that we can stay on point on the issues that you have 
organized thus far today in this hearing.
    I believe the tradeoff between speed and program integrity 
is a false one. Our government should be able to help Americans 
quickly without losing billions to fraud.
    Mr. Horowitz, in what ways could the Trump administration 
have instituted stronger controls in PPP while still issuing 
loans quickly and efficiently?
    Mr. Horowitz. Congresswoman, I think several of those 
points--several of those items have been identified by IG Ware. 
I think there could have been efforts beyond, in some of the 
programs--and I'll let IG Ware speak to the PPP specifically--
but, in some of the programs, simply relying, for example, on 
self-certification. That's an issue that we've identified as 
IGs--IG Ware has, others have, GAO has.
    There were additional steps that could have been 
undertaken, that recommendations were made to undertake, that 
would not have significantly slowed down, in our view in the 
oversight community, the delivery of funds to the public.
    Ms. Waters. I'm also concerned that the sheer number of 
potentially fraudulent PPP transactions presents an enforcement 
challenge. As highlighted in today's staff memo, of the 7.9 
million PPP loans issued to date, only 242 individuals have 
been criminally charged. And, of the nearly $84 billion of 
potentially fraudulent transactions in PPP and EIDL, only $626 
million, less than one percent, has been recovered.
    Mr. Horowitz, as a former fraud prosecutor, can you 
describe some of the challenges with addressing fraud on this 
scale through criminal prosecutions?
    Mr. Horowitz. It's an important question, Congresswoman, 
and you're exactly right. One of the substantial challenges is, 
with hundreds of billions and trillions of dollars out there 
and the scope and level of the fraud, it's going to take us 
months and years as we pursue it.
    What we're trying to do is leverage, for example, data 
analytics. We very much appreciate the funding that was given 
to us that the chairman mentioned that will allow us to 
undertake that effort, because it will help us focus our 
efforts and find the fraud more specifically. That's what data 
analytics helps us do.
    We've also set up a fraud task force and are working to 
help IGs like IG Ware and others across the community by 
leveraging the tools and looking at this, Congresswoman, as a 
whole-of-government approach by the IGs so that we're 
leveraging resources.
    Ms. Waters. Thank you very much.
    I am interested in learning whether or not there was 
organized crime involved in this, where operations were set up 
supposedly to help many of the PPP applicants, who really 
didn't know government, had not understood government very 
well, had not been involved in the past, but they went to and 
were directed to an organized effort that was turning out these 
applications for unsuspecting individuals.
    Have you detected any of that, Mr. Horowitz?
    Mr. Horowitz. You know what? I'm going to ask on PPP 
specifically if IG Ware wants to jump in on that, because----
    Mr. Ware. Yes.
    Mr. Horowitz [continuing]. His agents have been on top of 
that issue.
    Mr. Ware. If it's OK.
    I am very aware of that. That was something we found very, 
very early on, that that wasn't the case. In the complaints we 
were getting, particularly from the banks early on, from the 
onset, it was that, when they asked a followup question 
relative to the money, the people had no idea, they never had a 
business, they had nothing like that. They said that they were 
contacted by people who they didn't know, said the government 
was giving out free money.
    We also found this on the dark web, in terms of free money, 
free government money to be had, where they would contact 
people, tell them the government is giving out this money, and, 
for a percentage of the money, they could have the money placed 
in their accounts, the persons who were contacted, and then 
they'll get the money and then pay the organizers behind the 
scheme.
    So, we found that that was a regular occurrence.
    Ms. Waters. Well, my time really is up, but I just want to 
say, there are a lot of the small-business people who could end 
up, you know, being accused of fraud. I want the big boys. I 
want the organized efforts. I want those who have misused this 
program and misled these small-business people, rather than 
going out and locking up and indicting a whole bunch of little, 
little business people who just didn't know. So, I'm hopeful 
that that avenue will be, you know, approached and dealt with.
    I yield back.
    Chairman Clyburn. Thank you very much, Chair Waters.
    The chair now recognizes for five minutes Dr. Green.
    Mr. Green. Thank you, Chairman Clyburn and Ranking Member 
Scalise. Can you guys hear my OK?
    Chairman Clyburn. Yes.
    Mr. Green. I want to thank our witnesses for being here 
today.
    You know, one year ago this week, as the pandemic struck 
our Nation, Congress passed and President Trump signed into law 
the CARES Act. At the time, we knew that the economic danger we 
were facing threatened to overwhelm small businesses across the 
Nation. Unemployment claims reached record levels----
    [Audio interruption.]
    Mr. Green. Sorry. I'm in three different committee meetings 
at the same time here.
    The centerpiece of the CARES Act was the popular PPP 
program that gave small businesses access to forgivable loans 
to cover payroll expenses and saved millions of jobs. The 
program was a lifeline to small businesses hit hardest by 
strict lockdown orders in many cities and states.
    According to the U.S. Census Bureau, nearly 75 percent of 
all small businesses received PPP loans. This was not a bailout 
of special interests; it was a-broad based effort that played a 
critical role in saving tens of millions of American jobs.
    The PPP included significant mechanisms to protect against 
fraud and ensure taxpayer money went to the intended 
recipients. Leaders had to abide by existing Federal know-your-
customer, anti-money-laundering, and bank-secrecy laws.
    Now, any program swiftly arranged to spend hundreds of 
billions of dollars will inevitably incur fraud. That's just a 
fact. But the Trump administration made serious governmentwide 
efforts to investigate and prosecute COVID-19-related fraud 
starting from day one. The DOJ Criminal Division immediately 
set up a team specifically to root out and prosecute PPP fraud. 
By September, the DOJ announced that it had initiated multiple 
separate PPP fraud cases.
    And fraud can happen in many ways, such as false 
information on an application, misuse of funds for personal 
use. And those who take advantage of a national crisis for 
their own corrupt ends should be held accountable. However, 
according to calculations from the majority on this committee, 
the fraud rate within PPP was lower than the fraud in several 
other programs, such as the Pandemic Unemployment Assistance 
Program and the EIDL Program.
    By every possible measure, the PPP was a success that saved 
untold millions of jobs. But these mechanisms were not in place 
to capture two of the most outrageous frauds from this past 
year.
    What happens when a Governor deliberately misleads the 
public and covers up the number of COVID-related nursing home 
deaths? The Attorney General of New York found that Governor 
Cuomo's administration undercounted nursing home deaths by 50 
percent. And for months now, my colleagues and I have been 
calling for an investigation of Governor Cuomo and his false 
statements and policies, but silence from the majority.
    Or take another example. What of the fraud perpetrated on 
the American taxpayer under the false pretenses of COVID 
stimulus? Democrat leadership larded up a bill with handouts 
for special interests and their political cronies. Blue-state 
Governors that crushed their economies with lockdowns get 
rewarded with money to bail out years of mismanagement. This 
includes over $100 billion for schools that are closed, most of 
which doesn't even get paid in the near term.
    Ninety percent of the $1.9 trillion spending spree has 
nothing to do with public health. Instead, congressional 
Democrats viewed this as a--and I quote--``tremendous 
opportunity,'' end quote, to push their political agenda in the 
Trojan horse of a misnamed American Rescue Plan. But it's the 
taxpayers who will be footing the bill for generations to come. 
That's fraud by any definition.
    Thank you, Mr. Chairman, and I yield.
    [Audio interruption.]
    Chairman Clyburn [continuing]. Five minutes.
    Bill? Bill Foster? You are now recognized for five minutes. 
You need to unmute, I think.
    Mr. Foster. Oh, my apologies, Mr. Chairman. I was unaware 
of the order we're operating under. I'm happy to proceed.
    Chairman Clyburn. Thank you.
    Mr. Foster. In its January 2021 High Risk List, the GAO 
made recommendations to the Small Business Administration to 
provide greater oversight of the PPP and EIDL programs to 
reduce fraud in both programs, including using data analytics 
to identify potentially ineligible businesses.
    And I was encouraged to hear Mr. Ware cite the use of data 
analytics as one of the force multipliers that allowed the SBA 
and its OIG to more effectively identify fraud.
    Mr. Ware, can you go into some more detail about how data 
analytics have been used to detect fraud in the PPP and EIDL 
programs and what future plans are?
    Mr. Ware. Yes. Thank you very much.
    With access to the data warehouse that SBA has, 
particularly on the PPP side--because we are just working out a 
more direct relationship within EIDL--we were able to overlay a 
lot of the data coming in. For example, working with the Do Not 
Pay list with the Department of Treasury, working with the 
Department of Treasury on that, we were able to see that quite 
a bit of money went out to folks who should never have gotten 
paid.
    Using data analytics, we were also able to capture quite a 
bit of duplicate payments as well.
    And the speed by which you see law enforcement moving right 
now is unprecedented, as was stated earlier by--I can't 
remember who. But the reason it's allowed to move as quickly as 
it is because of access to data, transparent data, and the 
ability of data analysts and data scientists within our office 
and within the community to be able to quickly overlay 
information and get it in the hands of criminal investigators.
    Mr. Foster. Yes.
    Well, I'm particularly concerned about identity theft and 
synthetic identity fraud in the PPP and EIDL programs as well 
as other areas in our government. You know, fraudsters may 
improperly use the personal information of hardworking 
Americans, such as names, addresses, Social Security numbers, 
to fraudulently apply for pandemic relief loans.
    And the situation is compounded by the lack of a coherent 
approach to identity in this country, so that, for example, the 
list of bad actors who may be known to Treasury or to financial 
regulators or to the individual states may not be automatically 
known to the SBA.
    And, last Congress, I sponsored a bill called the Improving 
Digital Identity Act of 2020, which would modernize systems 
that provide driver's licenses and other identity credentials 
in our country and upgrade digital identity verification tools 
in citizens' interactions with government.
    Mr. Ware, has the SBA OIG found identity theft or identity 
fraud to be a problem in the PPP and EIDL programs? And what 
are the common forms of that fraud that you see?
    Mr. Ware. Right. So, we have found--identity theft is 
probably the most common underlying cause of the fraud that 
we're finding, particularly in the EIDL Program. As a matter of 
fact, it's really showing up itself in PPP now with the 
inclusion of Schedule C's. This is a major issue for us.
    And the way that is happening is, of course they have many 
of the romance-type schemes, many of the social media schemes 
by which people gain access to other people's identity. Most of 
it came to us when people were--victims received letters from 
SBA saying, ``There's a deferment on your loan,'' when they had 
never, ever applied for any type of loan. So, we've got quite a 
bit of that.
    We're up to, what, well over a million applications flagged 
for identity theft right now in these programs.
    Mr. Foster. Wow.
    And what are the better identity verification tools that 
you think would make a real difference in this?
    Mr. Ware. Well, it's simply verifying that the person that 
you're giving the money to actually exists. I honestly don't 
believe it's that much of a lift, but it is. I guess it could 
be a little bit more time-consuming.
    Mr. Foster. Yes.
    I'm struck by how other countries that have more rational 
systems to identify their citizens have not had the same kind 
of problem with, you know, fraudulent--everything from stimulus 
checks to other payments.
    And so, any conclusions that you come up with as to what 
tools would really make your life easier here would be very 
appreciated.
    Thank you. I'm basically out of time, so I'll yield back.
    Chairman Clyburn. Thank you very much, Mr. Foster, for 
yielding back.
    The chair now recognizes for five minutes Mrs. Miller-
Meeks.
    Mrs. Miller-Meeks. Thank you very much, Chair Clyburn.
    And thank you to our witnesses speaking about the very 
important programs that were initiated in response to this 
pandemic.
    Mr. Horowitz, your oversight testimony had a link to it 
regarding COVID-19 testing. And this was COVID-19 testing that 
was done at Federal agencies, so I realize that it's limited. 
And it was from February to August 2020. And it indicates in 
that link that 10.7 million tests were completed at Federal 
healthcare agencies at a cost of $659.5 million. And that was 
underestimate because it doesn't include the VA.
    Would you have an idea of how much has been--how many tests 
or how much has been spent now on testing at those agencies or 
in general for all testing in the U.S.?
    Mr. Horowitz. Congresswoman, I don't have that with me. I 
can certainly followup with my colleague at HHS OIG and see 
what the latest data is. We cut it off at that time so that we 
could obviously move forward and start doing analysis.
    Mrs. Miller-Meeks. The reason for my question is, as a 
physician and a former director of the Iowa Department of 
Public Health, I closely monitor what's happening with the 
number of cases, the number of hospitalizations, the number of 
deaths, the number of those who recovered who would have 
natural immunity, and then the vaccinations, at least here in 
Iowa. And given everything that I have seen since the 
vaccination was first approved in November, which is 
remarkable--and then now we have a total of three 
vaccinations--I've seen this decline very rapidly and 
exponentially and feel that we're very close to herd immunity.
    In this most recent American Rescue Plan for COVID-19, 
there is allocated $47.8 billion in testing and another $7 
billion to go to community health centers for testing. And it 
seems to me that with the decline that we're having that that 
amount of funding may be excessive. Do you have any, you know, 
suggestion or comment on that?
    Mr. Horowitz. So, I wouldn't be in a position, necessarily, 
to comment on how much money should or shouldn't have gone. 
I'll leave it to other policymakers to decide that.
    I will say that what we've found and I've seen at DOJ, for 
example--because I have oversight over the Federal prison 
system. And what we found a year ago, in the first several 
months of this, was, the absence of testing impaired the 
ability of the BOP to identify asymptomatic inmates so that 
they could segregate those individuals rather than simply wait 
for them to develop symptoms.
    And so, we certainly think there will continue to need to 
be testing available, much like there is for other diseases----
    Mrs. Miller-Meeks. And I think there's more recent data 
that shows that there is not the transmission of asymptomatic 
that we originally thought there was.
    I'm hoping that some of this money can be used in 
accordance with a bill that I introduced, H.R. 1897, that would 
do COVID-19 testing for those migrants coming across our 
borders, which is not done now.
    So, thank so much.
    Mr. Ware, I'm going to direct this to you. The PPP program 
to the individuals, both when I was a state senator helping 
small businesses get PPP and then those I've talked to, has 
been an extremely successful program.
    To be eligible, an applicant had to have not more than 500 
employees. And because of large chains receiving loans 
designated for small businesses, the SBA had instituted an 
affiliation rule. If the parent exerted control or had the 
power to exert control over the affiliates, the entirety of 
their employees should be counted toward that limit.
    So, is having affiliates using the same bylaws as the 
parent ``exerting control''?
    Mr. Ware. We have not taken a look as yet into how that 
works out and if it's the same or not, but----
    Mrs. Miller-Meeks. Or----
    Mr. Ware [continuing]. We did--sorry. Go ahead.
    Mrs. Miller-Meeks. Are having affiliates apply for 
accreditation from the parent company ``exerting control,'' the 
parent company imposing performance policies on the affiliate 
``exerting control,'' or the parent mandating certain services 
be performed at the affiliate, are those things ``exerting 
control''?
    Mr. Ware. Without the work to actually dig into it, I'm 
unable to answer the question at this time.
    Mrs. Miller-Meeks. Well, Planned Parenthood across the 
Nation had 16,000 employees nationwide, but they got more than 
$80 million in PPP loans. Even their own lobbyist admitted that 
the rules made their affiliates ineligible when they said the 
CARES Act money had broad discretion to exclude Planned 
Parenthood.
    Has Planned Parenthood returned any of that money?
    Mr. Ware. We have not taken a look at Planned Parenthood 
specifically. We have a series of reviews in the queue dealing 
with eligibility across these programs.
    Mrs. Miller-Meeks. Thank you. That was going to be my next 
question, if there was a reviewing of the affiliation status. 
Thank you so much for your testimony.
    Thank you, Chair Clyburn. I yield back my time.
    Mr. Ware. Thank you.
    Chairman Clyburn. Thank you very much for yielding back.
    The chair now recognizes Mr. Raskin for five minutes.
    Mr. Raskin. Mr. Chairman, thank you for calling this very 
important hearing about more than $80 billion lost in fraud and 
rip-offs of the taxpayers within these programs. And some of 
our colleagues prefer to minimize the damage, saying, oh, well, 
it's less than one percent or two percent.
    Mr. Horowitz, let me start with you. Is that the right way 
to look at it, to say, well, it's a small percentage of an 
overall amount of money, or do we look at and say, that's $80 
billion that could've gone to small businesses that deserved it 
and people who needed the money?
    Mr. Horowitz. Well, I think the way we look at it from the 
accountability community is, could there have been steps taken 
that would have reduced the fraud to a greater degree, or the 
risks to a greater degree? And, as you've heard, GAO and the IG 
at SBA made important recommendations to try and do that. So 
that's really the issue that we look at.
    Mr. Raskin. And those were ignored by the Trump 
administration. So, I'm glad that we've got a President in who 
is serious about cracking down on fraud and making the 
government actually work for the people.
    I've had a number of constituents reach out to me for help 
after their identities were just, out of the blue, fraudulently 
used to obtain SBA loans for some of these criminals. One of my 
constituents is currently getting payment notices from the SBA 
on a $150,000 EIDL loan that was taken out in his name without 
his knowledge. He didn't know anything about it. And he got one 
letter saying that SBA was reviewing the case, but, otherwise, 
he hasn't gotten any updates or info from SBA at all about how 
this is going to be remedied.
    And so, the SBA I don't think is addressing this with 
serious enough concern and attention. It's one thing if there 
are people out there ripping off the government. OK, let's go 
after them, and if it takes a little time, it takes a little 
time. But if they're ripping off the government using other 
people's names, that's an emergency for my constituents whose 
names are being used, whose credit is being ruined, and who 
have a shadow cast over their name.
    So, Mr. Ware, is there anything that I can tell my 
constituents about what to expect in this situation? What steps 
is the SBA's Office of IG taking to respond to and remedy 
complaints about identity theft? And can you set up a special 
unit just to respond to these kinds of cases?
    Because, believe me, it's a dire thing in the lives of 
people. Imagine if your name was used by somebody else with 
your Social Security number to get an SBA loan.
    Mr. Ware. Yes----
    [Audio interruption.]
    Mr. Ware. Thank you. I know that we're having connection 
problems because----
    Chairman Clyburn. Yes, we are having a bit of a problem. 
Mr. Ware?
    Mr. Ware. Yes? Can you hear me?
    Chairman Clyburn. I hear you now.
    Mr. Ware. OK. Sorry. I don't know what's happening. I'll 
blame it on SBA's technological advances. Just teasing, just 
teasing.
    No, but if you can hear me now, I think I got the gist of 
the question, although on my screen Representative Raskin is 
completely frozen. So, I hope I got it, in terms of what is my 
office doing to assist the victims of identity theft.
    Now, clearly, we've heard countless stories and complaints 
involving identity theft to fraudulently obtain those loans, 
but it's important to understand a couple of things.
    We don't have principal jurisdiction on investigations 
involving identity theft. That belongs to the Federal Trade 
Commission. What we've done is work with SBA to set up a system 
where people could receive assistance and have moved to 
investigate many of these complaints.
    We do have a report that will be coming out very, very 
shortly on SBA's handling of identity theft. By ``very, very 
shortly,'' it's next month, by end of next month. And, at that 
time----
    Mr. Raskin. OK.
    Mr. Ware [continuing]. A lot of information----
    Mr. Raskin. OK. Well, I appreciate if you would followup 
with me on this. And we would like a way that we can get to 
your office the names of our constituents who are having a 
serious problem with this. Obviously, we want it prosecuted by 
the FTC, but we also want it to stop and make sure that the 
names of our constituents are cleared.
    Mr. Clyburn, if I could say one final thing--and I'm sorry 
about all these technical snafus we're having. Congresswoman 
Waters correctly pointed out that Mr. Jordan's original 
provocation in this hearing was an irrelevant distraction from 
the matter at hand. But she shows a lot more patience than me, 
and I want to address specifically what he said.
    It is true that Republicans and Democrats alike have issued 
technical challenges under the electoral college over the 
course of the last century. But only one President has incited 
a violent insurrection, a mob, to attack Congress and to try to 
overthrow the election result.And that's what he's excusing 
with that completely false equation of his.
    And, meantime, he also knows that there's a Federal 
statute, the Federal Contested Elections Act from 1969, by 
which both Republicans and Democrats have brought challenges to 
congressional elections. There's an entire procedure in place 
guaranteeing due process to people on all sides.
    And if he's prepared to vote to overturn an election that 
was decided by 7 million votes, more than 7 million votes, for 
Joe Biden, certainly he would accept the regularity of hearing 
an election contest where there was a six-vote difference 
between the two sides under a Federal statute. That is regular 
order.
    And I yield back to you, Mr. Chairman.
    Chairman Clyburn. I thank the gentleman for yielding back.
    The chair now recognizes Mr. Krishnamoorthi for five 
minutes.
    Mr. Krishnamoorthi. Thank you, Mr. Chair. Can you hear me?
    Chairman Clyburn. Yes, I can.
    Mr. Krishnamoorthi. Very good.
    Well, first of all, I wanted to point out some very 
interesting aspects of the SBA OIG report.
    Mr. Ware, I noticed in the report, my staff and I noticed, 
that at one point you said almost 320,000 potentially 
fraudulent COVID-19 EIDL loans totaling almost $25 billion were 
disbursed to people with the same email addresses.
    You give one example where one applicant with one email 
address received 10 loans in the name of 10 different bathroom 
renovation companies in one city, and when you went back and 
looked, you couldn't find any of those bathroom renovation 
companies in that city. Instead, you were able to find that the 
email address was for a burrito restaurant which was located in 
that city.
    Just a basic question: What are we doing to make sure that 
folks can't apply for multiple loans from the same email 
address?
    Mr. Ware. Well, that's one of the things that we've been 
working hard with the Office of Disaster Assistance to fight 
against. And the Office of Disaster Assistance has assured us 
that they have a secondary review process in place to make that 
very assurance.
    We have not verified or validated that that is in place and 
working as yet, but--they have not provided that information to 
us as yet, but----
    Mr. Krishnamoorthi. Let me jump in, because I think that's 
really important. I think the American people don't want 
multiple loans to be applied for from one email address or from 
one IP address, meaning probably one computer, or from one 
physical address. And so, these EIDL loans, I think, deserve a 
lot more scrutiny, and I hope that you are going back to check 
that these EIDL loans don't come from the same address, the 
applications.
    Can you rule out, given the staggering potential amount of 
fraud in the EIDL Program, that there was any coordination 
between applicants and insiders at the SBA?
    Mr. Ware. No, I cannot rule that out, because I know for a 
fact----
    Mr. Krishnamoorthi. OK. I just going to--I'm going to be 
going through a rapid-fire series of questions here.
    Can you rule out that any foreign actors or entities 
received money through the EIDL Program?
    Mr. Ware. No.
    Mr. Krishnamoorthi. Can you rule out that--I'm from 
Illinois, so I have to ask this question. Can you rule out that 
any deceased people received money through the EIDL Program?
    Mr. Ware. No.
    Mr. Krishnamoorthi. Can you rule out that people under the 
age of 18 received money from the EIDL Program?
    Mr. Ware. No.
    Mr. Krishnamoorthi. What claims are being made that you're 
aware of under the False Claims Act, also known as qui tam, 
related to the EIDL Program?
    Mr. Ware. Well, I won't be able to speak to any of those 
that's active. Many of those are sealed.
    Mr. Krishnamoorthi. Let me ask Mr. Horowitz, our expert, 
probably, on this issue of whistleblowing and so forth.
    Is there anything that can be done to encourage folks that 
know about fraud within these programs, maybe even people at 
the SBA right now, to come forward and make a False Claims Act 
claim or a qui tam claim related to what I perceive to be just 
staggering amounts of fraud in the EIDL Program?
    Mr. Horowitz. Absolutely, Congressman. First, come to our 
website, pandemicoversight.gov. They'll see a link there to 
report electronically to us. They can get in contact with us 
through other means, but electronically is the best way to do 
it.
    We'll get on top of it, and we'll make sure that whatever 
IG has jurisdiction over the program they care about, we'll get 
it to them and we'll work together with them.
    Mr. Krishnamoorthi. And just let's educate people who might 
be viewing this. When we refer to False Claims Act or qui tam 
claims, the claimant, through a confidential process, if the 
claim is validated, could receive between 15 and 30 percent of 
the recovered amounts, right?
    Mr. Horowitz. That's correct.
    Mr. Krishnamoorthi. So, Mr. Horowitz, do you know how much 
has been recovered overall through your investigations, your 
collective investigations, into fraud in the EIDL Program and 
then separately into PPP program?
    Mr. Horowitz. I don't know separately as to those two 
programs. I know it's tens of millions of dollars overall. I 
could get back to you on----
    Mr. Krishnamoorthi. But that's an incredibly small portion 
of the sizable potential amount of fraud, right?
    Mr. Horowitz. At this time, it is. But I would just make 
sure that the public is aware and assure all of you, obviously, 
prosecutions take time, and we are using the tools we have, 
whether it's criminal prosecution, civil, forfeiture, and, by 
the way, suspension and debarment for entities that are here, 
that aren't fraudulent entities themselves. They're risking 
their ability to do business with the government going forward, 
period.
    Mr. Krishnamoorthi. Thank you.
    I yield back.
    Chairman Clyburn. I thank the gentleman for yielding back 
his time.
    I notice that all members who are present have been allowed 
time to ask questions and to make comments. There are several 
other members who we expected to join us, but the time seems to 
have run out, and so we aren't going to prolong this.
    At this point, we usually give the ranking member an 
opportunity to make a closing statement, and, in his absence, 
whoever he may designate. But I think Mr. Jordan, who made the 
opening statement, indicated that he had to go off to other 
business, and I don't see that he's here with us. So, I'm going 
to now proceed to my closing statement, and hopefully we'll be 
able to conclude this hearing.
    I want to thank all of our witnesses who are here today, 
and we appreciate the invaluable expertise that you've shared 
this afternoon on how we can better identify and eliminate 
fraud in the pandemic relief programs.
    This select subcommittee is modeled after the Truman 
Committee during World War II. In a speech to the Senate upon 
the establishment of that committee, then-Senator Truman said, 
and I quote, ``I consider public funds to be sacred funds, and 
I think they ought to have every safeguard possible to prevent 
their being misused and mishandled,'' end of quote. I 
wholeheartedly agree with Truman.
    Unfortunately, today's hearing has made clear that the 
Trump administration failed to institute the necessary 
safeguards to prevent public funds from being misused and 
mishandled in key small-business relief programs, leading to 
the loss of billions of dollars through fraud.
    I agree very much with Chair Waters, whose interest it is 
to go after what seems to be some pretty sophisticated 
fraudulent activity. And hopefully we'll get to the bottom of 
the source of all of this and not pat ourselves on the back for 
sending small, unsuspecting businesses out of business or into 
jail.
    Fraud should have real consequences. Diverting funds that 
were intended to help Americans struggling to save their 
businesses, feed their families, and stay in their homes is 
just something that needs to be dealt with.
    But it is not too late to act. The Biden administration has 
already taken significant steps to reduce fraud by instituting 
stronger controls when using PPP loans. And the administration 
has encouraged Federal agents to work with, not against, 
inspectors general and congressional oversight.
    The Biden administration and Congress have also worked 
together to ensure that critical oversight bodies like the 
PRAC, GAO, and IG community have the resources and tools they 
need to do their jobs. The $142 million allocated to the 
oversight community in the American Rescue Plan will go a long 
way toward accomplishing that goal.
    There is much more to do to prevent fraud and prosecute 
those who engage in it. I look forward to using what we have 
learned from our witnesses today to make the small-business 
relief programs more effective, efficient, and equitable. Those 
are the standards that must be met when we are spending sacred 
public funds.
    With that, and without objection, all members will have 
five legislative days within which to submit additional written 
questions for the witnesses to the chair, which will be 
forwarded to the witnesses for their response.
    Chairman Clyburn. This hearing is adjourned.
    [Whereupon, at 1:20 p.m., the subcommittee was adjourned.]

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