[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
FEDERAL PANDEMIC SPENDING:
A PRESCRIPTION FOR WASTE,
FRAUD AND ABUSE
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HEARING
BEFORE THE
COMMITTEE ON
OVERSIGHT AND ACCOUNTABILITY
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 1, 2023
__________
Serial No. 118-1
__________
Printed for the use of the Committee on Oversight and Accountability
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available on: govinfo.gov,
oversight.house.gov or
docs.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
50-896 PDF WASHINGTON : 2023
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COMMITTEE ON OVERSIGHT AND ACCOUNTABILITY
JAMES COMER, Kentucky, Chairman
Jim Jordan, Ohio Jamie Raskin, Maryland, Ranking
Mike Turner, Ohio Minority Member
Paul Gosar, Arizona Eleanor Holmes Norton, District of
Virginia Foxx, North Carolina Columbia
Glenn Grothman, Wisconsin Stephen F. Lynch, Massachusetts
Gary Palmer, Alabama Gerald E. Connolly, Virginia
Clay Higgins, Louisiana Raja Krishnamoorthi, Illinois
Pete Sessions, Texas Ro Khanna, California
Andy Biggs, Arizona Kweisi Mfume, Maryland
Nancy Mace, South Carolina Alexandria Ocasio-Cortez, New York
Jake LaTurner, Kansas Katie Porter, California
Pat Fallon, Texas Cori Bush, Missouri
Byron Donalds, Florida Shontel Brown, Ohio
Kelly Armstrong, North Dakota Jimmy Gomez, California
Scott Perry, Pennsylvania Melanie Stansbury, New Mexico
William Timmons, South Carolina Robert Garcia, California
Tim Burchett, Tennessee Maxwell Frost, Florida
Marjorie Taylor Greene, Georgia Becca Balint, Vermont
Lisa McClain, Michigan Summer Lee, Pennsylvania
Lauren Boebert, Colorado Greg Casar, Texas
Russell Fry, South Carolina Jasmine Crockett, Texas
Anna Paulina Luna, Florida Dan Goldman, New York
Chuck Edwards, North Carolina Jared Moskowitz, Florida
Nick Langworthy, New York
Eric Burlison, Missouri
Mark Marin, Staff Director
Jessica Donlon, Deputy Staff Director & General Counsel
Daniel Ashworth, Deputy Chief Counsel for Oversight
Raj Bharwani, Senior Professional Staff Member
Sarah Feeney, Professional Staff Member
Mallory Cogar, Deputy Director of Operations and Chief Clerk
Contact Number: 202-225-5074
Julie Tagen, Minority Staff Director
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C O N T E N T S
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Page
Hearing held on February 1, 2023................................. 1
Witnesses
The Honorable Gene L. Dodaro, Comptroller General of the United
States, Government Accountability Office
Oral Statement............................................... 6
The Honorable Michael E. Horowitz, Chair, Pandemic Response
Accountability Committee
Oral Statement............................................... 7
Mr. David M. Smith, Assistant Director, Office of Investigations,
U.S. Secret Service
Oral Statement............................................... 9
Ms. Rebecca Dixon, Executive Director, National Employment Law
Project
Oral Statement............................................... 81
Opening statements and the prepared statements for the witnesses
are available in the U.S. House of Representatives Repository
at: docs.house.gov.
INDEX OF DOCUMENTS
----------
* Memo, Implementation Guidance for Supplemental Funding
Provided in Response to COVID-19; submitted by Rep. Raskin.
* Report, PRAC, ``State-Entitled Key Insights in State Pandemic
Unemployment Insurance Programs;'' submitted by Rep. Ocasio-
Cortez.
* Article, New York Times, ``How Bar's Quest to Find Flaws in
the Russia Inquiry Unraveled;'' submitted by Rep. Goldman.
* Letter, Jan. 31, 2023, from Reps. Lieu and Goldman, to
Inspector General Barr Durham; submitted by Rep. Goldman.
* Graphic, COVID Funding; submitted by Rep. Luna.
* Letter, January 31, 2023, from Office of the Inspector
General, Social Security Administration, to Chairman Comer;
submitted by Chairman Comer.
* Letter, January 27, 2023, from Sen. Sen. Ernst, to Chairman
Michael Horowitz; submitted by Rep. Burlison.
* Article, Politico, ``Biden Administration Reroutes Billions
in Emergency Stockpile, COVID Funds to Border Crunch;''
submitted by Rep. Donalds.
* Report, Small Business Administration, OIG, ``Paycheck
Protection
Program Eligibility for Non-Profit Organizations;'' submitted
by Rep. Brown.
* Statement for the Record; Ranking Member Connolly; submitted
by Ranking Member Connolly.
* Questions for the Record: to Mr. Dodaro; submitted by
Chairman Comer.
* Questions for the Record: to Mr. Dodaro; submitted by Rep.
Palmer.
* Questions for the Record: to Mr. Dodaro; submitted by Rep.
Donalds.
* Questions for the Record: to Mr. Dodaro; submitted by Rep.
Perry.
* Questions for the Record: to Mr. Michael Horowitz; submitted
by Chairman Comer.
* Questions for the Record: to Mr. Michael Horowitz; submitted
by Rep. Palmer.
* Questions for the Record: to Mr. Michael Horowitz; submitted
by Rep. Perry.
* Questions for the Record: to Mr. Michael Horowitz; submitted
by Luna.
* Questions for the Record: to Mr. Smith; submitted by Chairman
Comer.
* Questions for the Record: to Mr. Smith; submitted by Rep.
McClain.
* Questions for the Record: to Mr. Dodaro; submitted by Rep.
Raskin.
* Questions for the Record: to Mr. David Smith; submitted by
Rep. Raskin.
* Questions for the Record: to Mr. Michael Horowitz; submitted
by Rep. Raskin.
The documents listed are available at: docs.house.gov.
FEDERAL PANDEMIC SPENDING:
A PRESCRIPTION FOR WASTE,
FRAUD AND ABUSE
----------
Wednesday, February 1, 2023
House of Representatives,
Committee on Oversight and Accountability,
Washington, D.C.
The committee met, pursuant to notice, at 10:05 a.m., in
room 2154, Rayburn House Office Building, Hon. James Comer
(chairman of the committee) presiding.
Present: Representatives Comer, Gosar, Foxx, Grothman,
Palmer, Higgins, Biggs, Mace, LaTurner, Fallon, Donalds,
Sessions, Armstrong, Perry, Timmons, Burchett, Greene, McClain,
Boebert, Fry, Luna, Edwards, Langworthy, Burlison, Raskin,
Norton, Lynch, Connolly, Krishnamoorthi, Khanna, Mfume, Ocasio-
Cortez, Porter, Bush, Brown, Gomez, Stansbury, Garcia, Frost,
Balint, Lee, Casar, Crockett, Goldman, and Moskowitz.
Chairman Comer. We will call this hearing to order, the
first hearing of the 118th Congress for the House Committee on
Oversight and Accountability. Welcome.
As chairman, I intend to focus this committee's attention
and resources on its core mission, to ensure our government is
working for the American people in an efficient manner,
agencies guard taxpayer funds from fraudsters and ineligible
participants, and political leadership be held accountable for
bad consequences of their policies.
Last Congress, Democrats strayed far from this mission. The
Biden Administration faced little to no scrutiny under
unchecked one-party Democrat rule in Washington. This committee
conducted almost no oversight of Federal Government agencies,
programs, or policies. The non-partisan Lugar Center gave
Democrats an F in oversight last Congress. Instead, this
committee spent its time and resources demonizing America's oil
and gas industry, investigating an NFL football team, and
examining pet flea and tick collars.
The American people have suffered from the lack of
oversight and accountability. Crises have continued and
worsened. Our Nation is facing the worst border crisis in
American history. Fentanyl, which is coming across the Southern
border, is the leading cause of death for many Americans.
Americans are facing high energy prices resulting from policies
aimed at diminishing domestic energy production, and the
American people have struggled with consequences of prolonged
COVID closures and lockdowns, inflation, and shortages of labor
and goods. That is why this first hearing is so important.
Today's hearing is the first step in examining the massive
waste, fraud, and abuse in COVID relief programs. In March
2020, the United States struggled to respond to growing threats
presented by COVID-19. With the economy on the brink of
collapse, Congress passed a series of bills intended to both
fund the public health response and keep the economy afloat.
The largest of these measures was the Bipartisan CARES Act. It
created programs like the Paycheck Protection Program, which
saved jobs at small businesses across the country. It rolled
out pandemic unemployment insurance to help American workers
who were victims of business closures and spiking unemployment.
These programs brought relief to many Americans, but with
massive government spending comes opportunity for waste, fraud,
and abuse.
Unfortunately, Democrats conducted little oversight of the
over $2 trillion spent under the CARES Act. They did the exact
opposite. They spent another $2 trillion, but this time with
absolutely no protections or guardrails to prevent waste. And
worse, they spent this money when there was no sign that it was
actually needed. This out-of-control spending led to 40-year
high inflation, kept people out of work longer, and harmed our
economy. During the markup for this legislation, many of us
warned that without oversight mechanisms in place, taxpayer
dollars were at risk of being misused or lost to fraud, waste,
or abuse.
Republican amendments would have put strings attached on
those dollars. They would have allowed for oversight, but
Democrats voted down every single amendment we offered. And
what happens if there is no oversight? Nothing good. We have
seen reports that between $163 billion to $400 billion in
unemployment insurance benefits were paid out improperly. We
have seen reports that between $76 billion to more than $100
billion in Paycheck Protection Program and Economic Injury and
Disaster Loan Programs were lost to improper payments. We have
seen reports that $266 billion in improper payments were made
by Medicaid during the pandemic. That is why we are having our
first hearing of the new Congress on waste, fraud, abuse in
pandemic spending programs. We will hold many more of these
hearings on this important issue.
We owe it to the American people to get to the bottom of
the greatest theft of American taxpayer dollars in history. We
must identify where this money went, how much ended up in the
hands of fraudsters or ineligible participants, and what should
be done to ensure that it never happens again. This committee
will evaluate the hundreds of billions of dollars in grants and
loans doled out for nearly every agency in the Federal
Government to ensure those funds were appropriately used to
respond to the pandemic and not wasted on ineligible payees or
unrelated matters.
We will investigate the $189 billion in elementary and
secondary school emergency relief funds, money meant to help
reopen schools and address learning loss. Instead, these funds
were often used on unrelated expenditures and even to push
divisive ideologies onto our students. We will work to ensure
that the watchdogs in our offices of Inspectors General and our
law enforcement officers, agents, and prosecutors have the
tools they need to track down fraudsters and recover illegally
obtained COVID-19 taxpayer funds.
This committee has for too long stood on the sidelines
while taxpayer dollars were wasted by bureaucrats, whose only
priority is getting money out the door. Today, we will hear
from Inspector General Michael Horowitz, GAO's comptroller
general, Gene Dodaro, and assistant director, David Smith, with
the Office of Investigations at the Secret Service. Thank you
all for being here to testify about your efforts to conduct
oversight of pandemic funding.
I now yield to Ranking Member Raskin for his opening
statement.
Mr. Raskin. Mr. Chairman, thank you kindly. Our committee's
purpose is to ensure that government is effectively delivering
on its promises to the American people. And as the new ranking
member, I am eager to work with you and the rest of the
committee in carrying out this shared responsibility in a
thorough, serious, nonpartisan, and even-handed way.
When I heard that our first hearing would spotlight
pandemic relief programs, I was pleased because I thought it
would follow up on everything the Democratic majority had been
doing in the 117th Congress since COVID-19 began. I was hopeful
for an opportunity to consider together how we can identify
schemes of fraud and self-enrichment, ripping off the
taxpayers, and continue to strengthen the structural efficiency
of critical government programs that help families and
businesses across America meet the challenges of the pandemic.
Just as the political system and the campaign finance system
have recently been proven shockingly vulnerable to imposters,
hustlers, con men, big liars, outright fraudsters, and fakes,
some of the programs developed to respond to the COVID-19
pandemic have proven vulnerable to the relentless, deceitful,
and fraudulent designs of criminal predators when they, too,
decide to exploit the generosity of the American people. The
traditional language of waste, fraud, and abuse does not quite
capture the confidence games in organized criminal artifices
and schemes that have targeted and exploited relief programs
built on the solidarity and goodwill of the American people.
The House Select Subcommittee on the Coronavirus, which was
chaired in the last Congress by then Majority Whip Clyburn, and
which I served on, led the effort to identify and combat these
criminal actors. The subcommittee conducted no fewer than seven
hearings focused on rooting out fraud in relief programs. I
will never forget how under Chairman Clyburn's leadership, in
our first week or two of existence, the subcommittee recovered
an improper $10 million Paycheck Protection Program loan. Less
than three months later, we helped secure the return of $109
million from a nursing home chain that was not using the loan
as Congress had specifically intended.
In March 2021, we exposed how the Trump administration's
reckless mismanagement of small business relief programs and
refusal to implement basic anti-fraud controls led to nearly
$84 billion in fraudulent loans. Just months later, we issued
another report highlighting how the Trump administration
awarded $95.7 million in pandemic Food Box Program funds to
three companies that all raised severe red flags. Then again,
in April 2022, we showed how Trump White House officials
overruled career Department of Defense officials to approve a
$700 million national security loan to a single company in
violation of legal requirements, and so on. We used the
spotlight and bully pulpit of a small subcommittee to expose
and reverse colossal frauds taking place against the American
people.
While I remain optimistic that this hearing can
meaningfully explore ways to ensure the taxpayer dollars go
where intended, I confess I am troubled that some of our
colleagues seem to want to cherry pick facts and deploy
distorted figures to attack the underlying legitimacy of the
programs themselves, the programs that were a lifeline and
salvation for millions of businesses and families across the
country. Recall that while the former President denied,
trivialized, and dismissed the COVID-19 pandemic, it was
Congress which acted responsibly, and swiftly, and in
bipartisan fashion to create and supercharge programs that
saved countless businesses and families from bankruptcy and
ruin. These programs included expanded unemployment insurance
benefits and the PPP Program, which empowered families and
businesses to avoid economic collapse. As a result of our
actions, the COVID-19 economic recession was the shortest on
record.
The programs were by no means perfect. Antique government
IT systems, many running on obsolete software, collapsed and
were incapable of adapting to the scope of the crisis. States
entered the pandemic at a 50-year low for unemployment
insurance system funding, and UI claims burgeoned from 211,000
to 6.6 million, a 3,000 percent increase over a three-week
period in March 2020. People unsure of how they would pay their
housing or medical bills panicked as they waited hours on phone
calls for customer service representatives were reached, to
endless busy signals in unemployment insurance purgatory. My
home state of Maryland was no exception. In the one-year period
from March 2020 until March 2021, my district office received
1,400 anguished constituent requests for help with
unemployment. This is in contrast to one constituent request we
received in all of 2019.
Congress asked agencies and states to do the near
impossible, and they did their very best. Expanded UI benefits
kept an estimated 5 million to 6 million people out of poverty
in 2020 and 6.7 million people above the poverty line in 2021.
The Center for Budget and Policy Priorities estimates that
expanded benefits may have saved the lives of as many as 27,000
people in high-risk occupations who may have died from COVID
had they not had access to benefits.
Organized criminals and fraudsters took advantage of these
circumstances by exploiting weaknesses in our IT systems. This
problem was compounded by critical decisions made by the Trump
administration that hamstrung pandemic relief and anti-
corruption oversight from the very outset, crippling the
government's ability to detect fraud. Despite specific
legislative instruction from Congress in our pandemic relief
bills, the Trump administration regularly told agencies to
ignore data reporting requirements. But congressional Democrats
and the Biden Administration have worked diligently from the
start to recover funds stolen by organized criminal groups and
other fraudsters, helped states modernize their IT systems, and
build new structural capacities to detect and prevent fraud.
Under President Biden's leadership, departments and agencies
across the government moved swiftly to strengthen program
integrity and bolster efforts to prevent, detect, and pursue
fraud, which festered under the lackadaisical stewardship of
the prior administration.
In the days preceding this hearing, Republicans have
claimed that Democrats on this committee and in the Biden
Administration neglected to conduct meaningful oversight of
these programs. The record demonstrates these assertions are
baseless. Democrats have systematically ferreted out fraud,
waste, and abuse in pandemic relief, although we all can
certainly be doing a much more effective job, and that is what
this hearing should be about. As the work of the 118th Congress
commences, I urge all of my colleagues across the aisle and on
our side to remember the crucial role this committee must play
in eliminating fraudulent schemes by imposters in order to
protect the integrity of the programs that we adopt and that
America needs. With that, Mr. Chairman, I am happy to yield
back.
Chairman Comer. The ranking member yields back. It gives me
great pleasure to introduce our panel. I will go through and
introduce each member, and then we will turn it over to begin
their opening statements, but let me say this. This is a pretty
quality panel. I think if you wanted to have the perfect
hearing to determine waste, fraud, and abuse in the Federal
Government, I can't think of three better witnesses from three
more appropriate agencies to come before this committee. And I
think you will see this is going to begin a trend of having
credible witnesses that are here to talk about serious
substantive issues, and I am very proud of this witness panel
today.
Our first witness today is Mr. Gene Dodaro, the eighth
comptroller general of the United States and head of the U.S.
Government Accountability Office, or GAO. In a career spanning
over 49 years at GAO, Mr. Dodaro has worn many hats and
testified before Congress dozens of times on important national
issues, including waste, fraud, abuse, and mismanagement in the
Nation's response to the Coronavirus pandemic. Mr. Dodaro's
extensive experience at the helm of an agency, often referred
to as the congressional watchdog, is invaluable. We are glad to
have you here for this very important oversight topic, and we
look forward to your testimony.
Our second witness, no stranger to Congress, is Mr. Michael
Horowitz, who is the chair of the Pandemic Response
Accountability Committee, or PRAC, and Inspector General of the
Department of Justice. Mr. Horowitz is testifying today in his
role as chair of PRAC, an entity created by the CARES Act to
support independent oversight of pandemic relief spending. The
PRAC coordinates cross-agency investigations by agency
inspectors general, enabling faster identification of fraud
search across multiple programs. This is a very important role,
Mr. Horowitz, and the committee looks forward to learning more
about your and your colleagues' efforts to detect fraud, waste,
abuse, and mismanagement of taxpayer dollars.
Our third witness is Mr. David Smith, assistant director
Office of Investigations at the U.S. Secret Service. As the
28th assistant director for the Office of Investigations, Mr.
Smith leads the Agency's global investigative mission,
comprising 161 offices and over 3,000 employees. Mr. Smith's
office also oversees the Secret Service's national pandemic
fraud investigations and cross-agency coordinated efforts,
including investigations of foreign nationals stealing COVID
relief funds. I look forward to hearing about the Agency's
investigations into pandemic relief fraud and ongoing efforts
to counter such activities. Welcome, Mr. Smith.
We will begin with Mr. Dodaro, and I hope I pronounced that
right. I apologize if I didn't.
STATEMENT OF GENE L. DODARO, COMPTROLLER GENERAL OF THE UNITED
STATES, UNITED STATES GOVERNMENT
ACCOUNTABILITY OFFICE
Mr. Dodaro. It was excellent, Mr. Chairman. Very good. I
appreciate it. Thank you very much.
Good morning, Mr. Chairman, Ranking Member Raskin, members
of the committee. Very pleased to be here. I commend you, Mr.
Chairman, for holding this hearing, and I am very pleased to
see the attendance.
I would like to focus my comments this morning on four
points that I believe were the main causes of the widespread
fraud that has occurred and what could be done to deal with
these issues. First, agencies should have been much better
prepared in order to prevent fraud in the first place. We
worked with the Congress back in 2016 when the Congress passed
the Fraud Reduction and Data Analytics Act, which required
agencies to implement GAO's fraud risk framework to help
prevent fraud in the first place. Agencies were slow to
implement this legislation and, therefore, were not prepared
properly when the Coronavirus emergency occurred. This needs
greater attention and oversight, I believe, from this
committee.
Second, the urgency in providing relief funds led to
tradeoffs that limited the ability to achieve accountability
and transparency goals of the legislation. These tradeoffs
included allowing self-certifications and applications,
limiting the amount of supporting documentation that applicants
had to apply. These tradeoffs, along with internal control
weaknesses within the agencies, made these programs much more
susceptible to fraud than otherwise would have been the case.
Now, Congress rectified some of these tradeoffs in subsequent
legislation. Agencies have begun to implement our
recommendations, but there is much more that needs to be done
to deal with the remaining COVID programs to catch people who
have perpetrated fraud and bring them to justice. But unless we
make these changes, we are not better prepared for the future,
for future emergencies, which certainly will come with disaster
assistance, and relief, and other events that are unforeseen,
but certainly will come.
Third, advocating, and I have done this before, that there
is a permanent center for excellence and analytics in the
inspector general community. Now, this first one was created
back in the Recovery Act when we had the Great Recession, and
that recovery operation center helped prevent fraud and enabled
the IGs to work together because a lot of the fraudsters hit
multiple programs as well, and this brought in great data
analytics experience. Unfortunately, this center was terminated
in 2015, and I recommended that Treasury had the ability to
pick up the center operations. They declined on that. I
recommended that Congress make it permanent at that point in
time. I was not successful. I am at it again, and I think it
makes sense to have this to deal with.
Fraud occurs in regular Federal programs all the time, as
well as improper payments, which we talk about in our
statement. If you had this permanent capability, it would not
only deal with regular fraud, but it would be ready and there
when emergencies occur, and you won't waste time standing up.
Every day wasted is another day susceptible to fraud and
improper payments. This would help.
Fourth, the government has an underlying improper payment
problem. These are payments that shouldn't have been made or
made in the wrong amounts, and I have testified before this
committee many, many times on this problem over the years. It
occurs in a wide range of Federal programs. It is pervasive
across the government. So, when you have that type of problem
that we are not dealing with on a regular basis, and you add
additional spending, billions, hundreds of billions, in this
case, trillions of dollars, you are going to have these types
of problems in place. So, I have many recommendations in my
testimony that I think would help address this issue, and I
have put forth at least 10 legislative suggestions for how
Congress can act to make sure that this problem doesn't happen
again at the magnitude in which we have seen in this particular
case.
So, I am looking forward to answering questions today. I am
also looking forward to working with this committee to put
solutions in place that can guarantee when the Federal
Government finds it necessary in this case to provide funds for
public health purposes and the economic repercussions of
disasters, that it is done in a way that gets the funds to the
people who need it and not allow this type of fraudulent
activity to plague our national programs.
Thank you very much, Mr. Chairman.
Chairman Comer. Thank you. Mr. Horowitz?
STATEMENT OF MICHAEL E. HOROWITZ, CHAIR, PANDEMIC RESPONSE
ACCOUNTABILITY COMMITTEE, AND INSPECTOR GENERAL, U.S.
DEPARTMENT OF JUSTICE
Mr. Horowitz. Thank you. Mr. Chairman, Ranking Member
Raskin, members of the committee, thank you for holding today's
very important hearing.
This committee has consistently worked on a bipartisan
basis with the oversight community to advance program payment
integrity, government spending transparency, and the use of
data analytics, all of which have helped us to fight fraud,
waste, and abuse, and ensure that government benefits go to
those who need them most. Yet, as our pandemic oversight work
has demonstrated, far more can and should be done to protect
taxpayer money.
For example, earlier this week, we issued a fraud alert,
finding that over 69,000 questionable Social Security numbers
were used to obtain $5.4 billion in pandemic loans and grants.
This alert resulted from PRAC data scientists using our
analytics platform to assess over 33 million EIDL and PPP loan
applications. From that work, they developed a targeted subset
of applications and asked the Social Security Administration if
the name, date of birth, and Social Security numbers on those
applications fully matched information in SSA's records. Over
69,000 didn't. This type of advanced data analytics work is
transforming how we do oversight and would not have been
possible without this committee's support for data transparency
and spending accountability.
Our fraud alert also demonstrates the need for additional
measures to improve program integrity. In particular, agencies
must strike a better balance both in times of crises and in
routine program administration between the speed with which
they issue benefits and the need to assess applicant
eligibility before payments are sent out. For example, SBA's
central focus on getting PPP loans issued as quickly as
possible at the outset of the pandemic, based solely on an
applicant self-certification of eligibility, resulted in
substantial fraud as well as SBA issuing 57,000 loans worth
$3.6 billion to entities that were already on the government's
Do Not Pay list, a list SBA didn't bother to cross check.
The Federal Government needs more robust cross-agency data
sharing agreements to improve program administration, reduce
improper payments and identity fraud, and better prepare before
the next crisis hits. For example, consent-based identity
verification systems can have a significant impact in reducing
identity fraud, as we detailed in our fraud alert. Similarly,
authorizing agencies to access SSA's Master Death File index
would help eliminate improper payments to deceased individuals.
These are just two of many eligibility verification tools that
agencies should be using.
Our oversight reports also highlight the need for agencies
to be more transparent about spending information and to
address data reporting gaps and data reporting weaknesses. The
public has a right to know how its money is being spent, and
policymakers need to be able to assess whether programs are
effective. Moreover, transparency results in greater
accountability. As Justice Brandeis famously stated,
transparency is said to be the best of disinfectants.
Through our oversight work, we are making progress. For the
past two years, we have met weekly with OMB leadership and the
American Rescue Plan implementation team. These meetings have
enabled the PRAC and IGs to timely share concerns with
executive branch leadership and ensure that impediments to our
oversight are being addressed promptly. We have also
participated in more than two dozen meetings on agency-specific
pandemic relief programs prior to their implementation and
before money went out the door. In December 2021, OMB issued a
memorandum highlighting the value of this model and
institutionalizing it.
Finally, let me touch on three PRAC legislative priorities.
First, we hope Congress will take up legislation to make
permanent the PRAC's data analytics platform. Taxpayers need
that sophisticated tool to continue to exist, and I appreciate
the Comptroller General's continued support for that. Second,
Congress should consider raising the jurisdictional amount in
the Program Fraud Civil Remedies Act from $150,000 to $1
million so IGs can more effectively pursue smaller-dollar
frauds. Finally, Congress should consider extending from 5 to
10 years the statute of limitations for pandemic unemployment
insurance fraud as it did last year with PPP and EIDL fraud.
The PRAC and the IG community is committed to using all of
the tools we have been provided--criminal, civil and
administrative--to pursue for the taxpayers every dollar that
fraudsters stole from pandemic programs. Thank you for your
continued support for those efforts, and I would be pleased to
answer any questions the committee may have.
Chairman Comer. Thank you, Mr. Horowitz. Mr. Smith?
STATEMENT OF DAVID SMITH, ASSISTANT DIRECTOR, OFFICE OF
INVESTIGATIONS, UNITED STATES SECRET SERVICE
Mr. Smith. Good morning, Chairman Comer, Ranking Member
Raskin, and distinguished members of the committee. Thank you
for the opportunity to appear today and discuss the ongoing
efforts of the U.S. Secret Service to counter pandemic-related
fraud. As the chairman mentioned, I serve as the assistant
director for the Secret Service Office of Investigations,
overseeing our 161 offices. I also oversee our 42 cyber fraud
task forces that are central to our criminal investigations. I
also direct our National Computer Forensics Institute in
Hoover, Alabama, which trains and equips local law enforcement,
as well as prosecutors and judges. I thank you all for your
recent support of our institute and reauthorizing it.
For more than 150 years, the Secret Service has conducted
criminal investigations to protect the American public and
financial infrastructure from criminal exploitation. We
continue to do so while also fulfilling our protective duties.
After 21 years in Federal law enforcement, exploitation of
government programs by criminals is not new to me. I often say
the pandemic didn't create any new criminals. It just provided
more opportunities for them to exploit. Countering pandemic-
related fraud has been our investigative priority since March
2020. In less than three years, we have opened thousands of
investigations, recovered over $1 billion, arrested nearly 500
criminals, yet there is more work to do. It is our duty to
detect and arrest criminals, seize their illicit assets, and
disrupt their networks. Our experience in combating pandemic-
related fraud reaffirms our investigative strategy. We continue
to evolve our application of technology and training to develop
skilled investigators, who can in turn combat emerging criminal
tactics.
We recognize the potential for fraud based on our
experience following major disasters. Prior to the CARES Act
enactment back in March 2020, we reached out to some natural
partners to include the Offices of the Inspector General for
the Small Business Administration, the Department of Labor, and
the Council of the Inspector Generals on Integrity and
Efficiency. We understood that many key partners had limited
resources, and the best way to address the potential wave of
fraud was to work together. We also worked with our
longstanding partners in fighting financial crimes at the
Department of Justice, including U.S. attorney's offices around
the country, the Department of Treasury, FinCEN, and many
others.
The Secret Service is seeing the full spectrum of pandemic-
related fraud. This included N-95 mask schemes, ransomware
attacks targeting hospitals, the wide use of stolen identities,
and inmates applying for benefits. Numerous cases also involved
insiders with access to personal data. Criminals were prepared
to exploit the pandemic, in part because for years they were
selling identities stolen from past data breaches. They were
also fabricating identities using personal and financial data
to real people combined with false information. Our
investigations also reveal that criminals used shell companies
and false employment information. These tactics were repurposed
for broad use during the pandemic.
In closing, I will share some observations from our
pandemic-related fraud investigative experience. The prevalence
of identity theft and the volume of personal data assessable to
criminals is undeniable. Continuing to improve identity
verification standard for government funding programs is
important. Advanced collaboration, as some of my colleagues
mentioned earlier, between government entities and the
financial sector is essential for mitigating fraud targeting
government programs, especially during emergencies. Ensuring
law enforcement are at the table would be a major step in
curtailing fraud of this magnitude as well. Our cyber fraud
task forces are a proven model for such collaboration in these
task forces. Similarly, in our protective mission, we
constantly communicate the importance of sharing information
and planning for contingencies.
Thank you again for the opportunity to testify today, and I
am honored to represent the dedicated men and women of the
Secret Service. I look forward to your questions.
Chairman Comer. Thank you, Mr. Smith. Before we get to the
questions, I am going to ask if you will stand and take the
oath here. Do you all--raise your right hands?
Do you all 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?
[A chorus of ayes.]
Chairman Comer. Let the record reflect the witnesses have
all answered in the affirmative, and we want to thank you.
Without objection, your written statements will be made
part of the record.
And before we move into the question portion, we have a lot
of new members, a lot of freshmen that have never served in any
committee in Congress, and I just wanted to make sure everyone
knows the rules here. We will rotate back and forth five
minutes. Please adhere to the five minutes. We are going to try
to be strictly by the book. The order is determined by myself
and Ranking Member Raskin. Please be respectful of everyone's
five minutes. I was telling some of the freshmen that during
the 2017 session, my first full year in Congress, I was the
very last person, dead last in seniority in the very far
corner, and you appreciate when people don't go over their
time. But this is your time to ask anything you want, so
please, to both sides, let's be respectful of each member's
five minutes. With that, I will begin questioning, and we will
start with Mr. Horowitz.
You mentioned the Do Not Pay list. Can you briefly tell us
what that is?
Mr. Horowitz. So, Treasury has set up a list of suspicious
payees. It doesn't mean they are not eligible. It doesn't mean
they can't get benefits. It means that they are on a list that
requires, at a minimum, secondary screening, secondary
consideration, and evaluation.
Chairman Comer. Was this used by government agencies to
prevent fraud? So, this is a tool that I would assume would
have been eligible in their toolbox. Let's say the Small
Business Administration or some agency that was doling out a
lot of money really quickly, did they utilize the Do Not Pay
list?
Mr. Horowitz. They did not, and the issue there is we have
heard over and over again, at the time, well, we needed to get
the money out right away. There was an emergency. No dispute
about that. We needed to get the money out right away. There
was an emergency. It gets back to what the Comptroller General
said. He needs to be ready for that. This list was sitting
there. This was not anything that would have taken much time.
There needs to be preparation.
Chairman Comer. So, let me get this straight. The Do Not
Pay list, I would assume that would be people that owe back
taxes, people that maybe owe child support?
Mr. Horowitz. There are a variety of reasons----
Chairman Comer. Convicted of fraud.
Mr. Horowitz. Indicative of potential fraud, indicative of
individuals who are in arrears in other payments. You can get
on the list for a variety of reasons.
Chairman Comer. So, how many people do we know received
money from the Federal Government that were on the Do Not Pay
list?
Mr. Horowitz. I don't know across all programs. What I do
know is from the SBA's PPP Program because almost $400 billion
went out in two weeks----
Chairman Comer. Right.
Mr. Horowitz [continuing]. In that program, of that amount,
$57,000, $3.6 billion shouldn't have gone out right away. I am
not saying every one of those would have been denied, but at a
minimum, there should have been secondary screening.
Chairman Comer. So, what would be involved? What would this
SBA had to have done, if we could go back in time, to ensure
that people on the Do Not Pay list were flagged at least for
further review?
Mr. Horowitz. Well, frankly, interacting with the Treasury
Department in advance to make sure that that screening was
occurring, that data matching was occurring.
Chairman Comer. Yes. Unbelievable. Mr. Dodaro, by the end
of 2020, Congress had already passed five laws containing more
than $3 trillion in COVID relief funds. More than $1 trillion
had been flagged by GAO as at-risk for waste, fraud, abuse.
Inspectors general and law enforcement officials were already
highlighting concerns about COVID relief money flowing to
criminals and other ineligible recipients instead of Americans
in need, and the economy was improving. Nevertheless, Democrats
insisted on $1.9 trillion more COVID relief spending through
the American Rescue Plan Act, ARPA, putting those funds at risk
and theft and the economy at risk of massive inflation and
recession. So sir, did we lose funds included in the American
Rescue Plan to fraud, and were additional improper payments
made at the ARP after the ARP was passed?
Mr. Dodaro. Yes. I mean, the improper payments estimate,
for example, for 2022 is the first year that the Paycheck
Protection Program and the Economic Injury Disaster Loan
Program made improper payment estimates. That was about $29
billion for PPP and about $7 billion, over $6 billion for the
EIDL program. We had urged that those improper payments be made
earlier in 2021, but they didn't make those estimates then.
Chairman Comer. Did you encourage Congress to do that?
Mr. Dodaro. No, the agencies. And my recommendations to the
Agency----
Chairman Comer. What could Congress have done to have
prevented this?
Mr. Dodaro. As one of my legislative recommendations from
GAO is that any new programs over $100 million--not billion--
$100 million, be designated immediately because of this past
problem to be susceptible to improper payments and, therefore,
make an estimate in the very first year of the program. Right
now, the improper payments estimates only have to be made 2 or
3 years after a program has already started. It is too late. It
is too late. And some of these temporary programs, they are all
done. So Congress can and should have that as a requirement to
be put in place.
Chairman Comer. Well hopefully, that will be some kind of
bipartisan legislative fix from this committee very soon. Mr.
Horowitz, same question. I have got 40 seconds. What warning
signs were there, and what should have been done?
Mr. Horowitz. There were plenty of warning signs. Frankly,
the urgency and speed to get it out without any consideration
of what was already available to use, like Do Not Pay, as we
did in our fraud alert this week, had there been agreements in
place, they could have checked again. So, Security
Administration, I think it is very important that consent-based
verification tools be put in place for programs. What you need
to know is whether the applicant is eligible. You can't just
self-certify, and they were relying on self-certification.
Chairman Comer. Wow. Thank you. I am sure we will have many
discussions moving forward, but my time has expired. I yield to
the distinguished ranking member, Mr. Raskin, for five minutes.
Mr. Raskin. Mr. Chairman, thank you much. Mr. Horowitz,
following up on that, when did the SBA start using the Do Not
Pay program to check the eligibility of applicants for PPP
loans?
Mr. Horowitz. Following recommendations by SBA OIG, the
PRAC, and GAO. They started in 2021.
Mr. Raskin. In January 2021, at the beginning of the Biden
administration.
Mr. Horowitz. They said they were, and actually I am not
sure who exactly started then. One of the issues has been
getting them to implement.
Mr. Raskin. Yes.
Mr. Horowitz [continuing]. Statement, what they said, but
they did make efforts to start, and they did subsequently start
doing that.
Mr. Raskin. Great. Well, when we passed the CARES Act in
2020 and we created the Pandemic Response Accountability
Committee, which you lead, the CARES Act included specific
language directing the PRAC to create a user-friendly website--
--
Mr. Horowitz. Right.
Mr. Raskin [continuing]. To give the American people an
overview of how pandemic relief funds were being spent all the
way down to the project, community level. But guidance released
on April 10, 2020, by President Trump, made it nearly
impossible to effectively track pandemic relief funding past
the first distribution. And, Mr. Chairman, I would want to ask
unanimous consent to insert the administration's April 10,
2020, guidance into the record.
Chairman Comer. Without objection.
Mr. Raskin. So, Mr. Horowitz, how did this guidance affect
the PRAC's ability to identify and prevent pandemic relief
fraud?
Mr. Horowitz. So, in the CARES Act, Congress said that the
PRAC needed to launch a website within 30 days. We did. Go to
pandemicoversight.gov, you can see how the money has been
spent. You can get to your local zip code if you would like. We
were challenged at the outset because OMB leadership decided to
use what was already existing, reporting tools in
USAspending.gov, which we did not believe was sufficient, GAO
did not believe was sufficient, and SBA, and others IGs didn't
believe was sufficient to meet the requirements of the CARES
Act.
The memorandum that went out that you mentioned put that in
place, and it limited our ability at the outset to get the data
we needed. For folks who followed our website from 2020
forward, you will see gradual additions to the website. Indeed,
SBA wouldn't give us the information. This was an SBA agency
issue until September or October 2020. We couldn't get much of
any data from them because they were litigating FOIA lawsuits.
Mr. Raskin. Got you. So, do you think that that guidance
met the language and the spirit of the CARES Act requirements
for tracking pandemic relief spending all the way to the
ground?
Mr. Horowitz. The public should know where money went.
Congress needs to know where money went. You can't figure out
whether a policy worked, whether it has been defrauded, who is
accountable if you don't know where the money went.
Mr. Raskin. Mr. Dodaro, following the 2008 financial
crisis, President Obama signed the American Recovery and
Reinvestment Act to stimulate the economy and to get us out of
the Great Recession. I think that was a $787 billion program if
memory serves. Do you think that that Trump administration 2020
guidance we are talking about effectively incorporated lessons
that were learned from Obama's successful implementation of the
American Recovery and Reinvestment Act?
Mr. Dodaro. Not to the full extent that they should have
been. The Recovery Act reporting required reporting from
recipients, and the Recovery Act Board created that, so you had
much more timely reporting than what you had under the guidance
that Mr. Horowitz just talked about, which is using
USAspending.gov. So, they could have taken some of those
lessons, I think, and so----
Mr. Raskin. Got you. So Mr. Horowitz, then did you at all
express your frustration with this undermining of the CARES Act
determination that the public have complete accountability and
transparency?
Mr. Horowitz. At the time, PRAC leadership was meeting with
OMB and expressing the need to have better reporting portals
than what existed with USAspending. There are many issues with
USAspending. IGs have written about those that need to be
fixed. GAO has written report after report about that. Those
need to be fixed. If you want to find the best information that
is out there, it is actually for the Coronavirus Relief Fund,
which was the $150 billion in the CARES Act that went to the
states. The reason that is there, that information there is
because the Treasury IG, working with the PRAC, created the
Recipient Reporting Portal. We couldn't do that. It cost us
money. They cost them money. We couldn't do that for, you know,
trillions of dollars, but that is what needs to be done.
Mr. Raskin. Well, I am proud that we included those
provisions in the CARES Act precisely to ferret out fraud, to
try to prevent the waste and abuse. But it obviously requires
leadership at the Presidential level, at the very top, a
commitment to making sure that everything is accountable and
transparent. Thank you, Mr. Chairman. I yield back.
Chairman Comer. The chair recognizes Mr. Gosar for five
minutes.
Mr. Gosar. Thank you. Good seeing you, gentlemen. It is a
pleasure to see you this morning. You bring up mandated regular
reporting aspects, is a big key, and Congress has dictated a
lot to you, but Congress hasn't done their fair share either.
So, when you look at the National Emergencies Act, there is a
requirement that the Congress meet every six months to have a
detailed report instead of a synopsizing all this all over a
year or a year-and-a-half. It would be better to have these
numbers on a basis over six months, having account of it. Would
you agree with me, Mr. Horowitz?
Mr. Horowitz. Yes. I think more regular reporting would be
helpful, and part of that is getting the data information from
agencies to the public to Congress in a timely fashion, yes.
Mr. Gosar. So, do you agree with that, Mr. Dodaro?
Mr. Dodaro. Absolutely. Absolutely.
Mr. Gosar. Part of the National Emergencies Act-- that
actually Congress must, shall convene to look at these
expenditures and to have some rein over it. I think that part
of our purview is the power of the purse. So, if you are not
having accountability to this body, to this Congress, you are
lacking in your jurisdiction of oversight. I guess, having said
that, looking at what we have seen in this gobbledygook of
national emergencies-- date back, that are open to the 1970's.
I don't know how you figure these numbers out. I mean, it is
crazy. I just don't know how this works.
So my question is, to the American taxpayer, there are
estimates of $560 billion of fraud in the COVID-19 funds. Do
you agree with that, Mr. Dodaro?
Mr. Dodaro. It will be a while before the full extent of
fraud is known.
Mr. Gosar. Right.
Mr. Dodaro. As I mentioned in my statement, you know, there
has been over 1,000 people have pled guilty or been convicted.
There are over 600 charges still pending against people. The
SBA IG has 536 active investigations right now. The Department
of Labor IG is opening up 100 new cases every week. So, this is
going to go on for a while. There are definitely indications of
widespread fraud, but it is impossible to estimate right now
what the full extent will be. Time will have to unfold, and
these investigations will have to be undertaken because the
definition of ``fraud'' is willful misrepresentation to get
something of value that is adjudicated through a court or some
other judicial process.
Mr. Gosar. Would you agree that continued reporting would
be better, you know, a timely reporting to the jurisdictional
committee like this one or Transportation? In regards to the
amount of fraud, the number of fraud, what can Congress do to
allocate, you know, more streamlining in this process? Do you
see a process that we can go forward with that?
Mr. Dodaro. Yes. I mean, there is a regular process for the
inspector generals to report semiannually, but when you have
extraordinary circumstances like we have, there could be more
frequent reporting in those cases. But there are definitely
benefits of having more frequent interaction and oversight by
Congress with oversight bodies, the GAO and the Inspector
Generals in this case, the Secret Service, because some of
these legislative solutions that I have recommended could have
been taken a lot earlier in the process.
Mr. Gosar. And so, if we are rewriting the National
Emergencies Act, would you be able to give us your inferences
as to how to detail the changes?
Mr. Dodaro. I will be happy to look at the act and make
suggestions, yes.
Mr. Gosar. OK. How about you, Mr. Horowitz? I mean, you
always come up with great ideas.
Mr. Horowitz. Yes, absolutely. I would be happy to.
Mr. Gosar. To Mr. Smith, do you see any aspects of--
particularly, from the Secret Service, where we can make some
amends within the National Emergency Act?
Mr. Smith. Thank you for the question, sir. As I mentioned
in my opening, similar to our protective mission, which our
brand is largely associated with, one of the central tenets of
our mission is advance work. And, as some of the co-panelists
spoke about earlier, our cyber fraud task forces or our task
force, incorporating private sector, incorporating academia.
And what we do is share information on a continual basis, so we
don't wait until the President shows up in a district to
establish relationships. We do that prior to that time. So
similarly, in our investigative mission, we know that it is
important to maintain relationships with financial
institutions, academia, in order to get in front of fraud and
share ideas because we have a constant cadence of interacting
with bad guys in the context of our jobs.
Mr. Gosar. Thank you. I might run out of time. I yield
back.
Chairman Comer. The chair recognizes Mr. Lynch for five
minutes.
Mr. Lynch. Thank you, Mr. Chairman, and the ranking member
for holding this hearing, and I want to thank our panelists for
your good work. I recognize you from previous hearings, and
thank you again.
This was a difficult challenge from the very beginning, and
I just want to take us back to the Trump administration's
initial response. So, back in 2019 and 2020, Mr. Trump, on
January 24, 2020, the day the second coronavirus virus case was
confirmed in the United States, President Trump tweeted and
again reiterated that, ``China has been working very hard to
contain the coronavirus. It will all work out. I want to thank
President Xi,'' and then went on to say that the coronavirus
would be over by Easter. Based on what we know now, did those
statements by the President of the United States induce the
sense of urgency that the American people should have harbored
with respect to this pandemic, Mr. Dodaro?
Mr. Dodaro. I think that the actions that the Congress take
shows a sense of urgency in passing the CARES Act back in March
2020, on a bipartisan basis, and I think that sent the right
signal and a sense of urgency that needed to be addressed to
those issues.
Mr. Lynch. You are exceedingly diplomatic as always.
Mr. Dodaro. That is why I am still here.
Mr. Lynch. Mr. Horowitz and Mr. Smith, you want to take a
crack at that question?
Mr. Horowitz. Not particularly.
Mr. Lynch. Well, let me just get down into the details a
little bit here, unless Mr. Smith, you would like to add? No.
OK. I am not sure of the division of labor within your
agencies, but are any of you familiar with the Yellow
Corporation during your investigations? No?
Mr. Dodaro. Sorry, which corporation?
Mr. Lynch. Yellow Corporation. It was a trucking company
apparently with political connections to the Trump
administration. Are you familiar with that?
Mr. Dodaro. I think that is the one that there was a loan
given to out of one of the programs, and I think we----
Mr. Lynch. Correct. Let me refresh. Let me try to----
Mr. Dodaro. We looked at that issue.
Mr. Lynch. OK. Yes.
Mr. Dodaro. We looked at that.
Mr. Lynch. All right. Thank you. Let me try to refresh your
recollection. So, the Select Subcommittee report confirmed that
a $700 million loan to this trucking company that was
politically connected to the Trump administration was given
this $700 million loan, and Trump administration political
appointees overruled Defense Department officials in that case
to actually certify the company, as ``critical to maintaining
national security and, therefore, eligible for the loan.'' The
company then went on to use the loan for long-term capital
investments in violation of the CARES Act requirement. I was
just curious. I know you are familiar with it. Do you have
anything else you could add to that fact pattern?
Mr. Dodaro. I would be happy to provide our results for the
record. I can't remember offhand, and I don't want to misstate.
Mr. Lynch. OK. All right. Well, we could take that at a
later time.
Mr. Lynch. What are the lessons learned based on how the
Trump administration responded initially to the pandemic?
Mr. Dodaro. No. 1, I think there should have been more
preparedness on the part of the agencies to prevent fraud. You
know, Congress passed legislation in 2016 based on GAO's advice
on how to prevent fraud in the first place. Part of this is
there is a cultural problem. In most cases, the fraud issues,
people think of the inspector generals and think of the Secret
Service and GAO, but you got to prevent it in the first place,
but the agencies were slow to implement it.
Mr. Lynch. Yes.
Mr. Dodaro. The OMB was supposed to create a working group
to develop this. We issued a report in 2019, said the working
group had never met, that it needed to take more actions, No.
1. No. 2, I think the other lesson learned for the Congress is
to be careful about putting provisions in the legislation that
make programs more susceptible to fraud, allowing, for example,
the self-certifications, not using tax credit transcripts,
rather, so I think there is legislation there as well. Third,
the agencies that had not addressed improper payment problems,
they know they have payment problems, and not addressing open
GAO and IG recommendations make them less prepared. So, there
are a lot of lessons and my legislative solutions to these
address some of these lessons learned.
Mr. Lynch. Thank you, Mr. Chairman. My time has expired,
and I yield back.
Chairman Comer. The chair now recognizes Dr. Foxx for five
minutes.
Ms. Foxx. Thank you very much, Mr. Chairman, and I thank
you for holding the hearing. Well, I have no questions for Mr.
Dodaro, but I do want to thank him so much for the work he and
his team do on behalf of the American people in helping us
figure out ways to be more efficient and find the waste, fraud,
and abuse, and I appreciate your comments just now.
Since coming to Congress, I have fought for transparency
and accountability in Federal spending, and with trillions of
dollars of COVID aid spent over such a short period of time, it
is imperative we closely watch where and how that money was
spent, and I think you have given us some more ideas. It is
likely something we are going to have to track for a long time.
But Mr. Horowitz, I have questions for you. Can you speak to
the need for the Pandemic Response Accountability Committee, or
PRAC is and its importance?
Mr. Horowitz. Thank you, Congresswoman. I think it was
critical for Congress to set up the PRAC when the CARES Act was
passed. At the time, we were asked to oversee $2 trillion. It
is now $5 trillion of pandemic oversight. And what it did was
it brought the inspector general community together to
coordinate oversight. We created a data analytics platform to
do the kind of work that resulted in our fraud alert last week,
and you gave us hiring authority to bring on great data
scientists, a great team that has enabled us to do this work.
We got it up and running, and we moved forward. And as a
result, we have been able to coordinate more closely with not
only our IG partners, but with the GAO. And with state and
local auditors, we created a state Auditor-in-Residence
Program. We have two auditors from the state of Tennessee who
have come on board recently. First ever that has been done in
the IG community because we want to coordinate with our
counterparts and our oversight partners at the state and local
level. And so, we have brought together people in a way that we
have never had before in the IG community.
Ms. Foxx. So in your work, how would you rate, with the
PRAC, the various COVID relief funding programs from most to
least susceptible to improper payments?
Mr. Horowitz. Well, I think what you have seen so far is
the three of the biggest programs: the Paycheck Protection
Program, the Economic Injury Disaster Loan Program, and the
Unemployment Insurance Program. Those three programs, which by
the way, account for just under $2 trillion of the spending,
have shown to be highly susceptible to fraud for different
reasons. PPP----
Ms. Foxx. Can you give us the characteristics that cause
that?
Mr. Horowitz. Yes. So, for PPP and EIDL, those were
administered at the Federal level. And the problem there was
the desire to simply get the money out as quickly as possible,
without taking, not an unreasonable amount of time, but an
appropriate amount of time to make sure that they were sending
the money to the right people. That was the problem, among
others, with those two programs. On the unemployment insurance,
the issue was different because that is administered by the 50
states. The problem there is the lack of coordination among
them and with the Labor Department, and the Labor IG has
written extensively about that problem.
Ms. Foxx. So, we have some recommendations on what to do in
that area.
Mr. Horowitz. A number of recommendations.
Ms. Foxx. Good.
Mr. Horowitz. And I would be happy to send them up to you.
Ms. Foxx. Absolutely. Since the Labor Department is in the
jurisdiction of the Education and Workforce Committee, I am
anxious to see those.
Ms. Foxx. So, you charged 47 defendants in a $250 million
fraud scheme involving a Minnesota nonprofit, Feeding Our
Future, one of the largest COVID aid-related frauds uncovered.
What, if any, indicators, were there of this sort of fraud, and
could it have been stopped earlier?
Mr. Horowitz. So, it is always hard to say whether
something could be stopped earlier. We want to obviously be
careful in hindsight to say that. But had there been on these
various programs, a preclearing or a prereview of an applicant,
first of all, whether it was a legal entity. Did it really
exist? Was the email address coming from overseas? Was it from
an IP address, I mean, coming from overseas? As we just
reported on, did names, date of birth, and Social Security
numbers match what is in SSA's--Social Security
Administration's--records? That is an easy check. Were they on
a Do Not Pay list? There were multiple steps that could have
been taken in many of these instances. They could have, at a
minimum, paused, hit the pause button, take a second look to
make sure they are eligible.
Ms. Foxx. Mr. Chairman, I know my time is up, but I would
like to make one quick comment. I am really concerned about
what Mr. Horowitz said about the 2016 bill being passed on how
to prevent fraud, and the agencies were slow to implement. We
have got to get to the root of these kinds of things, and say
to these agencies, and fire people if they don't do things they
are supposed to do. That is our biggest problem in the Federal
Government. Nobody can be held accountable. Thank you. I yield
back.
Chairman Comer. Thank you. The chair recognizes Mr.
Krishnamoorthi.
Mr. Krishnamoorthi. Thank you, Mr. Chairman. Mr. Smith, I
want to ask you about your ongoing investigations involving
transnational criminal actors defrauding our pandemic relief
programs. It looks like in a statement that the Secret Service
put out in December, you talked about a group called APT 41.
Are you familiar with that?
Mr. Smith. Yes, sir.
Mr. Krishnamoorthi. And it says in your statement, APT 41
is a ``Chinese state-sponsored cyberthreat group that is highly
adept at conducting espionage missions and financial crimes for
personal gain.'' Are you familiar with that?
Mr. Smith. I am familiar with the article, sir. Yes, sir.
Mr. Krishnamoorthi. And apparently, according to this same
article, this group, the APT 41, Chinese state-sponsored cyber
gang, stole tens of millions of dollars in U.S. COVID Relief
benefits, including SBA loans, unemployment insurance funds, in
over a dozen states. Isn't that right?
Mr. Smith. That is what the article stated, yes, sir.
Mr. Krishnamoorthi. Now, tell me, sir, since that article
came out, I got to believe that they have probably targeted a
lot of states beyond a dozen. Can you tell us how widespread
the geographic coverage was in terms of the number of states
that they had tried to target?
Mr. Smith. So again, I am familiar with the article. Our
national pandemic fraud coordinator, who testified last summer,
who I appointed to that position, was a supervisor in one of
our field offices, the spirit of what he was conveying was that
it is unimaginable that organized transnational criminal
organized groups did not look to exploit pandemic-related fraud
no different than, you know, an American would. There are some
commonalities between some of the thousands of bank accounts
that we have seen used to move illicitly gained pandemic fraud
resources that were also being used by some of those
transnational criminal organized groups, to include the one you
mentioned. It is also worth mentioning when we do have cases
that involve transnational criminal organized groups or state-
sponsored entities, we do----
Mr. Krishnamoorthi. Let me stop you there. OK. We have now
established APT 41 is a Chinese state-sponsored cyber gang.
Now, let me just turn your attention to Russia. Have we
identified any Russian state-sponsored cyber gangs involved in
pandemic fraud?
Mr. Smith. A lot of the Russian underlying pandemic-related
fraud has to do with folks dealing in identity theft. So, for
decades, we have known forums wherein people that deal with----
Mr. Krishnamoorthi. State sponsored, though. Are they state
sponsored?
Mr. Smith. Sir, the Secret Service focuses on financial
crimes. Whether or not an entity is state sponsored or not is
generally not why we tend to focus on them. We follow money,
and if that leads us to a state-sponsored actor, we don't stop
the case, but we then employ our partners at DOJ.
Mr. Krishnamoorthi. And have you come across that link yet,
in other words, that required a referral to DOJ?
Mr. Smith. That referral to DOJ is actually part of the
task force the DOJ started at the beginning of the pandemic.
So, there are cases wherein we have some linkages or
commonalities between cases we are working for financial crime
reasons, and there may be a state sponsor act that has some
commonalities there.
Mr. Krishnamoorthi. OK. So, now we have established that
there have been Chinese state-sponsored cyber gangs as well as
Russian state-sponsored linked to the state individuals who
have committed pandemic relief crimes?
Mr. Smith. Sir, what I said was that there are
commonalities between some of the accounts and other indicators
we have seen. That is what I said.
Mr. Krishnamoorthi. OK. Now with regard to APT 41, in
particular, in your statement--I am sorry, the U.S. Secret
Service's statement.
Mr. Smith. Yes, sir.
Mr. Krishnamoorthi. It said it was ``state-sponsored''.
Now, have you been able to identify any evidence that the
Chinese Communist Party ordered or asked this particular cyber
gang to commit this fraud, or do we have evidence that they
just merely looked the other way and permitted them, knowing
them to have committed this fraud?
Mr. Smith. Sir, I have no evidence as to what the Chinese
Government ordered a transnational criminal organized entity to
do.
Mr. Krishnamoorthi. Are there any other cyber gangs, state
sponsored, either Chinese or Russian or any other state-
sponsored criminal gangs that have committed pandemic fraud?
Mr. Smith. Sir, just last year, we disrupted a
transnational criminal organized group known as Black Axe. They
are Nigerian based. They are operating in South Africa, and
they have a longstanding history of committing a lot of
different types of fraud, and they use a lot of the pre-
existing money mules. There is an extensive money mule network
that operates here in the states. Again, even the transnational
criminal organized groups overwhelmingly used or leveraged an
American or an American profile to facilitate pandemic-related
fraud. So, we did see that and we had an operation that
disrupted that group just last year.
Mr. Krishnamoorthi. Thank you.
Chairman Comer. The chair recognizes Mr. Grothman for five
minutes.
Mr. Grothman. Sure. A few more questions, follow-up
questions for Mr. Smith. Could you give me a little more
information as far as a stereotype, as far as fraud being
committed by people abroad, or fraud being committed by
immigrants?
Mr. Smith. What was the last word, fraud being committed by
who, second part?
Mr. Grothman. Immigrants. Immigrants. Immigrants.
Mr. Smith. So, I am not going to get into stereotypes. We
follow money. We follow evidence. And at the end of the day, as
I mentioned to the previous committee member, the majority of
the cases we have seen, even if there is a criminal looking to
exploit pandemic-related fraud abroad, they use an American
mule. We had certain campaigns that are cyber fraud task forces
communicated to don't be a money mule, whether witting or
unwitting, because what we saw was a lot of Americans being
utilized to move money abroad because the criminals didn't know
that overwhelmingly what we were looking for were, you know,
American bank accounts, American identities to issue money to.
So, they use that and leverage an extensive network of money
mules that preside overwhelmingly here in the United States to
get that money into their hands.
Mr. Grothman. Well, there would be an example. Is the mule
in America? Are they have contacts within the foreign nations?
I mean, are they immigrants from the foreign nations? Are you
just grabbing a random person off the street? I mean, could you
comment on these mules?
Mr. Smith. So we have, you know, dozens of cases, hundreds
of cases where, you know, we would have a person in ``fill in
the blank'' state. One state comes to mind where there was a
mule that had literally funneled $12 million to some criminals
that resided abroad. And once we start following the money,
once we start looking at some of the commonalities and bank
accounts, and we have an opportunity to go interview a person--
--
Mr. Grothman. Right. Could you tell me what those countries
were abroad, and could you tell me the background of the mules
here, where did they have connections to the country abroad?
Mr. Smith. So, one of the cases, as I mentioned a second
ago, was out of South Africa, focused on some Nigerian
individuals in a group called Black Axe. That case I just
mentioned with the $12 million was one of the cases where in a
money mule sent money to accounts that were operated by Black
Axe. And I want to impress upon the group here, money mules are
not a new concept. Like, there is an extensive network.
Mr. Grothman. Right. You are not answering my question.
Mr. Smith. Sir.
Mr. Grothman. Presumably, they got these mules somewhere,
OK? You mentioned Nigeria. You mentioned South Africa, where
the people who did the work in America connected in those
countries in any way. Were they immigrants from those
countries? Were they just random people they find on the
internet? Were the immigrants from those countries?
Mr. Smith. Not necessarily, sir.
Mr. Grothman. I know not necessarily, but does it happen,
and how often does it happen?
Mr. Smith. Overwhelmingly, in our experience, that does not
happen. Criminals just take advantage of folks looking to make
a quick buck, and the pandemic offered that opportunity with
the amount of resources that were made available.
Mr. Grothman. OK. Now in general, Mr. Horowitz, I can think
of flaws in these programs that the fraud would be almost
predictable. But can you tell us, in the future, what things we
can do in programs so the fraud is not committed so easily?
Mr. Horowitz. So, I think one of the easiest things to do
that wasn't done is to prepare, as the Comptroller General
said, by employing verification tools, identity verification
tools. The amount of identity theft was extraordinary here, and
it needs to be addressed because we are not only talking about
when that occurs, theft from a government program, theft from
the taxpayers, but for anybody who has been on the receiving
end of having their identity stolen, you understand how you are
victimized in that way. And just in the fraud alert, we
indicated we now have 200,000 social security numbers that were
used that we need to follow up on to see if those individuals'
identities were stolen.
Mr. Grothman. So, in other words, the money is going to, it
is going to an account or something other than the person who
is committing the fraud?
Mr. Horowitz. Correct. So, what is happening is individuals
are claiming that they are the person whose name is on the
application, whose date of birth is on the application, and or
whose social security number is on the application. When we
checked and went to Social Security Administration to ask them
to verify it, a check they can do. We entered into that. They
were doing large-scale verification for us. They came back and
said those don't all match for those 212,000 numbers, which
means in some instances, it could be a false positive. Somebody
could have transposed their social security number down or
their date of birth down, so there are going to be some of
those. But presumably, for most of them, those are individuals
who obtained, on the dark web through other means, social
security numbers that were previously stolen from individuals
and had their identity stolen.
Mr. Grothman. And then they wind up going to a bank account
that has this person's name on it, but this person doesn't even
know the bank account.
Chairman Comer. The gentleman's time has expired, but we
will let you finish the question.
Mr. Horowitz. Yes, certainly there is an ability to go to
the bank, particularly if, as with the PPP Program, the Agency
has said you don't need to do anything other than accept the
person's verification that it is them. In other words, all that
had to happen in the PPP Program at the outset was you went to
the lender, you signed an application saying, no, I am really
this person, and they accepted it. No one can walk into a bank
today and get a loan and say, no, no, really, I am this person,
give me the money, but that is what was going on.
Chairman Comer. Chair recognizes Ms. Norton.
Ms. Norton. Thank you, Mr. Chairman. Mr. Horowitz, this
question is for you. Democrats provided the Department of Labor
inspector general $25 million in the American Rescue Plan to
combat fraud and corruption in the process. Also in the
American Rescue Plan, Democrats made critical investments in
fraud prevention and accountability, including providing more
than $200 million in funding for watchdogs to investigate
fraud, waste, and abuse as well as $2 billion to support
states' modernization of unemployment insurance systems to
reduce fraud vulnerabilities. The Biden administration has
begun using these funds to support state efforts to make
unemployment insurance systems both more accessible to eligible
recipients and less susceptible to fraud. The American Rescue
Plan provided significant funding to the pandemic recovery
accountability committee as well. Yet my Republican colleagues
voted against these commonsense measures to reduce fraud.
When the American Rescue Plan became law, Mr. Horowitz, you
released the following statement, and here I am quoting you,
``The enactment of the American Rescue Plan adds to the
important independent oversight responsibilities of the PRAC
and its member inspector generals. We appreciate the ongoing
support from Congress and the administration of the PRAC in and
its oversight mission.'' Mr. Horowitz, how much funding did the
PRAC receive in the American Rescue Plan to perform the vital
oversight functions?
Mr. Horowitz. In the ARP, in the American Rescue Plan, the
PRAC received $40 million of funding.
Ms. Norton. Now, Mr. Horowitz and Mr. Dodaro, what other
resources and authorities do you need to continue your work?
Mr. Horowitz. So, as I mentioned in my written statement at
the outset, I think very important to continue the data
analytics platform that $40 million that was in the American
Rescue Plan covered our ability to start the data analytics
platform we have in 2021. It is funded through 2025, but we
sunset on September 30, 2025. We turn the key off at that point
unless it is extended.
Congress invested $40 million to fund that over four-and-a-
half years. That is $15 million, $16 million we are spending
right now. Just the fraud alert alone this past week, we
identified $5.4 billion of potential fraud. That is 360 times
the amount of money that we spent this year, or spending this
year, to run our data analytics platform. In other words, it
would take us 360 years of spending at that number to add up to
$5.4 billion, so that, I think, is very critical.
Mr. Dodaro. I would agree. I want to throw my support
behind the establishment of this platform, a data analytics
platform. Right now, it only applies to pandemic spending, and
it is going to expire. This happened back after the Recovery
Act, as I mentioned in my opening statement, and it was a very
effective process then, but it expired in 2015. Now, if it had
been in place at the beginning when the CARES Act was passed in
2020, I think we could have saved a lot of money and prevented
fraud or went after it earlier. But it wasn't established until
the American Rescue Plan in 2021, so by that point, hundreds of
billions of dollars have been already spent. So, I think this
is a prudent investment on the part of the Federal Government
to have this capability in the IG community on an ongoing
basis. It will more than pay for itself many times over.
Ms. Norton. In addition to the funding, Democrats included
funding to the American Rescue Plan to provide grants to states
to engage their local community organizations that represent
those eligible for benefits. The goal is to help states learn
how to more effectively reach these traditionally
underrepresented and under-resourced communities. So, may I ask
you, Mr. Horowitz and Mr. Dodaro, will these types of
investments in the community engagement help you separate
paperwork errors, other unintentional mistakes, and actual
fraud?
Mr. Dodaro. I think it is important to recognize, and we
have ongoing work. So, we are going to be looking at that issue
to see how effective Labor is working with the states and with
those entities, so that is very important. Today, we focused a
lot on the fraud part of the Unemployment Insurance Program,
but on the benefit side, there was lack of timely benefits that
were given to people. We find also some disparities in terms of
how different people, different races have been treated. So,
there is a lot to be done in unemployment insurance area to
make sure there are timely payments made to the proper people
in a balanced, equitable fashion, whilst stopping fraud on the
other area.
Now, we have added the Unemployment Insurance Program,
along with the PPP, and Economic Injury Disaster Loan Program
to the list of high-risk areas across Federal Government. The
unemployment insurance area is badly in need of transformation,
not only in dealing with these community organizations, but the
IT systems in the states are terribly antiquated and not
capable of executing this type of program in the future until
they are modernized.
Chairman Comer. Thank you. The chair recognizes Mr. Palmer.
Mr. Palmer. Thank you, Mr. Chairman, and I thank the
witnesses. To date, do we know the full amount of improper
payments of COVID funds, Mr. Dodaro?
Mr. Dodaro. There are estimates that have been made on the
unemployment insurance area. In 2020, the estimate was improper
payments was $78 billion, up from about $9 billion in 2020. And
then there was another $18.9 billion of improper payments
reported by unemployment insurance program for 2022, and that
was a 22 percent error rate, and the year before was 18.9
percent error rate. Prior to the pandemic, it was about nine
percent, and the PPP and EIDL areas combined is about $36
billion.
Mr. Palmer. We are talking $135 billion. I have done math
in my head.
Mr. Dodaro. Yes.
Mr. Palmer. As you know I like to do.
Mr. Dodaro. Yes, I do.
Mr. Palmer. It appears to me that some Federal agencies
might not have been as forthcoming with information as both you
and Mr. Horowitz would have needed. The Small Business
Administration potentially violated Federal law by failing to
respond to the GAO's requests. Has that been the case that they
have not responded to your request?
Mr. Dodaro. It was early on in the start of the programs.
It has gotten much better and I actually had to go back in 2020
and 2021. I testified before the Coronavirus Select Committee,
and I had called the chair and ranking members of this Small
Business Committees, both the authorizers and the
appropriators, to get help. I mean, we couldn't get any
information on SBA at all, and it wasn't until later, there was
a lawsuit where they had to then disclose the amounts of loans.
Now it has gotten better.
Mr. Palmer. One of the problems is that the unemployment
insurance programs authorized under the CARES Act were excluded
from the program's total reported improper payments because
they were not in existence for more than 12 months, and these
programs represented about 70 percent of the unemployment
payments in 2020. Should Congress consider legislation reform,
the improper payments reporting periods in order to more
accurately track the COVID relief funds in the future if we
have to have this again?
Mr. Dodaro. Yes, absolutely, and that is one of my
legislative recommendations.
Mr. Palmer. I would appreciate, and I have enjoyed working
with both you and Mr. Horowitz over the years on things like
this, if you would provide to me in writing your
recommendations for legislative fixes.
Mr. Palmer. I want to move to something else. It has been
discussed about what actions Republicans took, and I just want
to ask you, if we had required two-factor identification for
online applications or provided state unemployment agencies by
fax/email or other means, or transmission, a copy of the
claimant's state ID, if we had utilized protocols to prohibit
applications from foreign IP addresses, if we denied claimants
using virtual private network identification, require
individuals--I could go down this whole list of things--would
that have helped reduce the amount of fraud?
Mr. Dodaro. Yes.
Mr. Palmer. Well, I just want to point out, Mr. Chairman,
that these are recommendations that were made by Republicans in
the House and Senate, including myself. I introduced a bill to
do this that were largely ignored. When we began to see the
massive amount of fraud as early as, I think, April/May 2020,
Mr. Horowitz, I think, and working with the Department of
Labor, the Office of Inspector General there, that billions of
dollars had already gone out, and we couldn't get these
guardrails back in, would that have helped, Mr. Horowitz?
Mr. Horowitz. Absolutely, and the fraud did start right off
the bat. I mean, for the PPP Program sent out $400 billion in
two weeks.
Mr. Palmer. Let me ask one other question. What we have
seen toward in the last few months here is states using their
COVID relief funds for things like New Jersey, $50 million in
state and local fiscal recovery funds to bolster the state's
bid to host the 2026 World Cup. We saw the state of Washington
sent out $128 million in 1,000 payments to 120,000 illegal
immigrants. We saw Colorado Springs use $6.6 million to put an
irrigation system at two local golf courses, $5 million dollar
state of Massachusetts pay off debts incurred by Edward M.
Kennedy Institute for the U.S. Senate in Boston. Are any of
those improper uses of funds? I mean, I know we wanted to give
them flexibility, but isn't that a little bit out of the box?
Mr. Dodaro. Yes. Well, there are broad uses authorized in
the legislation for that money. We are looking at it right now,
and so we will try to identify those areas that may be out of
bounds legally. But it reminds me that the Recovery Act, when
there was a lot of questions about the use of the money,
whether that was appropriate or not, when it was really, you
know, legally authorized because the government gave great
flexibility to the state and local community to make decisions.
The other issue you had to deal with always at the state and
local level was fungibility of the money.
Mr. Palmer. Well, they didn't have that early on, and Mr.
Chairman, I think this might be something we want to look into
because it is not just the fraud. It is the improper use of
some of the funds. And my time has expired. I always enjoy
hearing from you guys. I yield back.
Chairman Comer. Absolutely. The chair recognizes Ms.
Ocasio-Cortez.
Ms. Ocasio-Cortez. Thank you so much, Mr. Chairman. This
hearing is called Federal Pandemic Spending: A Prescription for
Waste, Fraud and Abuse, UI, unemployment assistance, the
Paycheck Protection Program, all of it. And in the wind-up to
this hearing, on January 13, I see that the chair sent several
letters to three states--Pennsylvania, California, and my home
state of New York--with serious allegations of widespread fraud
and abuse. But I am curious a little bit about how we got to
these three states. Mr. Dodaro, if you were auditing or
investigating what went wrong in states in the distribution of
pandemic-related unemployment insurance, how would you go about
choosing which states to examine?
Mr. Dodaro. Well, we would look at a number of factors. One
would be the amount of money that would go there. We would look
for geographic distribution of the programs. We would look for
other characteristics of state programs, a number of claims,
for example, that have been there. And so, we would take a
nationwide sample.
Ms. Ocasio-Cortez. And even, you know, in your experience,
looking at perhaps even something like a per capita approach,
or you know, in your expertise, if you had to estimate some of
the top candidate states, what do you think some of those
states would be and why, and, again, more on like a per capita
level?
Mr. Dodaro. Yes, I don't have the per capita numbers in my
head, so I don't want to venture a guess at this point. I would
be happy to provide something for the record.
Ms. Ocasio-Cortez. Overall, let's say not from per capita.
What would be some of the top states that you would look at in
terms of your experience and oversight of these programs?
Mr. Dodaro. Well, certainly California and New York are
always candidates to look at in those cases, but you have
Michigan, you have Florida, you have states in the South and
the West. And so, we would have a geographic distribution in
order to make sure that we covered the money. What we try to do
in these cases is cover, like right now we are looking at the
State and Local Coronavirus Relief Fund, and we have selected
18 states, and they account for about 60 percent of the total
amount of money.
Ms. Ocasio-Cortez. Thank you, Mr. Dodaro. I would like to
submit to the record this report from the Pandemic Response
Accountability Committee, ``State-Entitled Key Insights in
State Pandemic Unemployment Insurance Programs.''
Ms. Ocasio-Cortez. Now, Mr. Horowitz and Mr. Dodaro, can
you think of any methodology that would have brought the
committee to send those three letters specifically to just
those three states? Is there any methodology you can think of
that would just result in Pennsylvania, New York, and
California being under investigation by this committee?
Mr. Dodaro. Well, I would defer to the committee. I don't
really know what their objectives were in that case, and I
don't think----
Ms. Ocasio-Cortez. I understand. Now, I wanted to get into
this report, and according to this report to PRAC, for example,
Arizona paid $1.6 billion to individuals to--stolen identities
to get unemployment insurance benefits. Louisiana dispersed
more than $1 million to individuals after the date of their
death. And in Kentucky, state employees applied for
unemployment benefits while still employed by the state, and
were able to hack the state's information management system and
remove holds on their own accounts, and none of these states
have been put under investigation by this committee.
I find it very interesting because as was stated at the
beginning, the bipartisan nature of oversight is what gives it
its power. And what we are seeing are investigations into, and
I believe that the methodology for these three states is highly
questionable. And I ask for this committee, if we are going to
perform oversight, then let's perform oversight. Congressional
Democrats are ready to perform that oversight and help our
constituents get the benefits they need to pay their bills. And
I think that there is no shortage of members of this committee
who are willing to stand up to their own party when it is
necessary, but I cannot for the life of me understand why the
majority would send these three letters just to these three
states that leave us with no other conclusion that there needs
to be some rank partisanship in this investigation.
Committee Republicans, I ask you now, if we are going to
start off, let's do it right. And with that, I yield my time.
Chairman Comer. Before I yield back, if Ms. Ocasio-Cortez
is willing, I would love to join in a joint investigation of
the Kentucky unemployment system and New York unemployment
system if you wanted to do that, a joint probe or whatever. I
would love to work with you on that or any of the 50 states
because I believe it is a problem in all 50 states, especially
Kentucky. You are exactly right.
The chair recognizes Mr. Higgins for five minutes.
Mr. Higgins. Thank you, Mr. Chairman. We knew there would
be fraud because fraud is always connected to money. I
supported the CARES Act as a Nation's initial response to the
new virus. We didn't know what it was. The CARES Act was our
effort to respond and to help American families and American
employees remain financially stable while we endured the impact
of this unknown virus. So, here we are into year 4 of 2 weeks
to flatten the curve, and it very well falls upon this
committee under Republican majority to begin conducting
meaningful oversight into the massive fraud that was no doubt
staged to take place when you start rolling out programs with
trillions of dollars.
Some estimates as high as $7 trillion, the total economic
commitment from the United States of America, American
treasures, $7 trillion. That is $7,000 billion. It is $140
billion per sovereign state is an average of 62 counties per
state tested. That is over $2 billion per county. I would argue
that Americans across the country and in local and state
government would say they would have done much better if every
county could have received $2.2 billion in the form of a block
grant. Of course there was going to be massive fraud with
programs like this, but what we expected was not the absence of
fraud. What Americans expected is a presence of accountability
and criminal prosecution, and that accountability is what this
Republican-controlled Oversight Committee is going to deliver.
We know that fraud is not born in the mechanisms of man.
Fraud is born in the heart of man. It is to be anticipated. The
gentleman referred to certain tradeoffs between urgency and
processes that were put in place as these trillions of dollars
was set to be dispersed. Well, may I say that we anticipated
this, but some of us, in order for the most conservative of us
to support a $2 trillion response to this unknown virus, we
insisted that this money be made available through local banks
and credit unions. And we pushed the SBA product out through,
my recollection is about 4,500 lending institutions that had
never handled an SBA product before.
We wanted, and we insisted that regular Americans would be
able to communicate directly with the bankers they knew to
access this assistance. So, we knew it was ripe for fraud, but
we expected criminal investigations to take place, and we
expected people to be put in jail. Accountability for criminal
acts generally begins with a suspicion and a report at the
local level of fraud, theft, forgery, identity theft, et
cetera. That leads to an investigation, should lead to an
arrest, should lead to prosecution, should lead to conviction
and incarceration. May I say America will be just fine had we
witnessed that kind of accountability, but it has to be pushed
out of congressional investigations. That hasn't happened for
the last three years. It will happen now.
Director Smith, so specifically regarding investigations,
that it is understandable that the most massive cases will be
prioritized, millions and millions of dollars. But according to
my research, the vast amount of fraud that we have witnessed is
primarily from smaller cases, and I have been advised that they
have gone ignored. Can you speak to that, sir? What are we
doing at the Federal level to assist local and state
investigators to go after these smaller cases?
Mr. Smith. Sir, as I mentioned before, we follow money. We
follow evidence. And one of the things that I talked about in
my opening was the Secret Service training state and local law
enforcement professionals at our National Computer Forensics
Institute. It is the ultimate teach a man to fish, if you will.
We train thousands of state and local law enforcement
professionals every year to be able to investigate cases
locally.
I was just down in the chairman's home state last week in
Kentucky talking to some of our cyber fraud taskforce partners.
And they were actually briefing me on cases they were working
at a local level that were focused on elder abuse and some
pandemic-related fraud. So, we are a Federal law enforcement
entity, but we do have a responsibility to help train, equip,
and resource our local partners who help us in every aspect of
our mission to be able to build their capacity locally.
Mr. Higgins. Thank you for your response, Director. Mr.
Chairman, I yield.
Chairman Comer. The chair now recognizes Ms. Porter for
five minutes.
Ms. Porter. Good morning. I have questions about
unemployment insurance. Mr. Dodaro, could you read this
headline for the room? Yes, could you turn your microphone on,
sir?
Mr. Dodaro. Sorry. I am sorry. ``California's EDD
Unemployment System Disaster: Predictable Fiasco.''
Ms. Porter. Thank you. We are going to get everyone in on
the fun. Mr. Horowitz, could you please read this headline?
Mr. Horowitz. There is no way I can read this headline
because I didn't bring my glasses with me.
Ms. Porter. OK. I will read it for you: ``EDD's New
Software Has Thousands of Defects, Some Critical.'' Mr. Smith,
we will see, is also an eye test in case you need to get a
checkup. Can you read that for me, Mr. Smith?
Mr. Smith. It says, ``The North Carolina Unemployment
Agency is a Broken System.''
Ms. Porter. A broken system. North Carolina Unemployment
Agency, a broken system. Mr. Horowitz, do these headlines seem
familiar? Do they seem representative of the problems with the
unemployment system during the pandemic?
Mr. Horowitz. They do.
Ms. Porter. They do. Would it surprise you to know that all
of these new stories are from 2013 and 2014, long before COVID-
19 was a problem?
Mr. Horowitz. Not at all. This has been an issue that GAO
has spoken about for decades maybe. I am not sure if it is that
long, but certainly we have as IGs as well. The unemployment
insurance system needs to be fixed.
Ms. Porter. I could not agree more. So, let's talk about
that and how we can fix it. What these headlines show, of
course, is that, as you said, state unemployment agencies have
long had problems getting help to people who need it and
preventing our tax dollars from ending up in the wrong hands.
When the pandemic first began, we needed to deliver relief
quickly. But due to chronic underinvestment in technology and
systems at states that administer programs, we saw the same
problems with waste, fraud, and abuse that we have seen for
decades under Democratic and Republican Presidents, in blue
states and red states. Mr. Dodaro, I want to talk about the
GAO's High Risk List. What is that?
Mr. Dodaro. The High Risk List was originally created to
identify, for the Congress and the Administration, areas across
Federal Government that we believe were highly susceptible to
fraud, waste, abuse, and mismanagement, or in need of broad-
based transformation as it evolved.
Ms. Porter. Did GAO identify unemployment system, UI, as a
high-risk program?
Mr. Dodaro. Yes.
Ms. Porter. When?
Mr. Dodaro. In 2022.
Ms. Porter. June 2022. In June 2022, the year before
unemployment was added to the high-risk list, do you know what
the rate was of overpayment for unemployment insurance?
Mr. Dodaro. In 2021, it was 18.9 percent.
Ms. Porter. Great. And according to the Department of
Labor, before that, before you put it on the high-risk list, it
was about 15 percent. In 2019, it was about 9.5 percent. In
2018, it was 12.1 percent. In fact, the overpayment rate has
been over 10 percent for 14 of the last 18 years according to
the Department of Labor's OIG. When GAO announced that the
unemployment system had been designated as high risk, you said,
``GAO is concerned that many longstanding problems may go
unaddressed.'' Do you remember saying that?
Mr. Dodaro. I believe so, yes.
Ms. Porter. Is that a little bit of an understatement at
this point?
Mr. Dodaro. Well, you know, for many of those years, it was
mostly state money that was collected. There really wasn't big
Federal investment in this until the pandemic broke, or perhaps
earlier in some other emergency situation, but I thought the
time obviously was right.
Ms. Porter. Yes. What the OIG has said is the UI program
has experienced some of the highest improper payment rates
across the Federal Government. So, my question is, why don't we
fix this?
Mr. Dodaro. Well, I think it requires some leadership on
the part of the Congress and the Labor Department. You know,
like a lot of these programs where the Federal Government has
relied on the state and local governments, they give them a lot
of discretion, and when times are good, unemployment is low,
you know, they don't get a lot of attention until these
problems come up.
Ms. Porter. Mr. Dodaro, here is how I think about this.
When someone has a dollar and they lose a dime of it, they
think, shucks. But when someone has $100 and they lose 10
bucks, they are like little angry, and it just keeps going up,
and now we are in the billions and trillions. So, I would love
to have your continued pressure on the Department of Labor to
use all of the funding that Congress provided in the American
Rescue Plan to actually modernize UI because I am trying to add
up where that $2 billion from the American Rescue Plan has
gone, and it does not seem to have all been deployed and spent
to improve these programs.
Mr. Dodaro. Yes. No, I agree. We are going to follow that
$2 billion. Also, I was in the Senate testifying last March
with Michael Horowitz and the IG from the Labor Department. He
mentioned the money that was given to states after the Great
Recession to reform the programs, and he mentioned some of that
money went unused.
Ms. Porter. No, it absolutely did. Mr. Chair, if you will
indulge me for just one minute. In California, after the
American Recovery Act, they were given a $2 million grant to
EDD to prevent fraud, and guess what? It worked. At the end of
the grant program, California quit using the Fraud Detection
Program, penny wise and pound-foolish because that exact Fraud
Detection Program would have prevented and saved tens of
billions of dollars for Federal taxpayers during this pandemic.
So, I appreciate the chairman's indulgence, and I yield back.
Chairman Comer. Mr. Palmer, you want to be recognized?
Mr. Palmer. Thank you, Mr. Chairman. I just want to affirm
the gentlelady from California. Mr. Dodaro and I have worked on
this for quite a while, and over half of the problems with
improper payments are antiquated data systems at the state and
Federal level, administrative error, and failure to verify
eligibility. So, I just want to affirm what you just said, and
I yield back.
Chairman Comer. The chair now recognizes Mr. Sessions for
five minutes.
Mr. Sessions. Mr. Chairman, thank you very much. Mr.
Dodaro, welcome. Mr. Horowitz, good to see you again. I would
like to focus my question to you while it is this general
subject. We have had conversations about ideas that went back
and forth with the administration. Is there anybody at work?
Are they there? Are you working with them? They are answering
questions. Give me an idea about people at work, at least for
the last two years. What has that been like?
Mr. Horowitz. Yes. You know, we are engaged with folks. The
Labor IG has been engaged with the Labor Department to try and
address longstanding problems. As the Congresswoman said, this
is not new. We have been engaged with OMB leadership and White
House leadership to try, along with the labor IG, to try and
push these issues forwards and get them addressed because the
numbers are staggering.
Mr. Sessions. Well, they are staggering. Then what is the
progress--have they have come back to you? You have had
meetings? What have they said?
Mr. Horowitz. We have made some progress. Just to give you
a sense of some of the basic issues, the Labor IG, because
these programs are managed by 54 entities, the 50 states and
other territories, the Labor IG needed to send regularly
subpoenas to the 50 states to get the data because that data
isn't housed at the Labor Department.
Mr. Sessions. So, all 50 states denied information?
Mr. Horowitz. No, no, they didn't, but to get it, you
needed to go to them and ask for it, and they needed legal
process to be able to send it. So, we now have it at the PRAC.
We are looking at it. Just to give you an example, you know, it
was found because it is this locally based system. One social
security number we have identified today, so far, was used in
29 states because the systems don't talk to each other. They
are not managed at the Labor Department, at the Federal level.
They are managed at the state level, and, frankly, it is not
fair to blame the states for that. They are not resourced to be
able to fix and modernize their various systems. Some states
have done more than others, but they are all, I think, it is
fair to say, if not all, most are struggling with this.
Mr. Sessions. But not a new issue.
Mr. Horowitz. Not a new issue at all, and GAO has probably
been at the forefront of that with the Labor IG speaking of
this.
Mr. Dodaro. Yes, I think, you know, part of the problem
Congressman Sessions is there is not sustained attention to
these issues over time. And these issues require multi-year
efforts. And, you know, we have been working with the agencies,
but quite frankly, where there are state-administered programs,
Medicaid is another one, for example, which has huge improper
payments, where it is administered at the state level. The
Federal agencies give a lot of discretion to the states, and,
quite frankly, there is not enough oversight on the part of the
states.
Now, this is a particular issue in the unemployment
insurance program because in normal times, it is state money
that is leveled on employers that pay, and there are no Federal
funds involved until there is an issue where they need the
money. And so, there is not a good sense of direction as to how
involved our country wants the Federal Government to be
involved in state-administered systems. And so, you run into a
federalism issue a bit with these programs, and, quite frankly,
I think it would benefit from congressional oversight and
direction as to what signals that you want to send these----
Mr. Sessions. OK. Well, we agree with that. Mr. Dodaro, is
there still such a thing that we invented with you years ago,
1997, the high risk series.
Mr. Dodaro. It is still there.
Mr. Sessions. It is still there.
Mr. Dodaro. And SBA, two programs are on emergency loans
are on the high-risk list along with the Unemployment Insurance
Program, and there are 37 areas. We are getting ready for our
normal update at the beginning of each new Congress. So, we are
ready to unveil the update on the list soon.
Mr. Sessions. That would be great. One question. Is this
information on your website for the agency, or where do we find
this information?
Mr. Dodaro. It is on our website. We have a whole special
section, a medallion. It is GAO.gov, on our homepage, there is
a medallion that says, ``High Risk List.''
Mr. Sessions. Great. I want to thank all three of you. The
gentleman, Mr. Smith, please know that the Secret Service is a
valuable organization to us, but you should know that you have
got employee problems that we have been trying to work on for
years, and I encourage your management to look at that about
how they treat their employees and how quickly they respond
back to the needs of those people. And I appreciate each of
your time. Mr. Chairman, I yield back.
Chairman Comer. Thank you. The chair now recognizes Mr.
Gomez for five minutes.
Mr. Gomez. Thank you, Mr. Chairman. This is the first
hearing of a two-year session, and I want to be very clear to
the American people what I believe that the majority, the
Republicans in this committee and in Congress will do over the
next two years. They will attempt to rewrite history. They will
attempt to absolve themselves of any of the decisions they made
over the last two years in order to fit their own political
narrative, everything from the pandemic response to January 6,
to holding President Trump accountable himself. We even had
colleagues here that believe that some of the January 6
insurrectionists were patriots and heroes. They are not. They
are traitors. That is what those are. Those insurrectionists
were traitors.
So, let's focus on unemployment insurance. The chairman and
the majority of the Republicans voted 3 times in 2020 for UI
benefit extension. Three times, and that is a good thing
because it put money in the pockets of Americans who were
struggling to make rent, to pay food, just to get by. But after
a month of voting to extend those benefits, one month later,
they voted to slash and to stop those unemployment benefits.
What changed? Did they not know about some of the concerns of
that program at that time? No. What changed is we had President
Biden. My hunch is if it was President Trump, they probably
would have voted to extend those benefits once again, but it
wasn't. And why are they cherry-picking this program and not
focusing on other programs?
So, now let's talk about the Paycheck Protection Program.
You know, as members, we voted to put the money in the pockets
of constituents who needed it the most to keep their small
businesses afloat. We voted to put money in their pockets, not
Members of Congress. We have colleagues from Georgia who had
$183,504 forgiven. Other Republican members had up to $4.3
million forgiven. Why not focus on this program? That is
because if they did, they would have to answer these questions
regarding their own businesses, their own loans, their own--and
why were those forgiven and not others.
So, if we want to talk about handouts, we want to talk
about fraud, you know, let's talk about it. Let's not cherry-
pick programs. Let's pick all the programs that were in place
during the pandemic, and let's talk about if we want to do
oversight, let's do it, but this isn't about oversight. It is
about passing the buck and making one, too, so don't be fooled.
The American people shouldn't be fooled by them trying to
rewrite history and the role, and responsibility, and the
implementation of those programs. I believe they were a good
thing. You know, yes, no program is perfect, but it really did
keep afloat the American economy, the American worker, and made
sure that we didn't fall into a deep, deep recession.
So with that, let's focus on, Inspector General, on the
PRAC estimates. The PRAC estimates on the website say that we
spent roughly $653 billion in pandemic expanded unemployment.
However, your website also points out less than a quarter of
that could potentially be improper, and less than that was
fraud. Can you speak to the fact that a substantial majority of
funds did what they were intended to do and keep Americans out
of poverty and save lives?
Mr. Horowitz. Certainly, Congressman. In all of the work we
have done in the oversight work, no one has suggested or in any
way sought to undermine the importance of these programs. We
all can recall what was going on in March 2020, April 2020, and
the need to assist and help people. The problem has been not
that the programs were well intentioned or valuable. The
problem is we have seen substantial amounts of that money not
going to the people who is intended to help because of the
fraud.
We have also had hearings, and panels, and programs about
the scope of the identity fraud, such that, for example, we
heard how in the Unemployment Insurance Program, individuals
who were intended beneficiaries, sometimes when they went to
get benefits were denied because the state agency thought they
were the fraudster, not the person who came first who was the
actual fraudster. And so, they struggled to just get the
benefits they were entitled to. That is why these programs need
to be fixed and addressed because Congress meant the money to
go to the people who really needed it, and that is where we
should be putting our efforts.
Mr. Gomez. Thank you. With that, I yield back.
Chairman Comer. The chair now recognizes Mr. Biggs for five
minutes.
Mr. Biggs. Thank you, Mr. Chairman. Thanks for all of you.
I am sorry, I have been in and out doing multiple hearings as
we do. It is good to see you again, Mr. Horowitz. Mr. Dodaro,
it is good to see you, and welcome, Mr. Smith. So I guess, I am
going to try to broad shoot this thing here. Is there any money
not expended in any of the COVID Relief packages that you are
aware of?
Mr. Dodaro. Yes, there is about, as of November 2022, there
is about $157 billion in unobligated funds.
Mr. Biggs. OK. Unencumbered, unobligated, unspent?
Mr. Dodaro. Right.
Mr. Biggs. OK. Great. Thank you. And what is the total
amount that you estimate was spent through either fraud,
improper payments, or waste in any of those programs? Go ahead,
Mr. Horowitz.
Mr. Horowitz. So, Congressman, it is even at this point too
early to give any estimate that is reasonable. What I have said
before and I will say again, it is clearly in the tens of
billions of dollars, but it wouldn't surprise me if it exceeds
ultimately more than $100 billion, but we have so much work to
do. It is why Congress extended the statute of limitations last
year to 10 years. We are in year three, and that is why we need
that extension on the unemployment insurance side as well, so
we are going to be counting and figuring this out for years to
come. We are going to go after every penny we can. We are going
to use every tool you give us, but it is going to take time,
and we are not there yet.
Mr. Biggs. Yes, sure. And, Mr. Smith, I read that you had
returned through an analysis of, I think, 30,000 financial
institutions, something about $3 billion to unemployment
insurance benefits. Is that correct?
Mr. Smith. Yes, sir.
Mr. Biggs. OK. And I want to get to this because I think
this is interesting. During the last round of questioning, the
assertion was made that there was $653 billion overall in
unemployment insurance that was disseminated through those
programs, and that the estimate was somewhere below 25 percent
was improper payments, fraud or whatever. So, if that is the
case though, I mean, is that accurate? First of all, I want to
just make sure. I don't want to be misstating something. That
is what I understood the testimony to be.
Mr. Dodaro. Yes. The Department of Labor estimated for
2021, improper payments of $78 billion, which is about 18.9
percent rate.
Mr. Biggs. OK.
Mr. Dodaro. And in 2022, it estimated $18.9 billion. That
is a 22 percent improper payment rate. And so, those are the
estimates of the Department of Labor, and those estimates are
for the regular unemployment benefits. It is not for the
pandemic unemployment insurance fund. So, those aren't complete
estimates for all the Federal spending that was made during the
period of time.
Mr. Biggs. OK.
Mr. Dodaro. The Labor Department is now trying to figure
out the Pandemic Unemployment Insurance Program. That is the
one that went to people who are self-employed or working part
time or, you know, that was the new program that was created.
The other Federal programs extended the benefits, were added to
the benefit during a period of time. Those programs are covered
by the estimates, but not the other one, the new one.
Mr. Biggs. Doggone, I am more confused now than ever.
Mr. Dodaro. Yes, but I just want to be clear on exactly
what has happened.
Mr. Biggs. No, I appreciate that.
Mr. Dodaro. Yes. Right.
Mr. Biggs. And as we go forward, maybe we could get
together and just kind of suss out a little bit, you know, what
that range might look like in totality versus----
Mr. Dodaro. Yes. You know, what we have done is we have
estimated on the unemployment insurance area. If you take the
fraud rate and extrapolated that at the low end, the low end of
the estimate is greater than $60 billion.
Mr. Biggs. Sixty billion dollars. Yes, I saw that.
Mr. Dodaro. Right, and now we are working to try to figure
out an estimate. Again, no one will know--I agree with
Michael--until all these investigations are underway. And I
mentioned, the Labor Department IG is opening up 100 new
investigations every week, and the PPP Program has over 500
investigations underway. So, there will be investigations into
fraud on this for a period of time, but we are trying to give a
sense of what we think the magnitude would be.
Mr. Biggs. Well, I look forward to continued discussion
with you, gentlemen. And I just have to, Mr. Chairman, my
colleague from New York earlier mentioned fraud occurring
within the Unemployment Insurance Program in my home state of
Arizona. What she did not mention is that Arizona actually
identified the problem, partnered with a private sector
company, and implemented an identity verification system
because it is kind of getting to what you are talking about
there, that a Biden administration official, Treasury, called,
``kind of a silver bullet,'' and that ``almost immediately the
fraud ring saw the game was up,'' once the tools were rolled
out, and you had a 99 percent reduction in fraud once when we
implemented those measures in my state.
So, I would love to take a closer look at Arizona's
response, how it worked, why it worked, and maybe we get there,
at the Federal level as well, Mr. Chairman. And so, I
appreciate, again, you all being here today, and thank you, Mr.
Chairman. I yield back.
Chairman Comer. Very good. The chair recognizes the
gentleman from California, Mr. Garcia, for five minutes.
Mr. Garcia. Thank you very much, Mr. Chairman, and I want
to thank you and the committee for having us. We look forward
to, of course, hearing from and having been heard from all of
our witnesses, so thank you very much.
Before joining Congress, I served as mayor of Long Beach,
California. It is a city of about half a million people,
coastal community. I was mayor during the entire time of the
pandemic and the emergency. I also happen to be very proud of
the response that we had as a community to this pandemic.
President Biden called our response locally in Long Beach a
national model. The Governor of California said it was the best
response from a city in the state of California. In fact, we
were the first community to vaccinate 99 percent of our
seniors. We were the first community to vaccinate all of our
public school teachers in our school system, and we were the
first city to reopen our public schools as a school system in
the state of California.
So, I lived the pandemic 24 hours a day, every single day
since it started. And I think it is important as we have this
hearing and others on this important topic because I know that
the issue around the pandemic, and our response will continue
to be an important topic for the Congress. It is important to
remember that this emergency was a catastrophic loss of life
event. We have lost over a million Americans across this
country. And just in Long Beach alone, we have lost over 1,300
residents, friends, families, and neighbors. Personally, I lost
both my mom and my stepfather to the pandemic. My mom was a
healthcare worker, and so the loss is real for a lot of us. We
also saw our economy collapse. Jobs were lost, businesses were
closed, folks became unhoused, and families and kids were
greatly impacted, particularly around schooling and their
ability to learn every single day.
Now, there has been a lot of attacks by the Republicans on
this committee and across the House on the Biden administration
and our response on the work that is happening in our agencies.
I think it is really important to also note that we had a
catastrophic emergency and that the President, the Vice
President, and all the folks in our agencies did and are doing
the best job that they can to manage this emergency, so I want
to thank the President for his response. I want to thank his
continuous work that is happening right now in our recovery.
A lot of folks don't realize that the CARES Act and the
American Rescue Plan saved lives. It saved small businesses. It
saved cities. It saved nonprofits. The money that was sent to
us by the Federal Government kept cities like Long Beach afloat
and countless others across the country. It allowed us to
provide food for those that were hungry. It allowed us to keep
people in their homes with tenant and rental assistance. It
allowed us to open homeless shelters when people were falling
into homelessness. It allowed us to provide small business
grants to small businesses that needed to stay open, to
restaurants that were about to close. And so, I am grateful to
all of you that were involved in some type of oversight or
implementation. I am grateful to the Federal Government for
providing support for our cities. And most importantly, the
money from the CARES Act and the American Rescue Plan provided
opportunities for us to test, to vaccinate, and to keep workers
employed.
It is important to note that in any major crisis or
emergency, there are going to be mistakes. We were all moving
fast and quickly. We take them seriously and we learn from
them. In California, for example, we have already seized and
recovered over a billion dollars in fraud and abuse. I think it
is important to know that mistakes in emergencies are going to
happen, but it is also to know who should be held accountable
for some of these concerns being brought up by my Republican
colleagues. And if Comptroller Dodaro can just remind us who
was actually President when the pandemic started?
Mr. Dodaro. President Trump.
Mr. Garcia. Thank you for that because I remember as Mayor
how difficult it was to get any sort of support from the White
House. There was no PPE. We weren't getting our masks on time.
We had to go procure tests ourselves. And so, I am sympathetic
that oftentimes in emergencies, things are going to be
difficult. Us as a city had to spend $20 million of our own
money immediately without knowing if we were getting reimbursed
or having support from FEMA, just to keep people alive on the
ground. And to Assistant Director Smith, which administration
actually established the COVID-19 Fraud Enforcement Task Force?
Mr. Smith. Sir, we were protecting President Trump at the
beginning of the pandemic.
Mr. Garcia. But then I believe President Biden actually put
in place an additional committee on fraud and abuse on the
pandemic. So, I say that because there is obviously going to be
mistakes made across administrations, but I am grateful to the
Biden-Harris administration today for actually trying to do as
best they can to address some of the abuses that are happening.
I also think it is important to put the entire context of what
we are talking about in this idea that we have just experienced
the single largest loss of life event in the modern era of our
country. So, I want to thank the three of you for your service,
and I want to thank the committee for bringing this up in this
hearing. I yield back the rest of my time.
Mr. Palmer.[Presiding.] Before I recognize the next member,
Mr. Dodaro, you said there were $137 billion in unobligated
COVID funds that----
Mr. Dodaro. I believe it was $157 billion.
Mr. Palmer. A hundred and fifty seven billion?
Mr. Dodaro. Yes.
Mr. Palmer. If you have a general estimate of the total
amount of unobligated funds in all agency accounts regardless
of what they were there for, do you have an idea of what is out
there?
Mr. Dodaro. Do you mean for all Federal spending?
Mr. Palmer. Yes, and unobligated funds.
Mr. Dodaro. I don't have any idea on that right now. I can
find out and provide it for the record.
Mr. Palmer. I would appreciate it if you would provide
that.
Mr. Dodaro. It is a big government.
Mr. Palmer. Yes.
Mr. Palmer. The chair now recognizes gentlelady from South
Carolina, Ms. Mace, for her questions.
Ms. Mace. Thank you, Mr. Chairman. I also want to thank the
ranking member for this hearing today. And the partisanship and
the politics of this hearing is absolute and complete B.S. Our
country and the entire world faced a pandemic unlike anything
our generation has ever faced, and some decisions were made
that were good and some decisions were made that I am sure we
are going to look back on 20 years from now and have a great
heartburn over like all of the fraud that has been committed.
You know, partisanship in politics has kept us from doing
our job on oversight. It keeps us from doing our job in
Congress. It keeps our Federal agencies from being able to be
the best that they can be. And any time that the Federal
Government spends trillions of dollars, we should ensure it is
safekeeping regardless of who is in power. COVID-19 is not the
fault of this administration or the past administration at all,
but it is up to us. I mean, the spending and the fraud has been
a product of Republicans and Democrats for generations and for
decades. We have got to ensure that the safekeeping of this
money is done better now than ever before.
There was guidance from Federal agencies on how to allocate
these funds. The guidance was vague and led to potential
integrity concerns and opportunities for bad actors seeking to
take advantage. And I know that at the time this was rushed,
and there was an urgency because of the worldwide emergency,
but even with these concerns, the money kept flowing. As the
last two COVID Relief spending bills added to the sum total of
$1.15 trillion payments to individuals, just over $1 trillion
to unemployment, when we literally paid people to stay home. No
wonder none of us should be surprised it was hard to get people
out of their homes and back to work, and we had, you know, $779
billion for PPP loans. A total of about $5 trillion was spent
roughly on COVID relief.
As of today, there have been over 1,000 people convicted of
fraud relating to COVID-19 problems. Over 600 are currently
facing similar Federal charges, and it sounds like by the
testimony today, there might be thousands more charged in the
years ahead. And I appreciate everyone's testimony today,
coming here and being forthright with our committee.
Today I am encouraged by our leadership on oversight, that
we will leave no stone unturned to uncover waste, fraud, and
abuse plaguing these programs. And the thing that I found, I
think, most interesting to me in the testimony today is the
data issues that we as a Federal Government have. You
mentioned, Mr. Horowitz, about having to subpoena 50 states for
data, and it doesn't matter if we are dealing with immigration,
or we are dealing with COVID relief fraud, or we are dealing
with background checks on bad guys trying to buy guns. We have
a real problem with data, data integrations, our systems
talking to one another, or legacy technology that is being
utilized. And if we don't fix it soon, we are just going to be
overrun with it.
So, I appreciate some of the ideas that have been put
forth, but one of the things that has intrigued me and I think
it probably intrigues a lot of people, and this is in the few
moments that I have left in the committee today, is the use of
artificial intelligence in some of this and trying to find the
fraud. And of course, now we all know about it, since ChatGPT,
5 million users, I mean, 1 million users in the first five days
and only growing exponentially, and they are not the only ones.
I mean, there is GitHub, and Copilot, and a bunch of others.
But I would just--my questions today, and I will start with
you, Mr. Horowitz. Can you explain the type of work, you know,
how is AI being used? Is it advantageous? Is it speeding up the
process? How useful is it? Just some of your feedback with the
use of AI and detecting fraud.
Mr. Horowitz. Yes, and thank you, Congresswoman. It's a
very important question you raise, and I think at the outset,
people need to be cautious about it. We have also read about
some of the cautions in using AI. I know IGs are doing
oversight work in that space. GAO is as well, but it can be
very helpful. And in fact it is just a further advancement at
some level of the analytics that we are using to try and find
issues, and anomalies, and problems, and things we should be
following up on.
So, for example, we used a more primitive form of AI at the
outset to try and help the SBA inspector general because they
were getting in one day 1,000 or more complaints, which was
more than they had gotten in the prior year in total. They
needed to try and figure out and triage those, what were the
highest level most important ones. They came to the PRAC. We
helped them triage that by using a form of, if you will, AI,
far more primitive than what you mentioned. But those are the
kinds of things we can do. It is something that we have to do
as governmentwide agencies need to use it. Inspectors General
need to use it. I know GAO uses it. It is the future of
oversight.
Ms. Mace. Thank you. And I have run out of time, but I look
forward to working with you all as the new subcommittee
chairman on Tech, Cyber and Government Innovation. It is going
to be a huge marker for us to determine waste, fraud, and abuse
in the future and I agree. Thank you for your time today.
Mr. Palmer. The chair now recognizes gentleman from
Florida, Mr. Frost, for five minutes for his questions.
Mr. Frost. Thank you, Mr. Chairman. I am glad that we are
starting this committee talking about waste, fraud, and abuse,
and how we can make government work better for the people. You
know, Mr. Chairman, the previous comments, I agree with the
initial comment that we need to take the politics out of the
discussion, take the politics out of this, and the posturing
and the hyperbole, so that way we can work together, again, to
modernize our government and make it work for the people. And I
hope this committee will continue to look into other financial
abuses such as wage theft and corporate welfare as we continue
over the next two years.
Assistant Director Smith, you know, we have heard a lot of
hyperbole and political posturing from this committee today. I
think the way that we communicate and talk about an issue is
extremely important in finding the solution. You know, we have
heard things like the ``greatest theft in our country's
history.'' I am curious from the point of view from law
enforcement, does that type of hyperbole when talking about
crime work to exacerbate the issue?
Mr. Smith. Sir, thank you for the question. I think it is
inconsequential to the bad guys as a law enforcement
professional. Bad actors exploit situations, no matter what the
political climate is, so we focus on investigating violations
of identity theft, fraud, wire fraud and bank fraud.
Mr. Frost. OK. Thank you. Thank you, Mr. Dodaro. Is it
Dodaro, right? Yes, OK. All the GAO's recommendations include
increasing the capacity and resources of the Federal Government
to help deal with the waste, fraud, and abuse. You know,
oversight isn't just talking about an issue, you know. We have
to solve it. And in the spirit of solving it, can real
improvements be made without additional resources and money to
the government, to these departments and agencies, so that way
they are set up for success to deal with the issues?
Mr. Dodaro. Yes, some of them can be made without
additional resources. Some need additional resources, such as
the IG community, to continue their investigations on fraud,
but also to set up this analytics center. And so, you know, it
is really a mixture of both.
Mr. Frost. Do you think that the amount of resources that
were allocated during the previous administration was
sufficient enough for what we are dealing with?
Mr. Dodaro. I think there was adequate money given. I think
it was just a choice of decisions that were made. In some
cases, you know, I talked about limitations in the legislation
itself. The agencies made decisions that I think could have
been different decisions. They were given money to help
administer the programs. I think there could have been a little
bit more flexibility that was given.
I know Treasury has run into some problems recently because
they couldn't redistribute the money among some of the
programs, particularly new programs, because until you start
administering them, you don't know whether it is an adequate
allocation or not. Congress fixed that with the latest
Consolidation Appropriation Act. But I think by and large, the
resources were there, it was just some decisions that were
unfortunate.
Mr. Frost. Got you. Thank you. Thank you. Mr. Horowitz, on
this committee, I have heard a lot of demonizing of Washington
bureaucrats, and bureaucrats are often scapegoated. And to be
clear, when we talk about bureaucrats, we are talking mainly
about working class people who have decided to serve their
country by working to power our government. Do you believe that
one of the central issues here is that agencies and departments
were not set up for success? And I am thinking specifically
about the previous administration, we got into this issue. Do
you believe they were set up for success to be able to dole out
the amount of money that was being given out?
Mr. Horowitz. You know, I think the problem at the outset
of the pandemic was, as the comptroller general has mentioned,
the lack of preparedness. Now, understanding this was a 100-
year event with the pandemic, but we have emergencies all the
time. We have earthquakes, floods, hurricanes, tornadoes, other
disaster relief. It happens regularly, not at the scale perhaps
as this did, but we don't take the steps after an event like
this or smaller emergency events to fix what is needed. That
was the problem.
Just to give you a sense of it, the SBA, Small Business
Administration, which administered the PPP and EIDL Program,
the largest amount of money they had ever given out in a loan
program prior to the pandemic was $30 billion. They were giving
out $50 billion in a day when the pandemic hit. So when you
say, were they ready for success, well, if you go to an agency
that has experience giving out $30 billion over a year and you
say, here is $800 billion, get the money out the door, which
was the initial PPP Program. That is a recipe for a very
challenging situation, no matter who is running the agency.
Mr. Frost. Yes. No, no, thank you, Mr. Horowitz. Yes, and I
think the point here is, I agree, we need to prepare for the
future here, whether it is a pandemic or anything else. And I
am looking forward to working with my Republican colleagues on
ensuring that we give the adequate resources and know how to
our agencies and departments, so when this happens again, we
are prepared for it. Thank you. I yield back.
Mr. Palmer. The chair now recognizes the gentleman from
Florida, Mr. Donalds, for five minutes for his questions.
Mr. Donalds. Thank you, Mr. Chairman, and to the witnesses,
thank you for being here. It is actually great to have all the
witnesses here in person. It is a novel thing in the 118th
Congress, so really appreciate your attendance.
A couple of things has been stated through the hearing
that, you know, we want to make sure that oversight is being
conducted, of course. But I would like to remind a lot of my
colleagues and a lot of the freshmen who are here for the first
time, there was no oversight over any of these dollars in the
last Congress. I know that because I sat on this committee, and
there were no oversight hearings about anything associated with
pandemic spending, so I am glad that we are tackling this now.
And it is critical because the other thing that is kind of
in the news cycle, especially today, tomorrow, will be with us
for a couple months, is we have hit our debt ceiling. We are
out of money, folks, $31.5 trillion. We don't have new money.
And so, if you are going to take account of having to
potentially raise the debt ceiling in the United States of
America, you have to take account of how the Federal Government
goes through the process of spending its money, whether through
normal times or even through pandemic times.
Mr. Chairman, I want to submit for the record an article by
Politico. The title of the article is, ``Biden Administration
Reroutes Billions in Emergency Stockpile, COVID Funds to the
Border Crunch.'' That is the article.
Mr. Donalds. The article states that the administration
went through a process of reappropriating, or moving around
almost $2 billion from money supposed to go to the Strategic
National Stockpile, and also funds intended to help study long
COVID that was at the National Institute of Health and rerouted
to actually help house migrants coming across the Southern
border because of the President's reckless border policy. So
Mr. Dodaro, are you aware of this reshuffling of dollars from
the pandemic emergency to the southern border, in my view,
failed strategy of the President?
Mr. Dodaro. Yes.
Mr. Donalds. And, Mr. Dodaro, when the President made this
rerouting, what were some of the uses of funds that it was used
for at the southern border?
Mr. Dodaro. I don't have that information right now. I am
aware the situation and what happened, but I don't know, you
know, the details.
Mr. Donalds. OK. Well, one of the things that I will
request from you and your office is could you provide the
committee those details?
Mr. Dodaro. Sure.
Mr. Donalds. Because it is going to be important for the
Oversight Committee to understand that when money was shuffled
from pandemic response to border policy, which, by the way was
just a unilateral policy shift at the beginning of the Biden
administration, that could have put American citizens at risk
during the pandemic. And the reason why this is illustrative is
because if we go down the line of setting precedents on how
funding is going to be used, we should have an idea of what
administrations have done in the past. So, I think this is
actually very critical information.
One other point, there is money that came through the
American Rescue Plan, the $1.9 trillion, ``COVID bailout of the
American economy,'' I say, quote/unquote because it really
didn't work, but a bunch of that money is actually supposed to
go to state and local governments, including to school
districts through ESSER funds.
Now, Mr. Dodaro, there is another tranche of this money
that is slated to go out. This goes to the previous question by
Mr. Palmer, about obligated funds, somewhere to the tune of
half a trillion dollars that is slated to go out, and the
President has now said that he is going to end the COVID
emergency effective May 11. If the COVID emergency ends
effective May 11, what is going to happen with these ESSER
funds that are obligated, but have not yet been transmitted?
Mr. Dodaro. I will have our attorneys take a look at that
to make sure because we have appropriation law attorneys that
provide assistance. But I think--I am not sure the funding is
tied to the national emergency declaration in terms of what is
been appropriated already. And I know some of the funds are
available for use up to 2026, some up to 2030, so I don't know
if the termination of the national emergency would trump what
is already in the legislation in terms of how available those
funds are made, but I will have our attorneys take a look at
it.
My guess would be that the appropriation would be the
governing factor for the uses of those funds in the future,
that they would still be available, but I don't know for sure.
I will have a double check on that. There are some funding
things, particularly in Medicaid, for example, that would have
to be changed that are tied to the national emergency
declaration.
Mr. Donalds. Agreed. Medicaid is one of those things that
is tied to the national emergency. I would just proffer for the
committee that if we are going to go down this road of having
to find a way to raise our debt ceiling, one of the things we
should do is we should end letting money go out the door that
was tied to the pandemic. That is now essentially over. With
that I yield back.
Mr. Palmer. The chair now recognizes the gentlelady from
Vermont, Ms. Balint, for five minutes for her questions.
Ms. Balint. Thank you, Mr. Chair, and good afternoon, all.
Thank you for being here. I am sitting here as a new Member of
Congress, but I am also sitting here as a former leader of my
state senate in Vermont, and was on essentially our state's
frontlines in dealing with the pandemic emergency much like my
colleague, Mr. Garcia. And I want to be clear that we all want
to reduce improper payments. I think that is clear. I don't
know some of my colleagues on the Republican side, but I think
we all can agree that that is a goal because it is the people's
money.
What I want us to do, though, is bring us back to that
moment at the beginning of the pandemic. It is a moment that I
remember so clearly, thousands and thousands of Vermonters
calling my office, calling the office of all of my colleagues,
Republicans and Democrats, to say, we are desperate. We are
desperate. We can't pay our bills. We don't have money for
food. We can't pay our rental payments. And I cannot convey to
you the loss of sleep or the worry that we all had as state
legislatures trying to protect our people. And what I am
concerned about this morning is I feel like at the heart of
this hearing, has been a false choice between ease of access to
government assistance when disasters strike. And as Mr. Garcia
said, we lost over 1.1 million Americans, and I am sure like
many of the people in this room, I know people who succumbed to
the pandemic. So, I believe it is a false choice between ease
of access to help alleviate fraud, and making sure people get
the help they need. This is about real people. It is about real
families. It is about desperate people needing assistance.
And so, the question I have for you this morning is, do you
agree with that assertion that government must either choose
speed or accuracy, because what I know is getting the money out
quickly to people desperately in need saved lives in every
community in my home state.
Mr. Dodaro. I think you can do both if you are prepared,
and that is what I have said all along. I have acknowledged in
all our reports the important assistance delivered to needy
Americans, but there are definitely choices. I mean one of the
things, the economic impact statements where the money went
directly to individuals, there were some problems with that.
The first round, $1.4 billion, went to deceased individuals. We
have gotten about half of that back, one of which was my own
mother who had passed away earlier and my sister returned the
money, though, so.
Ms. Balint. Is that on the record, Mr. Dodaro?
Mr. Dodaro. Yes.
Ms. Balint. OK. Just checking.
Mr. Dodaro. Yes. No, that is.
Ms. Balint. I am joking.
Mr. Dodaro. I have already said it when I testified in 2020
on this.
Ms. Balint. OK.
Mr. Dodaro. But the programs that are administered through
third parties present problems, and if the agencies are
prepared and they are designed properly, you can get the money
out quickly, but you can also minimize the fraud. We are not
saying you can never eliminate it, but I think if the agencies
are prepared, the programs are designed properly, people can
get the aid they need as soon as possible. What happened with
the fraud, though, is because some of these funds were
limited----
Ms. Balint. Can I, Mr. Dodaro, just because I am going to
run out of time. I appreciate it.
Mr. Dodaro. Yes, sure.
Ms. Balint. So, a follow-up question is, can you highlight
for us the ways in which we can design benefit systems with the
recipient in mind, making sure that we are combating improper
use of funds, but making sure it is meeting the needs of the
people on the other side, those real Americans who need the
help?
Mr. Dodaro. Right. Yes. Well, I think we need better
identity verification systems to know who the people are that
are applying. Mr. Horowitz talked about that. I have talked
about that. We have made recommendations about that. I think
the agencies ought to be better prepared to know how to prevent
fraud from happening in the first place. There are a lot of
different ways that those things could be done and be done
properly.
Ms. Balint. I appreciate that, and I am eager to partner
with anyone on this committee that wants to address these two
things simultaneously. And I just want to say, in this
committee, we have to keep the people back home in mind every
single day. I yield back.
Mr. Palmer. The chair now recognizes the gentleman from
North Dakota, Mr. Armstrong, for five minutes for his
questions.
Mr. Armstrong. Thank you, Mr. Chair. At this point in time,
we have all seen the headlines, ``Paycheck Protection Program
fraud,'' ``Economic Injury Disaster Loan fraud,'' ``improper
unemployment payments.'' And I would like to concur with my
colleague from Florida in that one of the common and
unfortunate denominators to these headlines is that when they
held the majority, Oversight Committee Democrats failed to hold
a single hearing to protect COVID relief programs from waste,
fraud, and abuse.
But I think the most frightening result of this lack of
oversight is that foreign hackers, including those acting on
behalf of foreign countries, have tapped into these large
funding mechanisms and stolen dollars meant for struggling
Americans. I understand that the large scope and quick
disbursement of COVID relief can result in waste, fraud, and
abuse, but it is unacceptable that our strategic adversaries
had such an easy means to infiltrate through cyber means.
Specifically, in December of last year, it was reported that a
hacking group which was talked about a little earlier as APT
41, stole at least $20 million in U.S. COVID relief funds,
including both unemployment insurance dollars and Small
Business Administration loans.
By the time the COVID relief funds became a target of
opportunity, APT 41 had been in existence for about 10 years
and had become the workhorse of the cyber espionage activities
for the Chinese Communist Party. The hackers are believed to be
connected very closely to the government, and they allegedly
act on orders directly from China's Ministry of State Security.
While there are many bad actors targeting government programs,
this is allegedly the first strategic foe, a state-sponsored
cyber threat of the U.S. COVID benefit funds.
Assistant Director Smith, earlier you answered that the
Secret Service is unsure if APT 41 was directly ordered by the
Chinese government to target U.S. COVID relief funds. When do
you think the Secret Service expects to have resolution on if
the hackers acted on their own accord or by government
direction?
Mr. Smith. Sir, sometimes in the context of a criminal
investigation, those answers never get reconciled. As I said
before to your colleague who asked me the question originally,
we focus on financial crimes, and sometimes financial crimes
leads you and the evidence leads you to entities that may have
other interests in mind. Again, if that happens, we employ our
partners at the Department of Justice, who may also have some
additional angles into how they are looking at particular
groups.
Mr. Armstrong. And just generally speaking, whether they
were working directly for them or not, I mean, the Chinese
Communist Party knows of their existence, right?
Mr. Smith. I cannot attest to what their knowledge is or
not.
Mr. Armstrong. Reports have stated that Secret Service
recovered nearly half of the $20 million stolen by the APT 41
hackers. I am assuming you are continuing that investigation.
Mr. Smith. Yes, sir.
Mr. Armstrong. These are kind of unfair in that. Do you
have any timelines and like do you have anything you could
share with us, either publicly or sometime privately?
Mr. Smith. That case is a large, very broad case out of our
Denver Field Office, and it will be unpacking that for some
time, sir.
Mr. Armstrong. Comptroller Dodaro, as I mentioned, hackers
have targeted the unemployment insurance funds of several
states, the extent of which is still unknown. What can we do
outside of tearing down those entire systems in all 50 states
to provide states with whatever safeguards the Federal
Government can on unemployment insurance programs, even without
enhanced COVID benefits from foreign actors?
Mr. Dodaro. Well, I think the Labor Department, with some
of the funds that have been given available, has begun to set
up identity verification methods, means to also check
addresses, so those efforts need to be continued to go down the
road. But cybersecurity is an issue that the Federal
Government, governments at all levels haven't heeded. I put
that on the high-risk list across the Federal Government in
1997 and added critical infrastructure protection in 2003. This
problem has been known for a while, and I think we need to make
sure we have more modern systems that can check. The other
problem is allowing data sharing. It took me years to get
Congress to allow the Social Security Administration or to
require them to give the Death Master File to the Treasury
Department so we could stop paying deceased individuals. That
hasn't even happened yet. It is not scheduled to happen until
next year, and recommending that that be expedited.
So, there are a lot of things that could be done, but the
systems have to be modernized. There are too many legacy
systems. Some of the state systems go back to the 1970's, and
some of the Federal Governments are decades old as well.
Mr. Armstrong. Yes, in many states, that is the last IT
upgrade everybody does, I mean, regardless, all the way across.
So, thank you. I yield back.
Mr. Palmer. The chair recognizes Ms. Lee.
Ms. Lee. Thank you, Chairman, and thank you to the
witnesses for your testimony. It is still surreal to be in this
room on the Oversight Committee.
In January 2023, our country has experienced multiple mass
shootings and a lynching at the hands of police. And yet here
we are, the very first hearing of the Oversight Committee, to
criticize critical unemployment benefits from a global
pandemic. This isn't just politics for me. Before joining
Congress, I, like many of my colleagues, served for years as a
state legislator in Pennsylvania. Just one year later, we
crashed head on into this global pandemic that, frankly, we
were not remotely prepared to handle.
Every single day, I heard over and over and over the
desperate calls of folks unable to access food banks, people
facing the risk of homelessness, folks literally contemplating
suicide, unable to eat or work. Every call was a real
Pennsylvanian, a real person whose literal lives relied on the
same benefits my colleague see fit to criticize this morning.
When the benefits were ended in September 2021, there were
174,572 people receiving the pandemic emergency UC and 387,932
people receiving the pandemic unemployment assistance in the
Pittsburgh Metro Area. The pandemic relief was literally the
difference between life and death for my community and
communities all over the country, so focus on the people
impacted.
I turn to you, Mr. Horowitz. Understanding $3.1 billion was
secured in the Consolidated Appropriations Act of 2023 to
protect and strengthen the federated UI system under the
Department of Labor Inspector General, can you tell us how
these investments could be used to improve the federated
Unemployment Insurance system?
Mr. Horowitz. Absolutely. Thank you, Congresswoman. And,
you know, we held hearings about the value of the Unemployment
Insurance Program and other programs to help communities, as
you said, but also heard about the challenges that communities
had to get the money in the right place. First and foremost,
the money needs to be used to modernize IT systems. It is
different state to state. Some states have older systems than
others. But it seems to me that one of the first things that
has to happen is the funding needs to be used to modernize
antiquated state systems.
Ms. Lee. Thank you. I can certainly attest to that. Ours
was a system that was entirely ill-equipped to handle this. By
March 2020, I believe, almost a million Pennsylvanians found
themselves suddenly unemployed. With that in mind, I have the
same question for Mr. Dodaro. Again, how these investments
could improve the federated Unemployment Insurance system?
Mr. Dodaro. I would echo the first comment that Mr.
Horowitz made that the IT modernization systems need to be put
in place in each state. Now each state has a different program.
I mean, their eligibility requirements are different. So, it
has to be tailored systems. Second, though, I think there ought
to be more data sharing agreements made on the part of the
states to work together. Mr. Horowitz gave an example before of
a Social Security number, one number that was used by 29
states. That shouldn't be able to happen with the use of modern
technology. I also think that the Labor Department ought to try
to have states voluntarily implement fraud reduction programs.
I mean, there was fraud rate of about at least four percent in
these unemployment programs before the pandemic.
So, there has been fraud in these programs for a number of
years. And the requirement for the Federal agencies to
implement GAO's fraud reduction framework is for Federal
agencies, but it doesn't cascade down to the state level, which
is something I think Congress ought to consider. And the Labor
Department is helping them have fraud prevention programs. They
have to make sure that they are adequately staffed properly as
well. The problem was that, you know, we were at historic and
low unemployment rates. The states had reduced their staffing
systems, had old IT systems, not a prescription for success,
and so I think they need to deal with those issues.
Ms. Lee. Thank you, and thank you, Mr. Chairman. I yield
back.
Chairman Comer.[Presiding.] Thank you. The chair now
recognizes Mr. Timmons for five minutes.
Mr. Timmons. Thank you, Mr. Chairman. Mr. Dodaro, I want to
begin by thanking you for your work with the Select Committee
on the Modernization of Congress. We were able to get signed
into law just in December the Improving Government for American
Taxpayers Act. We hope that we can get the executive branch to
act on your recommendations and probably save taxpayers
billions and billions of dollars, so I just want to begin by
thanking you for that.
Mr. Horowitz, it seems that there is likely tens of
billions of dollars in PPP loan fraud that has yet to be
uncovered. Is that fair?
Mr. Horowitz. There is likely tens of billions.
Mr. Timmons. Some estimates are as high as $100 billion,
but we can just agree on tens of billions?
Mr. Horowitz. Yes.
Mr. Timmons. That is fine. It seems to me that you have all
of the information necessary at your disposal to identify this
fairly rapidly. You look at the Q4. Well, you get the business
tax ID number and you compare the Q4 withholdings for W2
employees versus the amount of the PPP loan, and then the Q2
and Q3 of 2020 withholdings, and there should be an algorithm
or some sort of a proportionality between those different
numbers. So, that should be some sort of a report that you can
run and then you can just start arresting people. Is that not
how this should happen?
Mr. Horowitz. There might be a little more sophistication
to it, perhaps, but let me just say, we don't have access to
that data.
Mr. Timmons. What do you need from Congress because it is
literally a report. You should be able to run a report on those
four data points, and then you are going to get tens of
thousands of businesses that got PPP loans fraudulently,
because if the metrics don't match up, then they lied, and they
stole, and they need to go to jail. So, what do you need?
Mr. Horowitz. A clear congressional action in legislation
that says that. It took the fraud alert we issued this week
matching our information, and all we did was send name, date of
birth, and social to the Social Security Administration and
said don't send us back your data. Just give us yes/no answers.
Are these the real names? It took us 10 months to do that.
Mr. Timmons. Again, we agree----
Mr. Horowitz. Yes.
Mr. Timmons [continuing]. That the Q4 withholdings of 2019
and the Q2 and the Q3 withholdings of 2020, plus the amount of
the PPP loan, those numbers should have a proportional
correlation that we can all agree is fairly straightforward. It
is going to be up and down a little bit depending on how much
your rent is, what your utilities are, but those numbers should
all match up. And if there is a huge discrepancy, and whatever
that correlation is, then they probably stole, and it was
fraudulent. Do you just need us to force everybody to create
that report?
Mr. Horowitz. What we need is access to data. It is what
the comptroller said about just the Death Master File Index.
Mr. Timmons. I don't even think you need access to that.
You need that report run, and you need to have the list, and
the discrepancy, and the correlation of those four metrics, and
then you need to go and start putting people in jail.
Mr. Horowitz. We need the data analytics platform to
continue, and we need access to all of this data, and Congress
has to legislate that.
Mr. Timmons. Do you need access to the data, or do you just
need Treasury to run a report?
Mr. Horowitz. They won't run the report unless it is clear.
We have access----
Mr. Timmons. We can make them run the report.
Mr. Horowitz. That is what we would need as well then.
That's correct.
Mr. Timmons. I am sure that this is not a partisan issue.
If people stole tens of billions of dollars in COVID relief,
possibly denying benefits to people that actually needed it,
those people need to be held accountable. And the fact that
here we are years later and we still have not done something,
that should literally be as simple as running a report in a
computer at the Treasury Department. I mean, you need us to
pass a law making them do that.
Mr. Horowitz. We need a law. We would love to get employer
identification number information to see if some of it actually
exists.
Mr. Timmons. Why would Treasury not do this?
Mr. Horowitz. Because there are Federal laws, like Section
6103 of the Tax Code, that restricts sharing of tax
information. And we are not talking just for the public's
benefit, not individual income tax returns that we are talking
about, but 6103 is written broadly for a variety of very good
reasons to limit where that--that tax information.
Mr. Timmons. All right. Well, look, there are four pieces
of data that are attached to every business tax ID number, and
this should be easy. I will work on legislation with everyone
that is willing, and we will try to get you that information as
quickly as possible. Thank you. With that, I yield back.
Chairman Comer. The chair recognizes Mr. Casar for five
minutes.
Mr. Casar. Thank you, Chairman, and thank you, Ranking
Member. I am so glad that we are having this hearing. After
years in local government working 24/7 during the pandemic to
save lives and jobs in Texas, I have this opportunity to thank
the Congress for their work, bipartisan work on the CARES Act.
And thank you to congressional Democrats for the American
Rescue Plan.
Congress should be proud of the way that those bills helped
save people's homes, kept people in their jobs and kept people
alive. I want to be clear. No one in the country is more
strongly against fraud than my working-class constituents who
needed those COVID dollars to make sure their small businesses
kept running, to make sure they got PPE at work, to make sure
they got vaccines, to make sure their house wasn't foreclosed
on. Any dollar taken from those programs by fraudsters is a
dollar taken away from people who needed support.
And similarly, we must be against fraudulent
mischaracterizations of COVID relief programs that ultimately
aim to reduce aid to people in need through these programs and
other programs. We can talk all day in D.C. about COVID
programs theoretically, but as a former city leader who put
these programs in place, I can tell you that thanks to the work
of the Congress and President Biden, local leaders in my
community, one, saved people's homes; two, saved local
economies; and three, saved lives.
So, before I ask my question, I just want to share some
facts that you may not have heard from Texas. One, we kept
people from losing their homes through protections against
evictions and foreclosures plus Federal housing relief dollars.
The city of Austin reduced evictions in 2021 by 75 percent,
keeping thousands of people in their homes. Conservative
estimates are that COVID housing programs kept over a million
Americans from losing their homes.
Two, we saved local economies. Because these programs and
this kind of funding, the city of San Antonio in my district
was able to support over 1,200 small family businesses, keeping
them from closing, provided 160,000 meals to residents in need,
trained over 5,000 struggling workers, putting thousands of
people to work. The ARP kept 12 million people out of poverty,
and pandemic relief programs according to CBO, kept GDP up
eight percentage points.
And third, we saved lives. Thanks to the funding for
vaccinations and public health programs plus our COVID rules,
the city of Austin had the lowest, along with Travis County,
had the lowest COVID-19 death rate amongst our major Texas
cities. Every death in our community was a tragedy, and if we
had been able to achieve that same rate across Texas, we would
have 45,000 more Texans who would have survived the pandemic.
President Biden's vaccination strategy, along with local
leaders' efforts, have kept nearly half a million people from
being hospitalized.
I just want to be clear. You cannot fraud your way to these
lower COVID death numbers. You cannot cook the books and save
this number of people from losing their homes, or their jobs,
or their businesses. The hospital beds, the food lines, the
morgues do not lie. These COVID relief programs did powerful
work, even while we continue to work to root out any instance
of fraud.
So, what I want to ask our panel here today is that we, of
course, need to focus on getting rid of fraud, but without
telling these stories of success, we could weaponize
accountability efforts to undermine these programs that you
have said have helped struggling Americans. So, in your time
targeting fraud, can you give us examples of programs you have
looked into that functioned well, served the American people
with urgency, and ensured that dollars actually got to the
people that needed them the most?
Mr. Horowitz. I would say, Congressman, we haven't heard
stories from people that said these programs were a complete
waste. That is not what we have heard. We have heard success
stories in many of the programs. We have talked about PPP, and
EIDL, and the unemployment insurance. Restaurant revitalization
program helped restaurants. The various state and local funding
vehicles had a substantial impact. We actually visited six
communities as part of our oversight work and are working on a
report on it to see how they used COVID-related funds, what
impact it had on those communities. And so, we have gone to
communities around the country to get that information.
The challenge has been making sure that large percentages
of that money went to the people it was intended for and went
to the communities it was intended to help. So, I wouldn't come
here and say we heard testimony that these programs were bad.
What we heard was these programs were helpful, and how do you
fix the fraud to make sure the money goes to the right place.
Mr. Casar. Thank you for that. Yes, of course, you know,
helping folks out in a mile-long food line, those folks aren't
there committing fraud. But what we are trying to do here is
make sure that we are recovering dollars that weren't getting
to those folks.
Mr. Dodaro. Yes. No, I agree with what Michael has said.
But I would also add, you know, Operation Warp Speed, I
thought, was a very effective program. We were able, working
with the private sector and government, to develop the vaccines
in a record time. Normally, it would take 10 to 15 years to
develop a vaccine, but Operation Warp Speed worked, I think,
extraordinarily well. The programs have provided funding to
help support healthcare workers, providers was very effective
as well. But all of these programs had some level of
effectiveness, but it could have been even more effective, is
what we are saying. If all the money that was allocated was
used properly, we could have maybe saved more people, helped
more people out, and that is our goal.
Mr. Casar. Thank you. I think it is our goal as well. I
yield back.
Chairman Comer. The gentleman's time has expired. The chair
recognizes Mrs. McClain for five minutes.
Mrs. McClain. Thank you, Mr. Chairman, and thank you all
for being here today. I appreciate it. A little bit of
background is, I come from the financial services background,
and I really want to focus on the waste, the fraud and abuse
and really to represent the American people.
In my background, if I were to defraud a client, probably
two things would happen. One, I would have to pay the money
back, and two, I probably do a little time for that, and
rightly so. So, I want to really focus on what are the
consequences and what are the penalties, and then what is the
relationship, because if I understand it correctly, it is your
job, Mr. Smith, to kind of make a preliminary case and then
hand it over to the DOJ. Am I directionally correct on my
understanding?
Mr. Smith. Yes, sir. Yes, ma'am. Yes, ma'am.
Mrs. McClain. So, in your testimony, you mentioned that the
Department has recovered over a billion dollars, which I think
is a good start. However, we still have $500 billion in
potential fraud out there that we have just identified, and who
knows, there might be more. So, I am curious as to how many
pandemic fraud cases your office has actually referred to the
DOJ. Do you know that?
Mr. Smith. So, to give you some background, we have opened
over 5,000 cases since March 2020. We obviously follow the
evidence, and once we feel like there is investigative merit,
we take those cases to the Department of Justice, U.S.
attorney's offices. And those U.S. attorney's offices look at
those cases and the prosecutorial merit of those, along with
other Federal law enforcement entities because it is not just
the Secret Service----
Mrs. McClain. Sure.
Mr. Smith [continuing]. But other Federal law enforcement
entities who are bringing pandemic-related cases as well. They
have to de-conflict and prioritize.
Mrs. McClain. So, let's stick with that theme because I am
trying to get some answers. So, you have over 5,000 cases. How
many of those have you referred to the DOJ, give or take?
Mr. Smith. When we open the case, once we feel like there
is enough evidence to move forward from a prosecutorial
judicial standpoint, we present that case to the U.S.
attorney's office. I don't have the breakdown of how many were
presented yet. I can get that number back to you though.
Mrs. McClain. If you could, directionally, do you have an
idea?
Mr. Smith. When we open the case, the----
Mrs. McClain. Is it a 90 percent accept rate? Is it a 20
percent?
Mr. Smith. Well, accept rate is actually different than
presentation rate because when we open a case, the intent is to
eventually present it to the U.S. attorney's office.
Mrs. McClain. Right. So, I am trying to make the
correlation to you commit a crime, there is a consequence. And
what I am trying to do for the American people to help justify
for them their tax dollars being misused on fraudulent basis,
and I appreciate and applaud your efforts. I am trying to
connect the dots on what is the number. Directionally, you have
no idea. Does the DOJ accept most of the cases? Are most of the
cases that you find accepted?
Mr. Smith. I mentioned in a previous response, so as a
Federal law enforcement entity, we are, you know, by nature,
trying to go after the most egregious actors.
Mrs. McClain. Sure.
Mr. Smith. That is why we train state and locals----
Mrs. McClain. Yes.
Mr. Smith [continuing]. In our Computer Forensics Institute
down in Alabama to focus on a local level, but we are confident
in our colleagues at the DOJ. They take as many cases as they
can, and they work----
Mrs. McClain. So, with all due respect, you may be
confident, but I don't know if the American people are
confident with their tax dollars. And I don't mean any
disrespect, but that is why I am trying to ask these numbers is
to get some answers for the American people. Let me rephrase
it. How many of these cases are currently being prosecuted by
the DOJ? Do you know that?
Mr. Smith. I don't know that overall number for the
Department of Justice. I do know that we have made nearly 500
arrests since the beginning of the pandemic.
Mrs. McClain. OK. So, you have made 500 arrests. What has
the result of that been? So, I know you have recovered over a
billion dollars, right? Any jail time?
Mr. Smith. Yes, ma'am.
Mrs. McClain. Can you talk to that effect?
Mr. Smith. I haven't compiled the number of years or months
total from the 500 arrests. I haven't done that, ma'am.
Mrs. McClain. OK, because I do think at the end of the day,
just like we treat our children, if there is a consequence to
your action. Mr. Dodaro, you talked earlier about deterrence.
Well, part of the deterrence process may be actually if we
publicly show the American people that we are going after these
criminals, these people that are stealing American's hard-
earned moneys, and not only are we recovering the money, but
they are doing time and hard time, that might help on the
deterrence. So, when can I expect some results or a report?
Mr. Smith. Ma'am, I will give you a timeframe on that when
I get back to the team, but we have been pursuing results since
the beginning of the pandemic and----
Mrs. McClain. But I would like an accurate accounting of
the results, if at all possible, and just to help on a positive
note saying, listen, we are good stewards of your money. We are
trying to get your money back. So, with that, I know I am over
time.
Chairman Comer. Right. The gentlelady's time has expired,
but feel free to answer the question.
Mr. Dodaro. Thank you very much, Mr. Chairman. So far,
according to the data that we have analyzed from the Department
of Justice, there have been over a thousand people who have
pled guilty or been convicted. There are over 600 charges
pending against another 600 people. There have been at least
779 people who have been sentenced so far. This is on page 6 of
my written testimony. The number of people, it has gone from
one year probation to 17 years in prison, so the sentences are
significant. We have a number of individual examples sprinkled
throughout our testimony. So, that is a broad accounting at
this point. Michael probably has even a more precise
accounting.
Mr. Horowitz. Yes, I was going to just build on that. You
know, there are the numbers. I agree with Mr. Dodaro.
Everything is on our public website. We post all of the cases
that we are as an inspector general community involved in. I
couldn't agree with you more. The public needs to know there
are consequences. Crime doesn't pay. And what we are going to
do as inspectors general, as long as that clock is running, and
Congress last year extended it from 5 to 10 years in one group
of cases--hopefully, we will do it in others--we are going to
keep going. It is going to go for seven more years or more, but
are going to hold everybody who we can hold accountable,
accountable. And as inspectors general, we don't care about
dollar thresholds. We are going to go after the smallest dollar
to the biggest. Obviously, you prioritize. We have multiyear
sentences to date for some people. No one should think they got
to get-out-of-jail free card, but one of the things that can
help, because we are not only talking about fraud, we are
talking about improper payments, right, and recovering money.
And so, that is where one of the things I mentioned
earlier--the Program Fraud Civil Remedies Act, it is an
administrative way we can get money back. It is not criminal,
but the taxpayers know we are getting the money back. Right now
the threshold to use, it is $150,000. We want to raise it to a
million dollars so that we can go after that.
Chairman Comer. Thank you. The chair recognizes Ms.
Crockett.
Ms. Crockett. Thank you, Mr. Chair. I have changed my
question a little bit, so I am going to go to my roots. As a
criminal defense attorney, a lot of times I would voir dire a
jury. And one of the questions that I would ask is, is it
better to convict an innocent person or to let a guilty one go
free? And oftentimes, the look that I am seeing on Mr. Smith's
face is the look that I would get from potential jurors because
for them, it was an impossible question because neither one of
them sounded like a good resolution. And I bring this up
because what we are talking about is government, which happens
to be less than perfect. We are also talking about a once-in-a-
lifetime pandemic.
And so, what I want to better understand is, I want us to
be real. I feel like in this hearing we have talked a lot as if
we can erode all bad guys, make criminals disappear. I believe
in the opening remarks from Mr. Dodaro, he talked about the
fact that, basically, there are those that were sitting and
ready to pounce, not necessarily that the pandemic was
producing some super criminal all of a sudden, but these are
fraudsters, many of them who had a record.
When you talk about these sentences, one can presume that
the higher sentences went with people that most likely had been
in trouble at some point in time before in their lives, and so
I want to talk about realistically. Let me first begin by
saying, I applaud the efforts that all of you have made in your
respective areas, to make sure that we are doing our part. But
I think that what we are losing sight of is the fact that we
save lives, and there were people that were in desperate need.
And when we talk about our economy and the fact that we are
still struggling to recover from the pandemic, we minimized
some of that. This was a mitigation exercise that Congress had.
And so, while it may not have been perfect, because there
wasn't a playbook for the previous pandemic, because I am
guessing most of you all weren't here a 100 years ago.
I am trying to find out, when you look at it overall, if we
wanted to be realistic about this imperfect system, if we were
to throw out percentages of fraud because I know that right now
you don't have a crystal ball to know exactly how much fraud
has occurred. But when we look at, say, other programs that
have been rolled out, what is a good threshold for what we
should anticipate as kind of part of the business that we
unfortunately may endure when we are talking about such a
large--government is big. And so, it is definitely not perfect.
There is a lot of people in it. What are we talking about
realistically, and how far off of that mark were we when we
look at these types of circumstances? And it doesn't matter who
answers.
Mr. Horowitz. Yes. Congresswoman, it is an excellent
question, and I don't have any precise number I can tell you. I
think for all of us who have done this for a while, the lack of
preparedness and the management of the programs at the outset
created a much larger opportunity for fraud than should have
happened. Whether that should have been--as you noted, there is
always going to be fraud in programs where there are some bad
people out there who will, no matter how much you try, find
their way to get the money illegally. But I think most of us
think that percentage of fraud could have been much smaller.
Ms. Crockett. OK.
Mr. Horowitz. And whatever we are going to end up here, had
there been preparedness and action taken in advance.
Ms. Crockett. OK.
Mr. Dodaro. Part of the framework that we work with
Congress to put in law back in 2016 requires a fraud risk
assessment, a profile, but also a tolerance level for risk.
That would be said for every individual program. So, you would
make a conscious decision up front of what you are willing to
tolerate in order to have that tradeoff for speed, and getting
delivery of services out there as fast as possible to save
lives, to help deal with economic consequences.
Right now, it is just whatever happens to us, as a
government happens to us, and we deal with the consequences.
And I have been in GAO over 49 years, so we have been a lot of
disasters during that period of time: Katrina, and the American
Rescue Act, during the Great Recession, the $700 billion to
unfreeze the credit markets during the global financial crisis.
In this situation, there is more fraud than we have seen in
equivalent type of things over the years, recognizing that this
was the biggest American rescue in our history. But had we been
better prepared and actually implemented requirements for
managing fraud consciously up front, we would reduce the amount
of fraud and made better use of that money to help really
achieve the objectives of the legislation.
Ms. Crockett. Thank you.
Mr. Smith. As I said in my opening remarks, I always think
that collaborating and sharing information on the front end
will lead to some mitigation of criminal behavior. But
obviously, my experience as a law enforcement professional
says, you know, there is always going to be some element of
criminal activity afoot.
Ms. Crockett. Thank you so much.
Chairman Comer. The chair now recognizes Mrs. Boebert for
five minutes.
Mrs. Boebert. Thank you, Mr. Chairman, and thank you so
much to our witnesses who are here today. I appreciate your
time and your willingness to be here and speak with us, and
answer these very important questions. Now, I am going to get
right to it.
Members of Congress have been told that American taxpayers
were defrauded a possible $560 billion as a result of the
Federal Government's negligence in carrying out these Federal
COVID relief funding programs. And I am going to start with a
rhetorical question here, but does anyone know of an
organization in America, or around the world, public or
private, that has been scammed out of $560 billion, and simply,
is that OK? I certainly can't think of one, and I don't think
that it is OK either. So, after what was the largest fleecing
in American history, possibly world history, can any one of the
witnesses today give me the name of one administrator, one
director, a supervisor that was fired, demoted, or put on leave
because they failed to keep hundreds of billions of dollars
from being stolen from the American taxpayers? And I will yield
very quickly to each of our witnesses for simple ``yes'' or
``no,'' and I will start with you, Director Smith.
Mr. Smith. No, ma'am. That is not my focus.
Mrs. Boebert. Thank you.
Mr. Horowitz. I don't know that as I sit here. I could ask
the fellow IGs to see if they know of any actions that have
been taken from an administrative side.
Mrs. Boebert. Thank you.
Mr. Dodaro. Yes, offhand, I do not.
Mrs. Boebert. Thank you. I didn't think so, and that is
pretty insane. Five hundred and sixty billion dollars we are
projecting, and we have hundreds of billions of dollars lost,
causing massive inflation. Seventy percent of the money,
according to the CEO of LexisNexis Risk Solutions, ended up
lining the pockets of crime in countries like China, Nigeria,
Russia, and not a single person in charge of distributing that
money has been held accountable.
So, here is how badly the American taxpayer was conned. The
United States Federal Government has reportedly been defrauded
of more money in the last two years than the entire 2022 tax
revenue of England, Italy, Mexico, Ireland, Greece, Israel,
Canada, Poland, and Brazil combined. The American taxpayers
have one question: how the heck were these bureaucrats so dang
incompetent, that they were being scammed out of $35 million
every hour for nearly two years? Absolutely insane.
And what is equally concerning is the fact that, for years,
Congress has known the size and scope with which the American
taxpayer was defrauded, yet this committee refused to act until
now. Now, the Republicans hold the gavel and in a desperate
attempt to protect the Bidens, the Big Tech industry, the
Democrat Party, the mainstream media has tried to discredit
this committee before our work has even begun. There should be
nothing more bipartisan than ensuring American tax dollars
aren't stolen by fraudsters, but sadly, it has taken a
Republic-controlled Oversight and Accountability Committee to
be willing to get to work on it.
So, here we are. The American people had their businesses
shut down. They lost their jobs, their livelihoods, their
life's work because of government mandates and shutdowns, and
that same government spent trillions of dollars, lost hundreds
of billions, and the result is skyrocketing inflation and
interest rates for the American people. And our role is to
ensure that we find out how this happened and make sure that it
never happens again, and hold those that stole money from the
American people accountable.
And, Chair Horowitz, I would like to ask you, under the
Biden administration, we have seen the DOJ wage a full out
attack against the American people from accusing parents
concerned about their children's education of being domestic
terrorists, to raiding the homes of pro-life activists, to
pressuring private companies to censor conservatives. As
Republicans have continued to mention throughout this hearing,
there is a clear difference between people who were issued
improper payments versus fraudsters who have stolen hundreds of
billions of dollars collectively from the American taxpayer
with malicious intent. Now, Chair Horowitz, what is the
Department of Justice doing to ensure that the Federal
Government is targeting criminals and those who knowingly took
millions of dollars from the Federal Government to fund
criminal gangs in Russia, China, and Nigeria?
Mr. Horowitz. So, we have worked with the Department,
inspectors general, and the PRAC have worked with the Justice
Department on these investigative matters. They have set up a
fraud task force. We are a member of it with the Secret
Service. We have worked closely with law enforcement partners
across the Federal Government. It is going to take a
substantial amount of time, effort, and resources because there
are so many cases. We have that partnership working right now.
We are going to continue to refer cases to them, and they are
going to have to make assessments on which cases to bring
criminally. We are also working with them on the prepayment
signed on with the civil lawyers as well because, again, we
want to get the money back for the taxpayers.
Mrs. Boebert. Yes. Thank you, Mr. Chair. I yield back.
Chairman Comer. Thank you. The chair recognizes Mr. Goldman
for five minutes.
Mr. Goldman. Thank you, Mr. Chairman, and thank you to our
witnesses for your service and being here today. After that
effort to blame the victim for fraud by bad actors, let's first
go back to the undisputed premise that the money appropriated
by Congress, including by nearly all of my Republican
colleagues on the other side during the past 2 Congresses, was
both life-saving and economic saving, as we faced the worst
pandemic in our history.
Now, as a prosecutor, I prosecuted rampant mortgage fraud
that resulted from the subprime mortgage crisis, and we know
there was significant fraud arising out of the TARP program
following the 2008 financial crash. But I was shocked to learn
in preparing for this hearing that many of the COVID benefits
or at least some of them were available based on a self-
certification process. Am I correct, Mr. Horowitz, that that
means that individuals could receive COVID relief funds simply
by certifying their eligibility without any independent review?
Mr. Horowitz. That is correct.
Mr. Goldman. Now, would you agree--Mr. Horowitz as also a
former Federal prosecutor and current IG of DOJ--that is self-
certification process is a recipe for fraud?
Mr. Horowitz. Absolutely.
Mr. Goldman. I read your opening statement closely, and I
appreciate very much your call for more resources for data and
data analysis, which, in my experience, is the most effective
way of rooting out identity theft, unquestionably the biggest
cause of COVID fraud, as well as most other frauds. Mr.
Horowitz, in your view, has the Department of Justice received
enough money to prosecute fraud related to COVID relief funds
to the very fullest extent?
Mr. Horowitz. I think that is going to be a question over
time because they are ramping up dramatically as we are, and as
Secret Service is, and others. They will need additional
resources, particularly this year and in the coming years, to
deal with what I think will be a continued, you know, a
substantial number of cases.
Mr. Goldman. So, you would certainly agree that the
Department would benefit from more funds for COVID relief
fraud?
Mr. Horowitz. I believe they will need that this year and
in the years to come.
Mr. Goldman. I want to ask you to switch your hats now back
to the inspector general for the Department of Justice, and I
am going to direct your attention to a recent New York Times
article entitled, ``How Barr's Quest to Find Flaws in the
Russia Inquiry Unraveled,'' which is dated January 26, 2023.
Did you read this lengthy article last week, Mr. Horowitz?
Mr. Horowitz. I did read it.
Mr. Goldman. OK. Mr. Chairman, I ask for unanimous consent
to introduce this article into the record.
Chairman Comer. Without objection, so ordered.
Mr. Goldman. Now, this article is based on a month-long
investigation by the Times exposing a tremendous amount of
waste and abuse, but no fraud by Special Counsel John Durham,
who was assigned by former AG Bill Barr to investigate the
origins of the Russia investigation under a false conspiracy
theory. Mr. Horowitz, you released a report on that exact
topic, didn't you?
Mr. Horowitz. We released our report about the handling of
Crossfire Hurricane and the FISA matter in December 2019.
Mr. Goldman. And Crossfire Hurricane, just to be clear,
became the Special Counsel Mueller's investigation, right?
Mr. Horowitz. What has been referred to colloquially as the
``Russia investigation.''
Mr. Goldman. Right, and you concluded that the initiation
of a full Russia investigation by the FBI was legitimate and
supported by the evidence. Is that correct?
Mr. Horowitz. I would want to go back and find the exact
words I used in that report, but we did not find evidence of
inappropriate decision-making in that regard. But again, I
would want to use the precise language I used in that report.
It is public. It is on our website.
Mr. Goldman. OK. And you referred one case to Special
Counsel Durham, correct?
Mr. Horowitz. That is correct, and attorney, Mr.
Clinesmith, who we found had altered a document.
Mr. Goldman. And he pled guilty, and other than that case,
do you know how many cases Mr. Durham charged?
Mr. Horowitz. As to what is public, I have no idea if there
is anything under seal. I am assuming not, but I don't know the
answer to that. There are two public cases beyond that.
Mr. Goldman. And how many convictions did he get?
Mr. Horowitz. Other than the Clinesmith case, the other
cases were--the juries has found the individuals not guilty.
Mr. Goldman. Mr. Horowitz, last night, Congressman Ted Lieu
and I sent you a letter requesting that you conduct an
investigation into Special Counsel Durham's investigation to
see if Mr. Barr or Mr. Durham violated any department policies,
regulations, or law. Have you reviewed this letter yet?
Mr. Horowitz. I was not aware that you had sent that until
you just showed it to me, but I certainly will read it and
review it.
Mr. Goldman. Mr. Chair, I would ask for unanimous consent
to offer into the record, and could I just add----
Chairman Comer. Without objection. The gentleman's time has
expired.
Mr. Goldman. Mr. Horowitz, can you just commit to right
now----
Chairman Comer. Gentleman's time has expired. We appreciate
the questions on COVID and appreciate the passion for
investigations. We will get to that in the next few weeks, but
thank you for the questions. The chair now recognizes Mr. Fry
for five minutes.
Mr. Fry. First, Mr. Chairman, thank you for holding this
hearing today. Thank you to the witnesses for being here. I am
going to highlight an example of COVID fraud in my very own
district. Just last year, two members of a Myrtle Beach family
were sentenced in Federal prison and a third to probation for
their roles in a scheme to defraud the government out of more
than $500,000 through a series of fake tax returns and stealing
stimulus checks sent to other Americans under the CARES Act.
While many people are struggling to make ends meet during the
pandemic, these criminals went on a shopping spree with money
stolen from the American people. You know, while I am a Member
of Congress, I am also a resident of that district. This is in
my very own community, so I want to thank you, Chairman for
holding this because this also touches home as it does for many
Americans.
I would imagine, Mr. Smith, that this is by no means the
only place that this is happening. Can you talk about or touch
on similar instances that are occurring around the country from
a factual standpoint?
Mr. Smith. Yes, sir. While we talk somewhat about
transnational criminal organized groups, our experience in the
5,000-plus criminal investigations that we have opened is
overwhelmingly, you know, homegrown actors. You talked about
your home district, Myrtle Beach. Our Columbia, South Carolina
Field Office is one of our most active field offices,
especially when it comes to employing taskforce partners. They
actually won the cyber games that were hosted by the National
Computer Forensics Institute last year. So, we do have a lot of
capacity, a lot of law enforcement passion in your district.
But as you mentioned in your question, that is a similar
footprint that exists in our other cyber fraud task forces, the
41 other ones around the country. And what we do is employ not
just agents with guns, but analysts and other professionals
that collaborate together with those financial institutions,
with those local banking communities and local law enforcement
professionals to, you know, detect and arrest bad people.
Mr. Fry. Thank you, and I know you touched on how you are
investigating some of these actions, but can you touch on how
you are identifying new cases of fraud or abuse moving forward?
Mr. Smith. So, early in the pandemic, as I mentioned in my
opening, we partnered with the Department of Labor, OIG, and
SBA OIG, and we assigned MOU, Memorandum of Understanding,
where we shared information, shared anomalies, shared
indicators of compromise that lead us to bad actors. I
mentioned earlier how we talked to a lot of money mules. We
follow money, and once you follow money and what accounts that
those resources went into, generally speaking, you are going to
get to the bottom of a crime because overwhelmingly, our
investigations focus on folks that are looking to enrich
themselves through illicit activity. So, once you start
knocking on doors, asking questions, and looking into bank
accounts, you usually got to get some answers from a law
enforcement perspective.
Mr. Fry. Thank you. Mr. Dodaro, once an improper payment
has been made, how difficult is it to recoup that money?
Mr. Dodaro. Well, it is important to recognize that the
improper payment estimates are estimates and projected, but
when they are found, it is always difficult to recover the
money. I think in the last two years, there have been improper
payments of over $200 billion. Recoveries have been about $20,
$23 billion.
Mr. Fry. So 10, 12 percent-ish?
Mr. Dodaro. Yes.
Mr. Fry. I mean, in this instance, would you agree that
improper payments are not always recoverable? I mean, you are
going to run into a brick wall?
Mr. Dodaro. Absolutely, and you are going to have the same
issue with fraud.
Mr. Fry. Out of all the improper payments that had been
made, and I know you have collected $23 billion back, how much
can we realistically expect to recover?
Mr. Dodaro. That has been about the consistent number that
I have seen over time. The main thing I have been trying to do
and convince Congress to have some legislation to do this and
oversight, is the stop the improper payments in the first
place. The same with fraud. Unless you prevent this from
happening, the prospects of recovering this money over a period
of time are pretty slim, based on historical evidence.
Mr. Fry. And I am going to ask this to you and direct to my
final question. Is it possible from a strategy standpoint to
enlist the help of states either incentivizing it or whatever
to broaden that perspective? Is that a decent policy initiative
to look into?
Mr. Dodaro. Absolutely. I have been trying to convince each
administration I have worked with the use the state auditors
more effectively in that area, Medicaid program in particular.
The Medicaid program alone in the last two years has had $98
billion and $80 billion in improper payments. State auditors
could help greatly. State auditors could help in the
unemployment insurance area, and auditing the Federal
Government, they ought to support state auditors, and they can
use them to hold people more accountable for third party
deliveries.
Mr. Fry. Thank you. I yield back.
Chairman Comer. The chair recognizes Mr. Moskowitz for five
minutes.
Mr. Moskowitz. Mr. Chairman, thank you, and thank you for
holding this hearing today on Pandemic Response, Waste, Fraud,
and Abuse. I think we can agree on a bipartisan basis that, of
course, we want to find out about waste, fraud, and abuse
because in the emergency management business, one of the things
we do after a disaster is we do after action reviews, and we
look at what went right and what went wrong to not repeat those
same mistakes.
And so, when the country began--you know, we are facing an
unprecedented whole-of-country crisis, the first 50-state
disaster in American history. Every state had a disaster
declaration. At the same time, the Trump administration was ill
prepared and, in fact, several times wanted the states to take
the lead instead of the Federal Government, specifically when
it came to PPE. And so, we have heard a lot about fraud and
abuse today.
I want to focus on the waste. It is not as sexy as fraud
and abuse, but the amount of waste that happened during the
pandemic, especially in the PPE space, is something that I want
to discuss. You know, that void that was created when the
states had to step up and procure all these resources. The
states had to compete against everybody but Antarctica, but,
most importantly, the Federal Government. And while the Federal
Government was raising prices, companies were price gouging the
Federal Government, while the Federal Government was not
following their own procurement. In fact, $18 billion was spent
by the Trump administration procuring these goods. Ten billion
dollars of that did not go through procurement. It was sole-
sourced contracts.
And so, one of the things I want to talk about as the
former director of emergency management for the state of
Florida for Governor DeSantis is, and this question is for you,
Mr. Horowitz. Did the Inspector General's Office ever look at
anyone within the inner circle at the White House on whether
they were involved in specifically selecting vendors and
negotiating pricing for PPE?
Mr. Horowitz. So, each inspector general has authority by
law in the IG Act over the employees in their building, in
their agency. We do not have authority to investigate
individuals outside, and there is no inspector general for the
Executive Office of the President or the White House.
Mr. Moskowitz. OK. I appreciate that. So, let's switch over
to the GAO then. Has the GAO examined whether anyone within
Trump's inner circle, including family members, were involved
in decisions on who should get what contracts and the $10
billion that didn't go through procurement, and the pricing
that was paid for all sorts of different PPE, whether that be
masks or ventilators? I mean, trust me, I have read all of the
stuff, but I just want to know, did you guys specifically look
at any of that?
Mr. Dodaro. No, we did not.
Mr. Moskowitz. OK. So, what if I proffered for you that
when states could not get this PPE out of FEMA or out of HHS,
that we had to call the White House to get this stuff released
directly from his inner circle? What if I proffered for you?
Would that sound like normal procurement process during an
emergency?
Mr. Dodaro. Probably not.
Mr. Moskowitz. Right. So, you know, one of the questions
that I think we should focus on, Mr. Chairman, in this hearing
is that COVID was not a two-year event. It was a three-year
event. And I am more than happy to join with the majority and
look at the fraud and abuse that went on in the last two years
in COVID-related programs, but I think it is only fair for us
to also look at the beginning of the disaster and the amount of
government waste that existed by the Federal Government sole
sourcing contracts and negotiating pricing within the White
House subverting the process from Federal agencies, because not
only did that drive up cost and waste. That filtered down to
the other 50 states because if the Federal Government was
paying more money, and if I wanted to buy those supplies, I had
to pay more money. So, it isn't just the $18 billion that was
spent here. It is the money now that FEMA has to reimburse
those states for goods that were too expensive because the
Federal Government drove up those prices. I yield back.
Chairman Comer. The chair recognizes Mrs. Luna for five
minutes.
Mrs. Luna. I just want to thank the chairman and all of the
witnesses for participating, and I know it has been a long day,
so I will try to keep this short.
COVID improper payments continue to be an area of concern
in the Federal Government due to lack of oversight from the
Biden administration, as Representative Boebert had stated.
Estimates range as high as $560 billion of government COVID
spending was subject to fraud, waste, and abuse. That is our
hard-earned taxpayer dollars that could have been used to feed
families, heat homes, and fill up the pump during the Biden-
caused inflation crisis.
President Biden continued to approve COVID spending with no
guardrails in place to make sure that money was going where it
was intended to go. We have seen the Federal Government
spending and distributing to illegal immigrants, the same
illegal immigrants, mind you, that did not take or pass the
health screening process for legal immigrants to come here. And
in addition to that, they did not pay into our taxpayer system.
I would like to submit the graphic into record.
[Chart]
Mrs. Luna. We can see that the city of Chicago is sending
$71 million for financial assistance for underserved
communities, such as undocumented residents. The state of
Washington is handing out $340 million in grant payments for
immigrants or illegal immigrants who are not otherwise eligible
for Federal stimulus. And the city of Boston is sending $1
million in direct cash transfers to legal immigrants, who are
unable to receive Federal COVID benefits. This rewards a
dangerous process incentivizing people to come here illegally
where some estimated that a shocking 60 percent of Latin-
American children, who crossed the border largely because they
are seeking the American Dream and understand some of the
benefits people offer in this country are caught by cartels,
exploited for child pornography, and drug trafficking. These
are not cherry-picked facts or distorted figures. This is
actually happening.
My question is for Mr. Horowitz. If illegal immigrants are
prohibited from Federal public benefits, then why are they
allowed to receive Federal COVID dollars from programs like the
American Rescue Plan?
Mr. Horowitz. So, I would have to go back and look at, you
know, each program and what eligibility determinations were
made, and who was eligible, and I am happy to follow up with
you and provide information to you. We are looking at anybody
who is ineligible. Frankly, we don't break it down between the
categories of as to why, so we are looking for people who are
ineligible. We are working with our law enforcement partners on
that, whether you are here legally, not here legally, you
really own the business, or you never owned a business. You
know, we are going to follow up and pursue that.
Mrs. Luna. Before I yield back my time, real quick, I just
want to put out there that obviously being a part of Oversight,
we want to ensure that our taxpayer dollars are being
safeguarded, right? But also, that government funds are not
being used to largely incentivize and hurt people in the
process. And so, just to finalize and maybe just your personal
opinion, do you believe that because of this type of
inappropriate spending, that it is putting people in harm's way
that would potentially not be subject to this victimization?
Mr. Horowitz. So, you know, as I said earlier, I don't
think we have heard testimony that these programs weren't
helpful to individuals. In fact, for many of them, like the PPP
Program, we have heard from small businesses that it saved
them. For restaurants in the restaurant revitalization program,
for unemployment insurance, we heard testimony about how it
kept people afloat during this period. So, we haven't heard
testimony that the programs were a waste and useless.
What we heard was there was a lack of preparation to issue
the benefits. It resulted in fraud, a lot of identity fraud,
and what we have heard is how it victimized not just the public
who lost the benefit of these programs to wrongdoers, it harmed
the person whose identity was stolen. That individual has to
deal with that, and it often harms the individual who is
intended to benefit because they often struggle to get the
benefits because the fraudster got there first----
Mrs. Luna. Thank you.
Mr. Horowitz [continuing]. And the program said they were
the fraudster.
Mrs. Luna. Thank you. And now before I leave, Chairman,
would you please submit the graphic for record? Thank you.
Chairman Comer. Without objection.
Chairman Comer. And thank you for your questions. Just to
note, they just called floor vote. We are going to get two more
questioners in, then we will recess and reconvene 10 minutes
after votes. There are only two votes, and we move a lot
quicker than Pelosi did, so the recess won't take long. But
now, the chair recognizes Mr. Connolly for five minutes.
Mr. Connolly. I thank the Chair, and I welcome Mr. Dodaro.
Mr. Horowitz, welcome back. Mr. Smith, welcome to the
committee. My questions are going to be to you, Mr. Dodaro, and
you, Mr. Horowitz. On Monday, the Pandemic Response
Accountability Committee, led by you, Mr. Horowitz, released a
fraud alert that found fraudsters used nearly 70,000
questionable Social Security numbers to obtain as much as $5.4
billion from SBA's paycheck protection program. Is that
correct?
Mr. Horowitz. That is correct.
Mr. Connolly. And the fraud could have been stopped if the
Federal Government invested in appropriate data analytics
capacity and focused on sharing that data across agency silos
and among various levels of government. Is that fair
assessment?
Mr. Horowitz. That is correct.
Mr. Connolly. Would you agree with that, Mr. Dodaro?
Mr. Dodaro. Absolutely.
Mr. Connolly. So, based on previous conversations, we have
about improper payments and trying to curb that, which this
committee has been talking about for a long time, and has been
a high-risk category for GAO for a long time as well. I
introduced the Stop Fraud Act, that in fact, would, by statute,
do just that. It would have used data analytics and would have
propagated that data analytics information sharing across
Federal agencies, a desirable goal that could very well have
curbed or prevented the fraud we are concerned about. And the
bill would also create a center of excellence to look at best
practices and to try to assist other agencies in achieving
those goals. Unfortunately, not a single Republican co-
sponsored that bill, today's hearing concern notwithstanding.
So, I would invite the Chairman, Mr. Comer, maybe to take a
second look at the Stop Fraud Act, and maybe we can, as he
indicated yesterday his desire and the desirability of
cooperating on a bipartisan basis. I do think Stop Fraud Act
has real bipartisan potential, and I would welcome Mr. Comer
joining me in that effort, but I do think that there are steps
we can take, and could have and should have taken that might
have made a difference. Mr. Dodaro, would you like to comment
on that?
Mr. Dodaro. I have since 2015 recommended the permanent
creation of a data analytics capacity to support the IG
community. It has proven value, and I was very disappointed
that the Treasury Department did not pick up that option that
Congress gave them to take over the Recovery Operations
Center's existing capacity, and I was also disappointed that
Congress didn't act on my recommendation back in 2015.
Mr. Connolly. Right.
Mr. Dodaro. But better late than ever, and so, I hope that
Congress does pass that. I think it will have tremendous proven
value and return many more dollars than the investment, but it
has to be made permanent so it is ready to go any time.
Mr. Connolly. Yes, absolutely. Mr. Horowitz, would you like
to comment on that?
Mr. Horowitz. I would just say ditto at some level, but I
would remind, as you know, and remind Congress, the law was
created with tens of millions of dollars in taxpayer money. It
was very effective. It went away in 2015. We had to start from
scratch in 2021 with a new appropriation from Congress and more
money. We not only wouldn't have had to do that, but I bet we
would have found some wrongdoing, fraud, and other recoveries
in that intervening five years between the two disasters
because there were other disaster relief programs.
Mr. Connolly. And I guess the final point I would pick up
on, and you testified to this earlier Mr. Dodaro, it is the
culture too. What is rewarded. You know, what is rewarded is
pushing money out the door, and funding programs, and having
metrics that show many people you have helped to reach all
worthwhile goals. But what is not really rewarded comparably
is, and when I say $4 billion, I avoided fraud, I took measures
to make sure it couldn't happen. And we have to change that
culture, and I am hoping this piece of legislation is a big
step in that direction, but I think your point is very well
taken. And I yield back.
Mr. Dodaro. Yes. And actually, the other culture that has
to be corrected, if I may, Mr. Chairman?
Chairman Comer. Go ahead.
Mr. Dodaro. Is to make it clear to agencies' management for
the programs, that prevention of fraud is their responsibility.
It is not just the auditors coming in later, the investigators,
Secret Service, or whoever, because unless it is prevented up
front, it is not really going to be totally successful. We will
always need to have investigations afterwards, but unless that
culture shifts to the agencies' management and Congress holds
them accountable, you are not going to really be as successful
as we all want to be.
Chairman Comer. Thank you. And before we yield back, I
would like to comment. We are going to hold these agencies
accountable. That day starts today. I ask unanimous consent to
enter into the record a letter from the inspector general of
the Social Security Administration, dated January 31, 2023.
This letter describes various activities that that office has
undertaken with respect to COVID fraud, notably in relation to
the misuse of social security numbers, which is an issue at the
heart of what you all have discussed today in many COVID fraud
schemes. This letter also points out that the Social Security
IG has never dedicated funds for oversight. He has never
received dedicated funds for oversight. This is another step
Democrats could have taken in the American Rescue Plan, but
chose not to.
So, without objection, I will enter this into the record.
Chairman Comer. Our last question before recess, Mr. Fallon
from Texas.
Mr. Fallon. Oh, thank you, Mr. Chairman. Mr. Horowitz, we
are hearing a lot of testimony, and would it be fair to say
that we are talking about billions of dollars in fraud?
Mr. Horowitz. Correct.
Mr. Fallon. It could be tens, it could be hundreds of
billions of dollars. The facts matter. I think we are
discussing the largest case of fraud in the history of the
United States, and, frankly, this might be the largest case of
fraud in human history. As we have known about these extremes
since early 2021, and it is absolutely an embarrassment to this
institution, to the executive branch, to all the Federal
Agencies involved.
The U.S. Government has been swindled by not only our own
people, but criminals in Russia, in China, Romania, and
Nigeria, to name a few. It is estimated that 40 percent of
pandemic unemployment assistance funds, about $4 billion of
taxpayer money went to criminal organizations and authoritarian
regimes, like Russia and China. Just put this into perspective,
according to the World Bank, there are 194 recognized countries
on earth, and 171 of them don't even have annual GDPs that rise
to that level of $560 billion. To add insult to injury,
Democrats did not hold one, not one full committee hearing on
oversight last Congress on COVID-19 fraud, which begs the
question, what is this committee even for? Quite frankly, it is
for a hearing just like this when a potential amount of $0.5
trillion has been stolen. And what did the Democrats do instead
of investigating rampant COVID fraud? They used the
reconciliation process to ram through $1.9 trillion of spending
in the form of the American Rescue Plan Act that continued to
fund broken programs we knew were systemically fraudulent.
So I ask again, what did the Democrats do for two years in
oversight instead of investigating the largest fraud in
history? Well, they held hearings on the dangers of flea and
tick collars for pets, whether or not the Postal Service could
handle packages during the holidays, the developments in state
cannabis laws, and potential bipartisan reefer reform. They
made villains out of CEOs of the critical and essential
American energy sector, who are the most effective and most
efficient in the world at extracting natural resources. In
fact, they help guarantee our national security.
So, I wonder if Democrats considered if their massive
spending and barring Federal land leases and permits for
drilling had anything to do with the 40-year high in energy
prices we have seen. They held hearings on protecting the free
speech of environmentalist activists and others that agree with
them, while at the same time celebrating censorship of those
who didn't share their views. And get this: they hosted two
depositions, one roundtable, and one full committee hearing on
the Washington Redskins, or Commanders rather they are called
nowadays, and why? Because somebody had a bee in their bonnet
about Daniel Snyder.
We had hearings to tell us believe it or not that pollution
is racist. The weather, racist. Climate change, racist. COVID-
19 by definition, an indiscriminate virus was racist. Material
healthcare, you guessed it, racist. And America itself, the
land of opportunity and prosperity where millions of people
come to this country every year, both legally and illegally, to
live their dream, many Democrats told us for two years that
America is systemically and irrevocably racist, that white
privilege runs amok. Fortunately, the hard data proves this
leftist talking point to be categorically false, and the list
of useless hearings goes on and on. Plain and simple, the last
few years were an egregious dereliction of duty and a waste.
So, Mr. Chairman, it is with tremendous delight and relish
that I see this committee actually and actively tackling
serious matters of import to our country and our citizens,
like, for instance, criminal transnational organized crime,
stealing $0.5 trillion from the American Treasury, and, by
extension, the American taxpayers, very pockets. So Mr.
Chairman, thank you very much, and I yield back.
Chairman Comer. Thank you, gentleman. We are going to now,
without objection, go into recess, and we will reconvene 10
minutes after the last vote. We only have two votes, which
won't be long. I know we have about eight or nine more
questioners and then a second panel. So, without objection, we
are in recess until 10 minutes after conclusion of the last
vote.
[Recess.]
Mr. LaTurner.[Presiding.] The committee will come back to
order.
The chair recognizes the gentleman from California, Mr.
Khanna.
Mr. Khanna. Thank you, Mr. Chair. You know, we have a
tendency in this place to always run down everything Congress
does or that Washington does. I would submit that our response
as a Nation to the pandemic is one of the most extraordinary
responses on a bipartisan basis that this country has ever had.
We had 22 million people out of work with the pandemic. Most
other nations around the world followed austerity politics.
They didn't have enough aid.
We spent, on a bipartisan basis, $5 trillion to make sure
that millions of people got back to work, to make sure that we
have a 3.5-percent unemployment rate, not a 10-percent
employment rate, to make sure that we didn't have a depression
in this country, to make sure that 6 million people didn't go
into poverty. That was what unemployment insurance extension
was about.
We voted not because it was going to help red states or
blue states. We voted because it was going to help the United
States of America. And we learned the lesson of the Great
Recession that the stimulus then, which the Republicans
opposed, was actually too small, that we needed to go bigger,
and the person who realized that was not just the Republicans.
It was Donald Trump. Three-point-three trillion dollars of the
spending we are talking about was Trump oriented spending.
My first question to you is, what percent of fraud are we
talking about on the $5 trillion? Is it less than two percent,
three percent? I mean, what percent are we talking about?
Mr. Horowitz. Congressman, at this point, I am not in a
position to tell you----
Mr. Khanna. Ballpark.
Mr. Horowitz. I have no idea at this point.
Mr. Khanna. You don't know? Is it less than 50 percent?
Mr. Horowitz. It is less than 50 percent.
Mr. Khanna. Is it less than 10 percent?
Mr. Horowitz. There are some programs. I am not sure
where----
Mr. Khanna. Overall. Are you saying there is a possibility?
Mr. Horowitz. We have a lot of investigating going on, so I
am not going to make a guesstimate when I don't really have----
Mr. Khanna. Does anyone have a sense if it is less than 10
percent, five percent? You have no idea what percent?
Mr. Dodaro. There are still hundreds of cases that are
being investigated, so we----
Mr. Khanna. So, let me ask this. Is there any evidence that
the fraud is higher on the $1.8 trillion that was allocated
under President Biden's Rescue Plan as opposed to the $3.3
trillion that President Trump signed off on the CARES Act?
There is no evidence of that, right? I mean, the fraud was
equally applicable, potentially, to the $3.3 trillion as the
$1.8 trillion. Is that a fair statement?
Mr. Dodaro. I would say that is a fair statement.
Mr. Khanna. And Mr. Horowitz?
Mr. Horowitz. Yes.
Mr. Khanna. Mr. Smith?
Mr. Smith. The breakdown of our criminal investigations is
roughly 45 percent UI based and the other 55 percent SBA, but
that is just a Secret Service context, just to give you what we
have opened up.
Mr. Khanna. Yes, but the UI was extended under the CARES
Act when President Trump was President. And by the way, the
Democrats objected back then to a lot of the deregulation on
SBA and a lot of the deregulation and how that was
administered. But I just want to be clear because they are
trying to imply that somehow this fraud, which, in my view is,
is less than 2 to 3 percent, I mean, you can't say it, but even
if you think that the fraud, it was $100 billion, that is still
less than a couple percent of the total spending. They are
trying to imply that somehow President Biden is to blame for
that, and that you would agree is just not factual, correct? I
mean, you can't blame President Biden and not blame President
Trump with $3.3 trillion of it was under Trump. Is that
correct?
Mr. Dodaro. I mean, we are looking at the totality of the
programs from 2020 to current day, and we are finding problems
across that whole spectrum.
Mr. Khanna. Mr. Horowitz?
Mr. Horowitz. Yes, the fraud began in March 2020. We are
looking at fraud cases throughout. Most of the money went out
in the earlier periods of time, but there is fraud throughout.
Mr. Khanna. It is a great point. Most went out earlier. So,
if anything, the Trump administration probably is more to blame
for that three percent of the fraud. Let me ask this to Mr.
Dodaro. One of the challenges has been the antiquated IT
systems in many of these states prior to the pandemic, and this
is actually one of the challenges with the unemployment claims.
Could you compare Republican led state performances on these IT
systems versus Democratic states or talk more generally about
these IT systems?
Mr. Dodaro. Well, I can talk generally. We didn't look at
it that way. We don't look at things on a partisan basis. But
the IT systems, some of them date back to the 1970's, from what
we understand, and efforts were made to try to modernize them.
You know, we keep a list of the highest risk areas. This is at
the Federal level for the Federal Government. IT acquisitions
and operations on the high risk list government wide for the
Federal Government.
At the state level, they were having similar problems, and
that contributed to their inability to detect some of the
fraud. They weren't able to do matching on some cases in some
of the larger states, and with the volume of claims that came
through, they needed to have automated processes. And some
states, they were doing it manually, you know, visually just
trying to----
Mr. Khanna. That was one of the big reasons for the fraud,
correct?
Mr. Dodaro. That was a contributing factor, yes. And the
other contributing factor was self-certifications, and self-
certifications, I think was one of the biggest contributing
factors were, you know, the people could just say, I'm eligible
for this program. In some cases, they weren't allowed and not
required to submit supporting documentation, so he just said
it, take people word for it, and that is a prescription for
fraud.
Mr. LaTurner. The gentleman's time has expired. The chair
recognizes the gentleman from North Carolina, Mr. Edwards.
Mr. Edwards. Thank you, Mr. Chair. This is working now.
Gentlemen, thank you so much for being with us this afternoon.
And I have got to tell you, sitting here and watching you be
still for as many hours as you did at our age, is a real test
of stamina, so you have my respect. You are going to have to
tell me how you do that some time.
I want to shift gears just a little bit. We talked about
fraud, and waste, and abuse quite a bit. I would like to turn
the conversation if we may, just for a couple of minutes to
government efficiency. Through the pandemic, I have observed
across all industries, because of the loss of work force, and
we could get into the reasons for that. That is a whole series
of hearings, I am sure. But every industry that I talked to
seems to have been forced to reinvent itself through the
pandemic and now that the pandemic is coming to a close. And by
reinvent itself, I am talking about doing more or the same job
with fewer people. And serving as an appropriations chair for
the state of North Carolina immediately before I got here, it
occurs to me, because every state agency that was coming to me
asking for their appropriation for the following year was
asking for more, not less. And I am just curious what you might
be seeing, or are you in a position to comment on, has
government been able in any way to reinvent itself.
This Congress is on the cusp of having to make some really
critical decisions to raise the debt limit to change our
spending trajectory. And I would like to know that government
is working as hard to reinvent itself and do more with less
just like every other industry out there is doing. Do you have
any evidence or commentary on that observation?
Mr. Dodaro. I don't know if I put it in the category of
reinventing itself, but for 11 years now, I issued an annual
report to the Congress on overlap, duplication, and
fragmentation in the Federal Government, and how to achieve
cost savings and perhaps revenue enhancements, and we have
issued almost 1,300 recommendations over that period of time.
About half of those recommendations have been fully
implemented, some partially implemented. To date, there have
been financial benefits to the government of over half a
trillion dollars, and I think $565 billion. So, there are
efforts underway, and there are hundreds of other GAO
recommendations we haven't opened yet, that haven't been
implemented, that could save tens of billions of additional
dollars.
Right now, we probably have around 5,000 recommendations
implemented. I will be issuing that report again this spring.
And we also have the high risk list that I have referenced
earlier in areas that need a transformation, and that program
over the last 15 years has saved $675 billion. So, there are
improvements being made. They are difficult to effectuate, but
there is much more that could be done for government to do
that, and I think congressional oversight has been key where
there has been progress. It has been through congressional
action for the big dollars.
Mr. Edwards. Thank you. I will be waiting on that report.
That will be my favorite read this spring. One other quick
question. I know from chairing oversight of unemployment in
North Carolina, the Federal Government had this process where
they came back and asked for unemployment funds that had
already been appropriated through a process called
sequestration. Are you familiar with that, and if so, can you
tell me nationwide how many dollars were sequestered? And of
that, how many were actually recollected from the state?
Mr. Dodaro. Yes. I am not familiar specifically with the
Unemployment Insurance Program. The only sequestration I am
familiar with was due to the Budget Control Act of 2011, and by
there, the Congress set limits on discretionary spending. And
if the appropriation bills didn't come down to those levels,
there was an across-the-board government cut to bring them down
to those levels. That happened in 2013 and 2014. That was like
the equivalent of, if my memory serves me right, about seven
percent cut at that time.
Mr. LaTurner. The gentlemen's time has expired.
Mr. Edwards. Thank you very much.
Mr. LaTurner. The chair recognizes the gentlelady from New
Mexico, Ms. Stansbury, for five minutes.
Ms. Stansbury. Thank you, Mr. Chairman, and ranking member,
members of the committee. And of course, gentlemen, on the
panel, thank you for your time today. I want to take this
opportunity at the start of this Congress and this committee's
first hearing to say how honored I am to serve on this
committee and to join in the oversight of this committee's
work. As a New Mexican and as an American, I am deeply proud to
serve our country and to serve our communities, and to serve
under the leadership of our ranking member in particular, Mr.
Jamie Raskin, who is a hero and a scholar here in the House.
Our job on this committee is to defend our democracy and
our basic institutions, to protect our rights as Americans, and
as a member of the truth squad on this side of the aisle, to
hold our government accountable, and counter the lies,
conspiracy theories, and extremism that we are going to hear on
this committee this Congress. In a couple of words, we are here
to fight for the American people and for the people of New
Mexico, which is where I was born and raised.
And in fact, I am grateful for this discussion today,
because as a native New Mexican and as somebody who grew up in
a working family that struggled to make ends meet with a single
mother, I personally know what it means to live on the edge,
and why critical relief programs, like the programs that we are
talking about here today in this committee, were passed by this
body to help millions of Americans, who would have fallen
through the cracks, as we saw in previous economic disruptions.
In fact, the early relief programs, whether that is the
insurance, the PPP Program, the subsequent American Recovery
Plan, literally saved lives. Let me say that, again, these
programs saved lives. In fact, in New Mexico, almost 93,000 New
Mexicans received unemployment insurance. When the pandemic
began, I was serving in the state legislature. We called
thousands of New Mexicans in my district to find out how they
were doing welfare checks: elders who were stranded in their
homes without access to healthcare, people whose family members
had died, people who were unable to get food and water,
especially in our rural and tribal communities. These programs
were designed to save lives and to keep individuals from
falling into the free-fall of economic disaster during a
pandemic.
We know there was fraud and abuse. There is fraud and abuse
wherever there are humans who take advantage of systems that do
not have proper oversight. I know a lot about oversight. I used
to work in the Office of Management and Budget in this
government. I was a Senate staffer, I conducted financial
oversight. I know what that looks like. And I have never seen
more financial fraud and abuse of this system than I saw in the
previous administration under Donald Trump in which financial
systems were abused, including by his cronies and fraudsters
who were involved in his administration and his friends across
the country. And our job is to make sure that they are held
accountable and that we are looking out for the people and our
communities. So, let's get the story straight.
I know, gentlemen, you have been here a long time today,
many, many hours. I know you are ready probably to go take a
break and rest, and we thank you for your time this morning for
serving our country and the roles that you all play in doing
that oversight, but I want to just ask a couple of few
questions to clarify what is going on.
So, Mr. Dodaro, I know you have talked a lot this morning
and probably answered this question in multiple ways, but I
want to be very specific. Can you tell us how many convictions
and guilty pleas have come from Federal charges regarding fraud
with these COVID relief programs?
Mr. Dodaro. Yes. So far, according to the Department of
Justice system, there have been over 1,000 people who have
either pled guilty or have been convicted. There are another
600 people where charges are pending. There are hundreds of
investigations underway now----
Ms. Stansbury. Thank you.
Mr. Dodaro [continuing]. And will be done of the 1,000
people who have been guilty or----
Ms. Stansbury. Thank you, Mr. Dodaro. I want to just
clarify. So, we are talking less than 2,000 people, and we are
talking about millions of Americans whose lives were impacted
by these programs: 93,000 New Mexicans and less than 3,000
cases of fraud and abuse. Now, we need to hold those who
committed crimes accountable, and that is exactly what we are
going to do on this committee through the oversight of our
Federal programs, who are tasked with that role and our law
enforcement and our court system.
Mr. LaTurner. The gentlelady's time has expired.
Ms. Stansbury. But our job is to make sure that the
American people are represented and we keep this government
accountable. And with that, Mr. Chairman, I yield back.
Mr. LaTurner. The chair recognizes the gentleman from New
York, Mr. Langworthy.
Mr. Langworthy. Thank you very much, Mr. Chairman, and I
thank the witnesses for their long testimony here today and
your patience.
This is an interesting topic for me because I was a victim
of unemployment fraud in my prior role as chairman of the New
York state Republican Party, and a fraudster and a criminal
applied for unemployment insurance in my name through a
previous address that I hadn't lived at for over 10 years. The
Erie County District Attorney in my community also was a victim
in the same fashion where a fraudster used his name and very
public profile to apply for unemployment insurance. So, it was
a very prevalent problem in my state, and reports indicate that
billions of taxpayer dollars had been wasted due to
mismanagement, fraud, inefficient processes by the government
throughout this entire pandemic. You know, when a stock
brokerage loses billions of dollars of their customers'
investments, the brokerage itself is blamed. However, when
government does this, it is swept under the rug. The government
should not be excused for losing money on this extraordinary
level. Mismanagement and indiscretion to this degree is
unacceptable, and it is an absolute disservice to the
hardworking taxpayers that have entrusted their dollars, their
hard-earned money to this government.
So, Mr. Dodaro, in my home state of New York, a report from
the Department of Labor showed that throughout the state Fiscal
Year of 2021, the government wasted an estimated $11 billion of
taxpayer money. The primary reason for this waste is the New
York State Department of Labor was using outdated technology
that it was recommended to replace not once, not twice,
beginning in 2010, and again in 2015. So, Mr. Dodaro, I would
like to ask you, are there other agencies in the Federal
Government or any state governments, to your knowledge, whose
outdated technology has led to wasted taxpayer dollars to that
extent, and if so, would you mind mentioning who they are?
Mr. Dodaro. The problems with the IT systems affected a
number of states, and, you know, to what extent compared to New
York, I am not able to talk about that at this time. I know
there were similar problems in California, for example, and we
are now looking at additional states, but it was a problem
affecting a lot of states.
Mr. Langworthy. And it was Federal money coming down to the
states to make these programs whole. How, in the future, would
we hold Federal agencies and state Governments accountable for
failing to put in place mechanisms to reduce this risk of
improper payment or actually just being so porous a fraud is so
many states like New York were?
Mr. Dodaro. Yes. One way would be to make sure that they
implement our recommendations that we have made by the GAO,
inspector generals, and state auditors. Figures that you quote
on New York came up from state auditors' office, state
auditors, and other states--California, Kansas, and others--
have issued reports as well. So, one way is to make sure all
those recommendations are implemented. Another way is to make
sure that states certify that their systems meet certain
standards and that there is appropriate independent
verification that those systems are now able to meet certain
standards. The Department of Labor should also provide some
standards to the states, but each state has its own different
system and eligibility requirements. So, it has to be tailored
to the individual State.
Mr. Langworthy. Are there any mechanisms or penalties
available to the Federal Government to prevent this sort of
thing from happening again with states that won't listen to the
guidance?
Mr. Dodaro. Not to my knowledge right now. They would have
to be instituted, and I think it would be good to be able to do
that.
Mr. Langworthy. It seems like we put ourselves in a pretty
feckless position as a Federal Government, if we, you know,
continue to allow states to ignore guidance that has been
leveled on them, especially large populous states, you know,
that have a population that is open to that much unemployment
benefit. We can all agree that their losses to the tune of half
a trillion dollars is unacceptable. I think everybody in this
room can agree to that. We can't allow this to occur again. We
have to be way better stewards of the taxpayer dollar and take
that responsibility much more seriously, but I thank you very
much for your time here, and I yield back.
Mr. LaTurner. The gentleman yields back.
The chair recognizes the gentleman from Maryland, Mr.
Burlison.
Mr. Burlison. From Missouri. Thank you. Thank you, Mr.
Chair.
Mr. LaTurner. My apologies. I am sorry. The ``O'' looks
like a ``D'' on my list here. The gentleman is recognized.
Mr. Burlison. Thank you. I am very honored to serve on
House Oversight Committee this Congress, and I would like to
thank the chair for the hard work that he has been doing on
this committee. I look forward to working with each one of my
colleagues here in the 118th Congress.
My question is to Mr. Horowitz. On Monday, Senator Ernst
revealed that thousands of Federal employees have double dipped
on taxpayers and applied for pandemic unemployment assistance
in addition to receiving their Federal paycheck. You know, just
as a personal note, business owners and working families in
Southwest Missouri, which is not exactly the richest part of
the Nation, struggled quite a bit during the pandemic and their
livelihoods were threatened, and yet Federal employees have the
comfort of a government paycheck. Yet there is evidence that
thousands of these Federal employees may have falsely claimed
that they lost their job. My first question is, how is this
even possible? Is there nothing in place to cross-check these
employees or do we just pay out the benefits to whomever it
applies?
Mr. Horowitz. So, one of the challenges is, in fact, the
absence of cross-checking information, and that has been a
problem across programs. I am aware of Senator Ernst's letter,
and we are following up on that. We have done that, for
example, at DOJ. I have looked at some of these issues, and we
can look at it. It takes a fair amount of time once you get the
hits to figure out actually whether there are fraud cases or
not because there are spouses who potentially were eligible. We
have identified where there are addresses. It turns out there
are apartment buildings, so we then have to figure out who else
is in that building, you know, whether that address is a hit or
not. So, there are things we need to do to make sure we have
got the right number ultimately, but it is an important issue,
and we are going to follow up on it.
Mr. Burlison. Before I forget, Mr. Chairman, I seek
unanimous consent to enter into the record the letter from
Senator Ernst to the Honorable Michael Horowitz.
Mr. LaTurner. Thank you. Without objection. My apologies.
Mr. Burlison. Thank you. Mr. Horowitz, in your report to
Congress last fall, you said that the PRAC was working to
identify active Federal employees who applied for PPP, and that
so far, you had matched tens of thousands of employees with SBA
loans for which they were not eligible. Do you have any updates
on that analysis?
Mr. Horowitz. We have matched the numbers, and that is what
I was mentioning to you, we are working through. For example,
in my office, we do have cases that are moving forward as a
result of that, but it has taken a considerable amount of time
to get from the large number to the smaller number because of
the absence of particularized data. The challenge has been
Agency data not being sufficient to immediately figure this
out.
Mr. Burlison. Do you have an estimated, like an ETA, as
when you might have the results?
Mr. Horowitz. Well, when we find the case, we start
investigating it. We were working with our law enforcement
partners at that point, and hopefully those cases will wind up
being prosecuted.
Mr. Burlison. And then what actions have we taken, if any,
or what actions will be taken? I guess, if you could answer
both, what action has been taken against Federal employees who
might have applied for unemployment benefits fraudulently, and
what actions would be taken?
Mr. Horowitz. Well, you know, we are going to pursue those
cases to the fullest extent possible, including seeking
prosecutions working with our law enforcement partners on it. I
can give you an example. We have several on the PPP/EIDL side.
For example, a relatively higher-level person at NASA Agency
was sentenced to considerable number of years in prison. He was
worked in their financial office, who engaged in, I can't
remember whether it was PPP or EIDL fraud, but----
Mr. Burlison. That is disturbing.
Mr. Horowitz. So, we are pursuing those cases.
Mr. Burlison. That is good to know. Thank you. Mr.
Chairman, before I forget, earlier we heard from Congressman
Donalds about an article from Politico that the Biden
administration had re-routed billions in emergency stockpile
funds for the border, and I seek unanimous consent to enter
this into the record.
Mr. LaTurner. Yes, Mr. Burlison, from Missouri, without
objection.
Mr. Burlison. Thank you. I yield back.
Mr. LaTurner. The gentleman yields back. The chair
recognizes the gentlelady from Georgia, Ms. Greene.
Ms. Greene. Thank you, Mr. Chairman. I would like to bring
up something that was brought up by one of our Democrat
colleagues on this panel about Republican Members of Congress
taking PPP loans. I never took one as a Member of Congress, but
as a business owner, I did take a PPP loan in order to be able
to pay my employees. And I am so thankful I was able to do that
because they would have lost their jobs, and I think it is
important to recognize. But the minority side of our committee
here is having a witness on the next panel that had said that
she didn't or her or any of her affiliates take any Federal
grants or contracts related to this hearing's subject matter.
But in fact, as executive director of the National Employment
Law Project, they took over $825,000 in PPP loans from the SBA,
so that that does need to be pointed out about the next panel
witnesses.
Here we are a Nation that our government spent over $5
trillion in COVID relief funding, and we can't find $560
billion, I believe, of that money of the Americans hard-earned
taxpayer funding. We are also a Nation at $34 trillion in debt,
and we are on the verge of having to handle our debt ceiling,
raise it once again, and here we are looking at waste, fraud,
and abuse.
And gentlemen, I thank you for coming and speaking to our
committee on this issue. I know it has been a long day for you,
but I would like to ask some questions about the type of
funding that has been used with COVID relief funds, and it is
pretty shocking to me. You know, I read some examples. For
example, Washington, DC.'s Mayor Muriel Bowser plans to use
$31.5 million in American Rescue Plan Funds to transition homes
to green energy over the next five years.
As many small businesses were shut down, children lost two
years in education, child suicide rates went up, and it is hard
to even imagine a child committing suicide. Many people died
from COVID. Healthcare workers were fired from vaccine
mandates, many other people were fired because of vaccine
mandates, and all the issues that have come out of COVID. I
want to ask about how this money has been spent because
clearly, there is a tremendous amount of waste, fraud, and
abuse. And a lot of our hard-earned taxpayers' dollars spent on
things that don't even make sense that they have been spent on.
So, Mr. Dodaro, if you don't mind answering a few of my
questions, can you tell me as our comptroller of the United
States, how much COVID cash was given to abortion?
Mr. Dodaro. I do not know that answer. I don't have that
answer.
Ms. Greene. Oh, OK. So, I can tell you Planned Parenthood
Clinics received $80 billion in COVID relief loans, which is
hard to understand how that happened. Mr. Dodaro, can you tell
me how much money COVID cash went toward diversity, equity, and
inclusion, or racism issues?
Mr. Dodaro. Again, we have not looked at that issue, so I
don't know.
Ms. Greene. Oh, geez. Well, I can tell you the Pennsylvania
Humanities Council did receive $1.4 million in relief and used
it for equity and geographic diversity. I am not sure how that
helped in a pandemic time. Mr. Dodaro, can you tell me how much
COVID cash went to CRT?
Mr. Dodaro. CRT?
Ms. Greene. Critical race theory in education. It is a
racist curriculum used to teach children that somehow their
white skin is not equal to black skin and other things at
education.
Mr. Dodaro. Yes. No, I do not know that, but I do know that
there are provisions that the Federal funds, generally, they
are not used--supposed to be used for curriculum. That is a
state----
Ms. Greene. Oh, Mr. Dodaro, I have to tell you in Illinois,
they received $5.1 billion at an elementary school there that
used it for equity and diversity, so it is being used for these
things. Mr. Dodaro, can you tell me how much money was given at
Drag Queen Story Hour?
Mr. Dodaro. I am sorry. Can you repeat that?
Ms. Greene. Drag Queen Story Time where men dressed up as
women and read confusing books to children.
Mr. Dodaro. At first, I thought you said, ``dry clean,'' so
I am sorry.
Ms. Greene. It is OK.
Mr. Dodaro. No, I don't know the answer to either one of
those two.
Ms. Greene. We need to look into this, and I urge you to do
that. Bradbury-Sullivan LGBT Community Center in Pennsylvania
received $16,000 for Drag Queen Story Time from COVID cash. I
think this is an issue that needs to be looked into. A lot of
this money went to things that should have never gone to.
Mr. LaTurner. The gentlelady's time has expired.
Ms. Greene. And I thank you so much, and I yield back the
remainder of my time.
Mr. LaTurner. The gentlelady's time has expired.
The chair recognizes the gentleman from Pennsylvania, Mr.
Perry.
Mr. Perry. I thank the chairman. Gentlemen, thanks for
hanging in there. I know it has been a long day. Listen, I
think it is important a couple of things to acknowledge. A lot
of these folks that are involved in this, the government took
them out of their jobs, told them they couldn't go to work,
Federal or state government couldn't run their businesses, and
so there are a lot of people that this did a lot of good things
for, and we all want to acknowledge that. There was a lot that
was unknown.
I don't agree with taking people out of their jobs or not
allowing them to run their businesses, but that is another
story for another day. The other thing that I just want to make
a point is a personal sticking point for me. I don't see
unemployment insurance. I see unemployment compensation. There
is no insurance about this. There is no actual aerials, there
is no risk assessment to any of this, but that is a sticking
point, but it becomes an entitlement for some folks.
But in the interest of unemployment compensation, what I
wonder, what I find interesting, among other things, is that
according to a combination of estimates, $560 billion of that
Federal COVID relief funding may have been either lost to fraud
or paid improperly. And while some of my colleagues on the
other side of the aisle condensed that to a percentage of the
overall and would kind of have us believe that it is acceptable
because it is a small percentage of trillions of dollars, I
don't know: $560 billion. I am from a little town in
Pennsylvania. That seems like a lot of money to folks like me.
I imagine you feel the same way. This is pursuant to ID ME, 40
percent, that is nearly half of pandemic unemployment
assistance funds. That is $400 billion that did not go to
Americans and instead went to criminal gangs in Russia, China,
and Nigeria.
Now I am from Pennsylvania, and we have got our own
particular problems there, and we can get into that, but a
Nigerian crime ring named Scattered Canary was involved in
submitting more than 2 million claims. Two million claims from
Nigeria. There is this other one, APT 41, and I know that you
have all--mentioned here before--talked about that $20 million
stolen unemployment comp scheme began in mid-2020 and spammed
2000 accounts with more than $40,000 financial transactions.
What in the Sam Hill is going on in our states? But the Federal
Government gives the money to the states. They have an
unemployment compensation system, so it is already up and
running. So, we are just adding some more fuel to them so that
they can take care of these people that have been put out of
work by their government.
How are foreigners? Like, do these states not see Nigeria,
China, or some IP address that be associated with a foreign
country and say, huh, I wonder why foreign countries are
getting unemployment compensation, or, you know, do they fly
back to work in America every day from Nigeria or from China or
from Russia? Well, I don't know. Can you make sense of this to,
like, a small country boy like me?
Mr. Horowitz. I don't think I can make sense of it, but I
can tell you that it is one of the problems we have identified
along the way, not just in the Unemployment Insurance Program
and others that agencies aren't picking up the IP addresses for
these applicants because the country was largely shut down.
Most of these applications came in electronically, and that is
clearly one of the red flags. And something by the way, as we
get this data, we are going to be looking at is how many IP
addresses were there associated with these various programs
that were IP addresses from overseas.
Mr. Perry. I mean, some of the most egregious ones
Washington State, California, New York. I come from
Pennsylvania. I have got a whole list here of infractions from
the state that I am proud to represent. These unemployment
compensation systems have been around for a long time, so this
is kind of in the past now or maybe it is still ongoing, maybe
it is not at the same level. What assurance can you give me or
anybody else here that the states have addressed any of this so
that it, like, maybe it is not happening at the same scale, but
if it has happened here, it probably continues to happen? What
assurance can you give any of us that this has been solved at
this point, and why should the Federal Government give one more
dime to any of these states that are allowing that? Look, we
are looking at a debt ceiling increase. They want $2.6
trillion. We just talked about $500 billion just handed out to
foreign criminals. What assurance can you give us moving
forward that any of this is solved right now?
Mr. Horowitz. I am not going to give you any assurance that
it is all----
Mr. Perry. Is zero the right answer?
Mr. Horowitz. That is why this hearing is actually
important because, among other reasons, but there are fixes
that need to happen. GAO has been talking about this for
decades, and the Congress has to get involved. The
administration has to get involved. The states have to get
involved. We have to fix the problem.
Mr. LaTurner. The gentleman's time has expired.
Mr. Perry. Thank you, gentlemen. I appreciate you.
Mr. LaTurner. The chair recognizes the gentlelady from
Ohio, Ms. Brown.
Ms. Brown. Thank you, Mr. Chair. I would just like to point
out that my Republican colleagues are once again demonstrating
the extreme lengths they will go to villainize reproductive
freedom. Contrary to their allegations, Planned Parenthood
health centers that received PPP loans were eligible non-profit
recipients consistent with the SBA's rules governing
affiliation, status, and size. The Small Business Office of the
Inspector General affirmed this conclusion in a September 2022
report that specifically determined Planned Parenthood health
centers met PPP loan eligibility requirements. So, I would ask
unanimous consent that the SBA OIG report be made part of the
record, and I urge my Republican colleagues to cease their
baseless draconian attacks against the reproductive freedoms of
people once and for all.
And finally, the last point I want to make is just because
you disagree with the spending doesn't mean that it is
fraudulent, wasteful, or abusive. And with that, I yield back.
Mr. LaTurner. Without objection, it will be entered into
the record.
Mr. LaTurner. The gentlelady yields back. The chair
recognizes the gentleman from Tennessee, Mr. Burchett.
Mr. Burchett. Thank you, Mr. Chairman, and I am not an
attorney, and I am not trying to do any ``got you,'' so if you
all want to give me just a ``yes'' or ``no,'' it would be
great. All right. Assistant Director Smith, in 2021, NBC
reported that between $90 and $400 billion pandemic-related
unemployment U.S. taxpayers' dollars had been stolen, and half
of that was taken by foreign criminals. Is this consistent with
what your investigation revealed?
Mr. Smith. Sir, I can't validate that particular news
piece. Which outlet did you say it was from?
Mr. Burchett. NBC News. It has been widely reported in
other areas, but they were the biggest dog that wagged its tail
on that, I guess.
Mr. Smith. I am not the----
Mr. Burchett. OK. Well, the former assistant director of
investigation of the Secret Service, Jeremy Sheridan, called
this theft, ``the largest fraud scheme that I have ever
encountered.'' And I guess what I am getting at is, is that it
seems to be it is clear that foreign and maybe some localized
organized crime syndicates and other bad actors have
perpetrated some crimes against the American taxpayers.
Assistant Director Smith, do you agree with Mr. Sheridan or
have you ever encountered a larger fraud scheme?
Mr. Smith. I agree with former Assistant Director
Sheridan's sentiments. The magnitude of pandemic-related fraud
was what made it unique.
Mr. Burchett. Do you think that in your professional
capacity or otherwise that maybe some of these funds could be
linked to terrorism organizations, that these things would fund
them?
Mr. Smith. Sir, I don't have any direct evidence linking
terrorist organizations to pandemic relief funds, but as I
mentioned earlier, it is not beyond the realm of possibility of
transnational criminal organizations and groups of various
sorts.
Mr. Burchett. And drugs and human trafficking, all those
dirt bags that kind of run together, I guess.
Mr. Smith. Yes, sir. The group I mentioned earlier, like
Black Axe out of Nigeria, they involve themselves in human
trafficking, drug trafficking, the full gambit itself.
Mr. Burchett. OK.
Mr. Smith. They are also involved in pandemic-related----
Mr. Burchett. All right, and thank you. Comptroller Mr.
Dodaro--did I say that name right? I get it.
Mr. Dodaro. Pretty close.
Mr. Burchett. Pretty close. Well, Burchett, so we can just
go to get massacred together. I sent a letter in April 2020 to
then Treasury Secretary Mnuchin, raising concerns about
economic impact payments going to ineligible foreign nationals.
And my Republican colleagues have tried to warn our friends
across the aisle that we should not go blindly throwing money
at this pandemic without oversight. Unfortunately, I am afraid
they didn't listen. Does the GAO have details in the amount of
payments that were incorrectly provided to eligible foreign
nationals or deceased individuals during the rush to send COVID
checks to all corners of the world? I am sure this has sort of
been asked earlier, but I have been in and out, so if you would
tell me.
Mr. Dodaro. No, no, I understand. First on deceased
individuals, there is a tax inspector general.
Mr. Burchett. Right.
Mr. Dodaro. They found $1.4 billion sent to deceased
individuals in the first and second round of the economic
incentive payments.
Mr. Burchett. Right. Now, would you call that fraud or just
mistakes, or just people have died since that had gone on?
Mr. Dodaro. It is a mistake.
Mr. Burchett. OK. Wow.
Mr. Dodaro. It is a mistake. And actually, IRS interpreted
it that Congress intended them to do that. So, it wasn't until
Treasury stepped in and said that that was inappropriate and we
recommended that they try to get that money back, and they did
receive about half of it back.
Mr. Burchett. OK. Do you agree with the assessment that
several experts and some government officials at different
levels, they have indicated that there was so much fraud in the
COVID relief because of the lack of clear guidance, and that
was done by Congress obviously amid the rush to give away
taxpayer dollars?
Mr. Dodaro. That was a contributing factor, particularly at
the PPP level, but I think the main things were self-
certification, lack of supporting documentation.
Mr. Burchett. Right.
Mr. Dodaro. And actually, the CARES Act prohibited the
Economic Injury Disaster Loan Program from using tax
transcripts to compare against the loans.
Mr. Burchett. Wow.
Mr. Dodaro. And so, now Congress fixed these things later,
but those things affected the Unemployment Insurance Program,
too.
Mr. Burchett. Right.
Mr. Dodaro. Congress gave an incentive for states to waive
some of the requirements by giving them additional money to do
it.
Mr. Burchett. Cow is already out of the barn.
Mr. Dodaro. The cow, the pig, the chicken, and----
Mr. Burchett. Yes, the whole barnyard. So, because of that
lack of clear guidance, have we learned anything? Do we have
the proper things in place to stop that from happening again?
And I am running out of time. Give me a quick one, Mr.
Chairman.
Mr. Dodaro. We are starting to move, but it is slow, but
much more needs to be done to be better prepared next time.
Mr. Burchett. All right. Thank you. Thank you, you all. I
know you all probably woke up this morning and thought, wow, I
am going to go before Congress. It is going to be great, and
now, you are still here, so----
Mr. LaTurner. The gentleman's time has expired. I am going
to recognize myself for five minutes.
Although, I served on this committee last Congress, I am
excited to bring much needed accountability to Washington for
the first time in over two years. My Republican colleagues and
I are committed to returning this committee to its proper role
of rooting out waste, fraud, and abuse, and mismanagement in
the Federal Government, and that commitment starts today.
In the span of one year, Congress passed upwards of $4.6
trillion in the form of economic stimulus bills and expanded
eligibility for Federal relief programs, like unemployment
insurance. When communities across America started to recover
from the pandemic, Congress continued to saturate states with
millions of taxpayer dollars under the guise of COVID-19 relief
without the means to distribute it efficiently or safely. A
Kansas audit showed that my home state may have made hundreds
of millions of dollars in fraudulent payments when state agency
systems were overwhelmed by an unprecedented number of
claimants. As recently as last September, the Department of
Justice charged 47 people with using the Federal Child
Nutrition Program in Minnesota to siphon $250 million. And it
is no secret that many states have used these funds to alter
school curriculums, give illegal immigrants stimulus checks,
and advance green energy initiatives.
Public trust in our government is at an all-time low, and
we cannot expect that to change if we continue this poor
stewardship of Americans' tax dollars. I think Congress can do
better, and I look forward to discussing with our witnesses how
to avoid this level of fraud and waste of taxpayer dollars in
the future.
Mr. Dodaro, and I will ask the same question of the other
two witnesses, your institution is tasked with monitoring
administrative agencies and providing recommendations for
improvement. Per GAO's website and the testimony we have heard,
fraud detection is a difficult task. Can GAO ascribe a monetary
cost to conducting fraud detection and retroactive
certification of payments? If not, can you describe the
potential opportunity cost to the taxpayer of directing agency
attention toward auditing massive COVID payments after they are
distributed?
Mr. Dodaro. It is much more efficient to prevent the fraud
from occurring in the first place. That is why we worked with
Congress back in 2015 to 2016 to pass the Fraud Reduction and
Data Analytics Act to put in place a framework that we develop
for best practices on how to prevent fraud in the first place.
Much more efficient, much more effective.
Mr. LaTurner. Mr. Horowitz?
Mr. Horowitz. Yes, I would say the same thing. We talked
about this earlier, about the recovery rate when the money is
already gone and you have to chase it down. It is a 10-12
percent rate, I think Mr. Dodaro indicated. Keep in mind,
money, for example, that goes overseas takes a long time to try
and track that down, if you ever can, and so that is the
challenge. There is no better way to eliminate or reduce fraud
rates than to detect it and prevent it at the outset.
Mr. LaTurner. Mr. Smith? The winner of the easiest name
award on the panel today.
Mr. Smith. Thank you.
Mr. LaTurner. Yes, it is.
Mr. Smith. I agree with my colleagues. The Secret Service,
prior to the pandemic, is in the business of mitigating
financial crimes and fraud. I mentioned earlier that that is in
our DNA, if you will. We do advanced work because we know
criminals are nonstop in their efforts in trying to defraud
Americans, whether before the pandemic or not.
Mr. LaTurner. Let's stay with you. You worked with
government entities like the Small Business Administration, the
Department of Labor, ahead of the enactment of the pandemic
relief funding to explore strategies to address what you
describe as a, quote, ``a looming wave of potentially
fraudulent activity.'' Drawing from your experience, tracking
fraud in Federal relief programs, what could the government
have done to better support states and entities in charge of
dispersing funds?
Mr. Smith. What could we have done to support the states?
Mr. LaTurner. Correct.
Mr. Smith. So, one of the things I mentioned earlier was
putting out alerts. So, our Cyber Fraud Task Forces and our
Global Investigative Operations Center, which is the hub of all
of our task forces, submitted alerts, GIOC alerts, if you will,
to 30,000-plus financial institutions and to those partners.
What we were doing was sharing indicators of compromise with
those entities, such as if an individual was using an IP
address that was from an overseas originating point, or if a
financial institution saw, if you happen to see an account
being opened fairly recently and that account was being used to
move a substantial amount of money in a short period of time,
that would be something you would flag. So, one of the things
we did at the beginning of the pandemic and even prior was
sharing information and indicators of compromise that we are
seeing not only from other entities, but from criminals
themselves, because keep in mind, as a Federal law enforcement
entity, we do work with criminals. We have confidential
informants, and we get information from the inside, if you
will, regarding what tactics are afoot.
Mr. LaTurner. Thank you, and the committee thanks all three
of you for being here today and doing a great job answering
questions.
At this time, we are going to pause and change out the
panels.
[Recess.]
Mr. LaTurner. The committee will come back to order.
For our second panel today, I would like to introduce Ms.
Rebecca Dixon, the executive director of the National
Employment Law Project. Welcome to the committee.
Please stand and raise your right hand.
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?
Ms. Dixon. Aye.
Mr. LaTurner. Let the record reflect the witness has
answered in the affirmative. Thank you.
Without objection, your written statement will be part of
the record.
You are now recognized for five minutes for your opening
statement.
STATEMENT OF REBECCA DIXON, EXECUTIVE DIRECTOR OF THE NATIONAL
EMPLOYMENT LAW PROJECT
Ms. Dixon. Good afternoon, Chairman Comer, Ranking Member
Raskin, and members of the committee. Thank you for the
opportunity to testify today. I am Rebecca Dixon, executive
director of the National Employment Law Project, a nonprofit
research, policy, and capacity-building organization that for
more than 50 years has sought to strengthen protections and
build power for workers in the U.S., including workers who are
unemployed.
We must never lose sight of the terrible hardship that the
early days of the COVID-19 pandemic imposed on workers,
families, and communities nationwide. By April 2020, 23 million
U.S. workers were unemployed. Congress stepped up to pass six
bills which created programs that literally saved lives and
livelihoods and prevented what could have been a prolonged and
devastating economic collapse. This robust policy response
helped to make the COVID recession the shortest on record and
contributed to an economic recovery that has brought the
unemployment rate from a high of 14.7 percent in 2020 to 3.5
percent today. Indeed, according to Moody's Analytics, without
these programs, the economy would have succumbed to a double-
dip recession. A combination of well-designed social insurance
programs drove poverty to the lowest level on record in 2021,
cutting the number of poor children by nearly half and keeping
over 25 million people out of poverty.
One important piece of the protections enacted by Congress
were the pandemic unemployment insurance programs that not only
contributed to the historic reductions in poverty in 2020 and
2021, but they also broadly supported recipients' financial
stability and overall well-being, filling in the substantial
gaps in the Nation's inadequate UI system. UI is particularly
effective at getting money into the hands of consumers who need
it and who will spend it quickly, and this supports businesses
in their communities and stabilizes state economies.
Unfortunately, a decades-long failure to properly invest in
the administration of the UI system made it an appealing target
for organized crime during the pandemic. Chronically
underfunded and understaffed state UI systems operating with
antiquated technology were tasked with building and
implementing a major new set of Federal programs with little
advanced preparation. This resulted in multiple points of
vulnerability for criminal enterprises, which have previously
stolen the identities of workers during private sector data
breaches. They seized upon this pandemic as a time to use those
stolen identities to fraudulently obtain UI benefits.
As the temporary Federal pandemic programs had to be built
virtually overnight, state agencies were not able to design
systems to protect against identity fraud in these programs. As
detailed in my written testimony, Department of Labor has had
notable recent successes in pioneering national fraud
prevention solutions and enlisting state participation. Using
funds from the American Rescue Plan, DOL has made substantial
investments in strengthening state systems to detect and
prevent future identity fraud. DOL Tiger Teams, equity grants,
and IT modernization assistance all combine a focus on
improving access to UI for eligible workers with resources and
expertise to combat fraudulent activity. DOL also offers a wide
range of technical and system support for state fraud
prevention, detection, and recovery.
State participation in the Integrity Data Hub and the use
of its crossmatch systems have increased significantly since
the pandemic with more states using DOL's identity verification
service, incarceration data exchange, and recently launched
bank account verification service that enables states to thwart
ID fraud by verifying that a bank account belongs to the worker
claiming benefits. Moreover, states can no longer bring in
contractors to help run their programs as they were given
emergency flexibility to do so during the height of the
pandemic. GAO noted that a major cause of increased identity
fraud was the insufficient number of state UI staff and the
fact that new staff were severely under-trained. Although
intended to handle a historic increase in claims, inexperienced
and insufficiently trained contract staff, through no fault of
their own, both contributed to increased fraudulent activity
and created greater obstacles for workers who were seeking
benefits.
As for the outdated IT systems used by so many state
programs, Congress has provided much-needed increases in
Federal funding for UI administration and worker-centered
technology modernization over the past two years. Congress must
continue making these investments because sophisticated
criminal enterprises will continue to seek vulnerabilities in
state systems, and state agencies will need to keep pace.
In conclusion, the pandemic relief that Congress enacted
combined to provide critical lifeline to workers, families, and
communities in the Nation's economy. I hope that this committee
will recognize the tremendous value of COVID relief programs
and work together to find meaningful solutions to the ever-
evolving problem of identity fraud that has undermined their
effectiveness. Thank you.
Mr. LaTurner. Thank you, Ms. Dixon. The chair recognizes
the gentlelady from Ohio, Ms. Brown.
Ms. Brown. Thank you, Mr. Chair. Since this is our first
committee hearing of this Congress, I want to express my hope
that this committee will, on a bipartisan basis, find ways to
strengthen Federal programs and serve everyday working people.
I truly want to work with my colleagues on both sides of the
aisle to make life better for all our constituents, including
mine back home in Ohio.
In that spirit, I want to share some real-life stories of
people in Ohio who have benefited from some of the lifesaving
pandemic relief programs we are discussing today. Here is an
example. Tiffany from Northeast Ohio said, and I quote, ``I was
laid off on March 13, 2020. Even though it took a month to
begin receiving my unemployment benefits, I am so thankful for
them. Without them, my family of four wouldn't have anything at
all coming in. The extra Federal money per week enabled me to
pay my bills and helped me to provide for my children in such a
traumatic situation.'' Tiffany's testimony is just one example
among millions in all our districts, urban or rural, dense or
sparse, rich or poor, for whom this Federal assistance made all
the difference.
Ms. Dixon, how did COVID-19 relief legislation, such as the
bipartisan CARES Act and the American Rescue Plan, save
American families from disaster?
Ms. Dixon. So, one thing we know is that the economy is 70
percent consumer spending. Consumer spending drives our
economy, and with 23 million workers out of work, there would
have been an enormous contraction of spending, which would have
then sent us into a double-dip recession. It also prevented
hunger and homelessness and really allowed families to focus on
caregiving for their sick family members. And it was just
really a lifeline, a critical, important way that Congress came
through for working families.
Ms. Brown. Thank you very much. So, it is clear to me that
the Biden administration and Congress took decisive action to
provide relief for the American people. The critical and much-
needed investments in health and economic programs are helping
the country recover and bounce back from the worst pandemic in
recent memory, so let us not forget that, and we are continuing
to emerge stronger than ever. And with that, Mr. Chairman, I
yield back the balance of my time.
Mr. LaTurner. The gentlelady yields back. The chair
recognizes the gentlelady from Vermont, Ms. Balint.
Ms. Balint. Thank you, Mr. Chair. First of all, thank you
for being here. I really appreciate it. As you know, Ms. Dixon,
in March and April 2020, we experienced really an unprecedented
economic shock. Twenty-two million people lost their jobs,
millions of people suddenly found themselves without an income,
and in April in 2020, when I was a leader in the Vermont
Senate, we saw Vermont's seasonally adjusted unemployment rate
go up to 15.6 percent, which was up 12 percent from the year
before. So, thankfully, Congress stepped in and helped us to
expand the unemployment insurance. And as you said and as
others have said, it was an absolute lifeline for families and
individuals.
So, my question is, without unemployment insurance
programs, how would individuals and families be able to respond
to such an economic crisis? Like, what happens without these
kinds of funds to allow individuals and families to stay
afloat?
Ms. Dixon. It is not necessarily well-known, but the
unemployment insurance is the first line of defense against
poverty and homelessness. It is the only universal cash program
that we have that provides cash to working families when they
lose a job. There is nothing else. And what we saw in the Great
Recession, when folks were exhausting their benefits, is the
other program that they turned to was the SNAP program, and
there really was nothing else. And so, it just can't be
stressed enough how critical this program is to making sure
that families can maintain while they search for work.
Ms. Balint. I really appreciate that distinction, and I
think we can't overstress it. I know for me, having worked
directly with individuals and families, thousands of
Vermonters, that is exactly what I was hearing from my own
constituents. So, when we think about unemployment insurance
programs and how they assist workers in job searches, do job
searches change when an individual is benefiting from an
unemployment insurance benefit?
Ms. Dixon. The benefit has many important qualities. One is
that it allows workers to actually match with jobs that match
their skills so they are not trying to take the first possible
thing that is offered to them, which is not good for the
economy because those folks' skills are being unused. So, it
does give them the breathing room to find a good match that is
going to be close to the salary that they were receiving before
they lost their job.
Ms. Balint. And I would assume that not only would those
skills go unused, but when you have a worker who is mismatched,
they are much less likely to stay in that job, so exacerbating
this cycle of turnover, which we know is not good for
employers, it is not good for employees or families. And is
that the case? Do we see that there is a connection there with
job churn?
Ms. Dixon. There absolutely is, and we have heard employers
loud and clear, particularly in some of the industries that
were hardest hit in the pandemic, the service industry, the
restaurant industry, where workers have actually left those
industries entirely to go to other industries because better
conditions and better pay. And so, if a worker takes a job, we
want them to actually be able to stay in that job, advance in
that job. So, it is important to them and their families, just
as it is important to employers to have stability in the role
that they are in.
Ms. Balint. Thank you. Just one more question. From your
perspective, from your experience, and your research, and the
work that you do in your position, why do you think we need to
continue to invest in and modernize state unemployment
insurance systems, because we heard in the earlier testimony
how there was a breakdown there. So, we would love to hear from
you, from your perspective, why that is so important.
Ms. Dixon. So, about a decade ago, I did a report that was
a deep dive on unemployment insurance administration and the
impact on being able to pay benefits, and what I found then was
that the average UI benefits IT system was 26 years old. That
was 10 years ago, and at the time, the oldest one was 46 years
old. And so, it is critical for us to invest, to actually put
the money in. So, usually when there is a crisis like this
pandemic, there is investment in unemployment, there is
investment in the IT systems, there is investment in
administration, but then as soon as the economy recovers, we
take our foot off the gas, and we really need to keep our foot
on the gas for this program. We need to actually make the
changes that are needed so that these systems function
correctly all the time, whether it is one family who is
suffering unemployment or it is millions of people suffering
unemployment.
Ms. Balint. Thank you so much. I yield back.
Mr. LaTurner. The gentlelady's time has expired. The chair
recognizes the gentlelady from Missouri, Ms. Bush.
Ms. Bush. Thank you. St. Louis and I are here in support of
a government that ensures no one lives in poverty. During March
and April 2020, the U.S. economy lost more than 22 million
jobs. Our unemployment rate jumped from 3.5 percent in January
2020 to a pandemic peak unemployment rate of 14.7 percent in
April 2020. St. Louis families and families all across the
country were in need of emergency assistance during those
uncertain times.
One such story shared by the National Employment Law
Project comes from my constituent, Deshauna, a single mother
from St. Louis. She said, ``If it wasn't for unemployment, I
would have been put out of my apartment. Thank God for the
help. I am still trying to get myself out of debt, but the
pandemic unemployment gives me and my son a little security. I
am a single parent getting no help from the other parent, plus
losing my job, so it has definitely been a blessing.''
The CARES Act created a temporary unemployment insurance
program called the Pandemic Unemployment Assistance, or the
PUA. In 2020, President Biden signed the American Rescue Plan
into law, which extended PUA and other temporary unemployment
insurance benefits. The PUA unlocked unemployment insurance
benefits to workers and to families who were otherwise excluded
from regular UI programs. This program was the difference
between a full dinner table and an empty one for a number of
families. Ms. Dixon, who benefited the most from these
programs, and can you tell us why? And thank you for being
here.
Ms. Dixon. So, the unemployment insurance program was
created 80-plus years ago, and it has not been substantially
modernized, and it was created on a structurally racist
foundation that was aimed at white male breadwinners. And so,
if that is the foundation. That is who mostly benefits from
unemployment insurance, and so that means women workers, folks
who work part time. It means people who work in restaurants and
service jobs where their wages are low, they often are just
entirely left out of the program, and most workers who are in
gig jobs are also excluded from the program.
So, as the work force has changed over time, many workers
have been left on the sidelines, and particularly, this impacts
women and workers of color. And so, adding this program
actually invited them into the program, some for the first time
in their working lives.
Ms. Bush. Thank you. In August 2020, the Department of
Labor announced that it would distribute up to $260 million in
grants to states to address disparities in the service delivery
and administration of state unemployment insurance systems and
promote equitable access to benefits. Ms. Dixon, how have the
Department of Labor's equity grants impacted local communities
across our country?
Ms. Dixon. One of the most critical things to understand
when folks are doing this work in the states, they want to pay
benefits, so they are not standing in the way. They are
actually working really hard when they are understaffed and,
you know, underinvested in. And one of the things that the
Equity Grant Program has helped is for those folks to
understand what the impacts are of the way the program is
designed, so that it is not necessarily the individuals and the
actions that they are taking, but it is the system and how they
need to change what they do to help offset the inequities in
the system. And that has been a really critical piece for
states to take to heart as they are working to serve unemployed
workers.
Ms. Bush. Thank you. Sadly, Republicans are so focused on
cutting programs that benefit regular everyday people, that it
is impossible to take their criticisms of these programs
seriously. We need to ensure funds are being used properly and
then expand these programs and expand them permanently.
Democrats will continue to lead with bold legislation that
tackles our Nation's crises while advancing equity and equal
opportunity. Thank you, and I yield back.
Mr. LaTurner. The gentlelady yields back. The chair
recognizes the gentlelady from Pennsylvania, Ms. Lee.
Ms. Lee. Thank you, Chairman, and thank you so much, Ms.
Dixon, for your testimony. On the last panel, I discussed and
we discussed my time at the state legislature in Pennsylvania
where we heard intimate struggles of Americans that they faced
throughout the pandemic. They often had to choose whether to
pay their rent or their childcare, as we know. And we also know
that these conditions are unacceptable. Ms. Dixon, I understand
all states approach unemployment differently. Based on your
research, is there an ideal state system we could learn from
here in Congress?
Ms. Dixon. So, rather than an ideal state system, the thing
that Congress could do is create a universal baseline that is
Federal standards that every state has to meet. Right now,
depending on the state that you happen to be unemployed in, you
may receive a benefit as low as $235 a week as the maximum, or
you may receive eligibility for as low as 12 weeks of payment
as opposed to 26 weeks in other states. And so, that doesn't
make any sense that we would have this patchwork of programs if
we really want to make sure and we are serious about coming
through for unemployed workers when they need us the most.
And so, having a baseline of standards where there is a
minimum 26 weeks that all states have to pay, where there is a
minimum dollar amount that fits what the state's economy is,
that there is a minimum set of eligibility standards that fits
all workers. We need that, and we need that crucially. We also
need an extended benefits program that turns on automatically
and just triggers on when there is a crisis so that workers are
not waiting for congressional action, but they can rely on
their programs to just spring into action.
Ms. Lee. Thank you. We talked about how some of the
different workers or different people benefited more from some
of these programs. Could you elaborate on the disparate impact
the pandemic had on communities of color that you shared in
your testimony?
Ms. Dixon. Yes. So, our labor market is very stratified,
and by ``stratified,'' I mean that women make up the largest
portion of low-wage workers and people of color also, and those
jobs were actually really hit hard in this pandemic. And so,
those folks lost their jobs, but because of history, they also
don't have wealth accumulated in savings. And so, the fact that
Congress took action so quickly and was able to get the money
out the door, it meant a lot to folks who did not have savings
to rely on and for whom this program made the difference
between being able to pay rent and stay in their homes.
Ms. Lee. Thank you. Last, where would we have been without
these programs? In other words, what would have happened to the
millions of individuals who relied on these programs during the
pandemic without them?
Ms. Dixon. We would have had incredible child poverty, and
a tsunami of evictions, and many other ills that we were able
to avoid, and that was really great for children, for families
and communities. And Congress really came through for working
people in this program, and it is something that we will feel
the positive effects of for generations. When families are in
poverty, it is very hard on children. It is hard on the mental
health of parents if they don't have income. And so, there is a
payoff beyond just the actual monetary amount that happens in
families that we will be reaping the benefits for generations
to come.
Ms. Lee. Thank you for your testimony and for your answers.
With that, I yield back.
Mr. LaTurner. The gentlelady yields back. The chair
recognizes Mr. Goldman from New York.
Mr. Goldman. Thank you very much, Mr. Chairman, and thank
you, Ms. Dixon, for being here with us today. I am from New
York. New York State experienced its first COVID-19 case on
March 1, 2020, and I actually got COVID myself on March 10,
very early on. New York was at the epicenter of the pandemic at
the beginning, and more than 78,000 New Yorkers have died as a
result of COVID. As families in New York endured record
unemployment throughout the pandemic, the unemployment
insurance system became a lifeline to nearly 5 million New
Yorkers. In my district, organizations like the Chinese-
American Planning Council connected at least 740 households
with unemployment insurance, nearly 2,000 families with housing
assistance. And more than 1,300 people who were excluded from
Federal relief programs got aid through New York City's
innovative Immigrant Emergency Relief Program, and that is just
one outstanding organization of many.
When COVID surged and 22 million people lost their job, it
fell to our unemployment insurance system to take on the
immense volume of new claims. New York's Department of Labor
distributed more than $105 billion, which is the equivalent of
50 years' worth of benefits in the two years from the start of
the pandemic. But obviously, this new influx of benefits opened
itself up to fraud, especially through identity theft online,
which I know you have spoken about. The New York State
Department of Labor has recommended that Congress provide
sustained investments and additional resources to help states
combat the ever-evolving threat of cyber fraud.
And, Ms. Dixon, I am curious what you think Congress should
do to assist states, separate from the sort of Federal baseline
that you talked about. Where would our resources be most
effective in assisting states to modernize and upgrade its
unemployment insurance systems?
Ms. Dixon. I am echoing folks from the first panel. The
information technology investments are critical. We have a
decentralized system. There are 53 different unemployment
insurance programs, and so there are 53 opportunities for
criminal fraud rings to attack the system. And so, really being
able to invest in those systems, to harden those systems, to
make sure that those offices are staffed. And one other really
critical thing that Congress could do is create a program like
the Extended Benefit Program that actually can be pre-
programmed and already have the fraud measures built into it so
that when there is a crisis, it just triggers on, and states
are ready, and they are not rushing to program a different
program each time that there is a crisis.
Mr. Goldman. Thank you. One of the most, I think,
productive and effective measures that Congress passed was the
child tax credit, and I would love for you to talk a little bit
about the success of the child tax credit and why it was so
successful at reducing child poverty.
Ms. Dixon. So, one piece of it was that money actually went
into families' bank accounts, and they did not have to wait
until they filed their taxes to get this money. And so, when
you add that money together with the unemployment insurance
payments, you have families actually getting cash to meet their
needs at a critical time. And we see that in the reduction of
poverty, like what the huge impact that was to families and
children all over the United States.
Mr. Goldman. And you are drawing a distinction between the
earned income tax credit, which comes when you are paying your
taxes, as opposed to cash direct deposited or sent to you by
check in that moment. Is that what you are saying?
Ms. Dixon. No. So, the child tax credit is also generally
not paid on a monthly basis the way it was in this instance.
So, it generally is something that either folks are changing
their tax withholding to account for, or they are waiting until
they file their taxes to get it. So, what was really
revolutionary was actually giving the cash, putting the cash in
families' bank accounts.
Mr. Goldman. And in my final seconds, can you talk
especially about how important that child tax credit was to
underserved communities and people of color in particular?
Ms. Dixon. Well, we know that those families are the ones
who are hit the hardest in this pandemic, but they are also
sort of chronically hit the hardest because they are in the
lowest-paying jobs. And so, to make sure that children actually
have their needs met, this was critical, and it was critical.
It would have been critical at any time, but it was especially
critical during this pandemic, and it would be great if
Congress could figure out how to reinstate it because the
impact was just phenomenal for families.
Mr. Goldman. Thank you, and I yield back.
Mr. LaTurner. The gentleman's time has expired. The chair
recognizes the gentlelady from New York, Ms. Ocasio-Cortez.
Ms. Ocasio-Cortez. Thank you, Mr. Chair. It can be
difficult to remember given all that has happened in the last
three years, but I would like us to envision ourselves back in
those first few months of the pandemic in the spring of 2020.
In March and April 2020 alone, the economy lost more than 22
million jobs, and the unemployment rate skyrocketed to 14.7
percent. Jobs in sectors that are absolutely essential to the
American economy were threatened. But after the CARES Act,
states were able to put in place expanded unemployment
insurance programs to assist workers who had lost their jobs,
and Census data shows that these expanded benefits kept
approximately 5.5 million people out of poverty in 2020.
Ms. Dixon, I am curious about, from your vantage point, how
expanded unemployment insurance played out as such a vital
lifeline for workers as well as states during the pandemic.
Ms. Dixon. So, one of the reasons that Congress put in
place these programs is because the unemployment insurance
program in the states is inadequate, inadequate in who it
covers, inadequate in how much the weekly benefit amount is.
And so, when Congress added $600 a week and then $300, that was
amazing, especially in states where the national average
benefit is only $300 a week. And so, this made it possible for
folks to stay in their homes. They didn't have to choose
between food and gas in their cars. It was critical, and I
think that part of what we have to do is learn from the
successes.
So, we have talked a lot about instances where there was
identity theft and fraud, but we haven't talked about the
amazing number of folks who got UI for the first time and what
it meant for them and their ability to stay attached to the
work force. And so, I think we really have to mine the data on
the good pieces and figure out what we can carry forward and
what Congress can do to actually carry those pieces forward as
a minimum standard for states to implement.
Ms. Ocasio-Cortez. Absolutely. Thank you for that
information because, you know, for so much in this hearing,
there is a constant focus not just on the notion of the
pandemic response being fraudulent or wasteful, but it seems as
though a particular fixation on the unemployment program,
which, as you stated, if it weren't for the Federal
unemployment supplemental program, families would have been
potentially enduring months of unemployment and having to just
scrounge by on as little as $300 a week. And especially when it
comes to skyrocketing costs of housing, would it be also in
your assessment that this could have also potentially, without
that Federal response, dramatically expanded the amount of
housing insecurity and people who may even be struggling with
homelessness if it weren't for that supplemental?
Ms. Dixon. It absolutely did because even though there were
also things that Congress created that were housing supplements
and assistance, it did take a while to get out, and the UI
program is the quickest way to get money into the pockets of
workers. And so, this really did have a critical influence on
being able to stay in homes and for folks to be able to pay
their rent. And, you know, there was an eviction moratorium,
but it also means that they are not sitting there with $10,000
of back rent that they can never pay. So, you know, it kept
them going in a way that made sure that they weren't incurring
debt to actually try to just do their basic living expenses.
Ms. Ocasio-Cortez. Absolutely, and despite the United
States experiencing the worst job losses since the Great
Depression during that early COVID period, the COVID-19
recession was also the shortest on record. But to expand on
this point that you are making, how did these pandemic relief
programs, particularly unemployment insurance, help stabilize
the economy even from a more macro perspective?
Ms. Dixon. So, because so much of our economy is based on
consumer spending, that is the first thing that families cut
back on, and so we know it is kind of like a, it is an
unvirtuous cycle. So, there is an economic downturn, there is a
contraction, and it just gets worse and worse. And so, the UI
program actually did what it was designed to do, which was to
stabilize the economy, to stabilize communities and state
economies, and to prevent that downward spiral, and to prevent
a double-dip recession, which we had some experience with a
pretty terrible recession not that long ago. And so, just being
able to get through this pandemic without that protracted
recession and also without that protracted high unemployment
rate.
Ms. Ocasio-Cortez. So thank you, and I yield back to the
chair.
Mr. LaTurner. The gentlelady yields back. The chair
recognizes the distinguished ranking member, Mr. Raskin.
Mr. Raskin. Thank you kindly, Mr. Chairman. Ms. Dixon,
welcome. I have got a question that is triggered by something
that you said, which is, well, why did our unemployment
insurance system grow up in such a way that it is decentralized
in the 50 states rather than being one national program because
it seems like the problems are just legion with doing it that
way.
Ms. Dixon. So, the reason is because the Southern planter
class in the 1930's would not have approved a program of that
nature. There were actually proposals to make it a universal
program, to make it paid for out of general fund dollars, and
those were not adopted because the Southern states did not want
people of color, black people in particular, to have access to
this program. They wanted the control to be able to decide who
qualifies and who does not.
Mr. Raskin. I mean, to my mind, it is almost like having 50
different Social Security programs or 50 different Medicare
programs, right? And we have just been through a period where
we have seen the brokenness of a system that is that
decentralized. So well, thank you for clarifying that for me.
The bottom line here is that expanded unemployment insurance,
even with these dysfunctional antiquated state systems, allowed
millions of people to fill in financial gaps in their lives at
a time of unprecedented difficulty and loss. Would you share a
few examples with us of how expanded unemployment insurance
benefited the people that you work with?
Ms. Dixon. So, though we don't directly represent workers,
I do get emails from workers who don't know that, and often I
can refer them to legal representation. But it is very, very
satisfying when the email that you get from a worker is about
how grateful they are, that this program is in place, that this
program got extended, and that they are able to focus on their
family and their livelihood. And so, getting those kinds of
emails from workers, it really does fill my soul and makes me
want to show up every day to do this job.
And so, workers were really organizing around these
benefits. They were active, they were engaged, and it has been
critical and phenomenal that they had these benefits to cover
their basic needs in this, like, you know, once-in-a-century
crisis.
Mr. Raskin. Got you. Is there anything else you would like
to tell us before you go?
Ms. Dixon. Don't take your foot off the gas in supporting
UI administrative funding and providing support for upgrading
IT systems and all of the things. On behalf of working people,
really grateful for the way that Congress came through, and
just hope that you all, with what you have heard today from me
and from the other panel, will take seriously the need to
invest in the infrastructure of this program so that it can
function well without Congress having to step in when there is
a crisis or just when there is a personal crisis for a family.
Mr. Raskin. Thank you for your wonderful testimony and for
your commitment to the cause. And, Mr. Chairman, I will yield
back to you.
Mr. LaTurner. The gentleman yields back. Before we adjourn
this hearing, I would like to introduce our five subcommittee
chairs on behalf of Chairman Comer. Congresswoman Nancy Mace
will chair the Subcommittee on Cybersecurity Information
Technology and Government Innovation, Congressman Pat Fallon
will chair the Subcommittee on Economic Growth, Energy Policy,
and Regulatory Affairs, Congressman Pete Sessions will chair
the Subcommittee on Government Operations and the Federal
Workforce, Congresswoman Lisa McClain will chair the
Subcommittee on Health Care and Financial Services, and
Congressman Glenn Grothman will chair the Subcommittee on
National Security, the Border, and Foreign Affairs.
I yield to the ranking member for introduction of his
subcommittee ranking members.
Mr. Raskin. Well, thank you very much. Mr. Connolly will be
our ranking member on the Subcommittee on Cybersecurity, IT,
and Government Innovation, Ms. Bush will be our ranking member
on Subcommittee on Economic Growth, Energy Policy, and
Regulatory Affairs, Mr. Mfume will be the ranking member on
Government Operations and the Workforce, Mr. Krishnamoorthi
will be the ranking member on the Subcommittee on Health Care
and Financial Services, and Ms. Porter will be ranking member
on National Security, the Border, and Foreign Affairs.
Mr. LaTurner. I ask unanimous consent that the resolution
naming the five subcommittee chairs and the five ranking
members is approved.
In closing, I want to thank our panelists once again for
their important and insightful testimony today. I also want to
thank my colleagues for participating in our first oversight
hearing of the 118th Congress, an oversight hearing that goes
to the very heart of this committee's jurisdiction, protecting
taxpayer dollars from fraud, waste, and abuse.
With that and without objection, all members will have five
legislative days within which to submit extraneous materials
and to submit additional written questions for the witnesses to
the chair, which will be forwarded to the witnesses for their
response.
Mr. LaTurner. With that, our hearing is adjourned.
[Whereupon, at 3:52 p.m., the committee was adjourned.]
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