[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]




 STOLEN TAXPAYER FUNDS: REVIEWING THE SBA AND OIG REPORTS OF FRAUD IN 
                       PANDEMIC LENDING PROGRAMS

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             JULY 13, 2023
                               __________




                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                               



            Small Business Committee Document Number 118-020
             Available via the GPO Website: www.govinfo.gov



                               ______
                                 

                 U.S. GOVERNMENT PUBLISHING OFFICE

52-559                    WASHINGTON : 2023












                   HOUSE COMMITTEE ON SMALL BUSINESS

                    ROGER WILLIAMS, Texas, Chairman
                      BLAINE LUETKEMEYER, Missouri
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                         BETH VAN DUYNE, Texas
                         MARIA SALAZAR, Florida
                          TRACEY MANN, Kansas
                           JAKE ELLZEY, Texas
                        MARC MOLINARO, New York
                         MARK ALFORD, Missouri
                           ELI CRANE, Arizona
                          AARON BEAN, Florida
                           WESLEY HUNT, Texas
                         NICK LALOTA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                          JARED GOLDEN, Maine
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                          GREG LANDSMAN, Ohio
                       MORGAN MCGARVEY, Kentucky
                  MARIE GLUESENKAMP PEREZ, Washington
                       HILLARY SCHOLTEN, Michigan
                        SHRI THANEDAR, Michigan
                          JUDY CHU, California
                         SHARICE DAVIDS, Kansas
                      CHRIS PAPPAS, New Hampshire

                  Ben Johnson, Majority Staff Director
                 Melissa Jung, Minority Staff Director








                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Roger Williams..............................................     1
Hon. Nydia Velazquez.............................................     3

                                WITNESS

Hon. Hannibal ``Mike'' Ware, Inspector General, United States 
  Small Business Administration, Washington, DC..................     4

                                APPENDIX

Prepared Statement:
    Hon. Hannibal ``Mike'' Ware, Inspector General, United States 
      Small Business Administration, Washington, DC..............    36
Questions and Answers for the Record:
    Questions from Hon. Williams to Hon. Ware and Responses from 
      Hon. Ware..................................................    52
    Questions from Hon. Velazquez to Hon. Ware and Responses from 
      Hon. Ware..................................................    54
    Questions from Hon. Phillips to Hon. Ware and Responses from 
      Hon. Ware..................................................    63
    Questions from Hon. Scholten to Hon. Ware and Responses from 
      Hon. Ware..................................................    64
Additional Material for the Record:
    SBA OIG Report...............................................    67
    SBA OIG White Paper Excerpt..................................    85
    SBA Letter to CVD............................................    90
    SBA Protecting the Integrity of the Pandemic Relief Programs: 
      SBA's Actions to Prevent, Detect and Tackle Fraud..........    92
    SBA Letter to Hon. Williams..................................   123
    SentiLink....................................................   125







 
 PANDEMIC FRAUD ACCOUNTABILITY: REVIEWING THE SBA INSPECTOR GENERAL'S 
                         COVID-19 FRAUD REPORT

                              ----------                              


                        THURSDAY, JULY 13, 2023

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:26 p.m., in Room 
2360, Rayburn House Office Building, Hon. Roger Williams 
[chairman of the Committee] presiding.
    Present: Representatives Williams, Luetkemeyer, Stauber, 
Meuser, Van Duyne, Salazar, Mann, Molinaro, Alford, Bean, Hunt, 
LaLota, Velazquez, Golden, Phillips, Landsman, McGarvey, 
Gluesenkamp Perez, Scholten, Thanedar, Chu, Davids, and Pappas.
    Also Present: Representative Wenstrup.
    Chairman WILLIAMS. Before we begin, we are going to take a 
moment to say an opening prayer and the pledge, and I yield 
like Congressman Bean to say the prayer, and then we will stand 
for the pledge.
    Mr. BEAN. Thank you, Mr. Chairman.
    Good afternoon, Small Business Committee. Let's go to the 
Lord in prayer.
    Heavenly Father, we say thank you. It is the Small Business 
Committee saying thank you for small businesses. We know they 
are the businesses that put food on the table and provide jobs 
for Americans, and we know it is scary out there, and we know 
that it is a challenge to run a small business. So today we ask 
a blessing, a thank you, and protection for these businesses. 
May they thrive. They are the backbone of America.
    We are also grateful of a free country, those that protect 
it and have protected it and will protect it. We ask a blessing 
on leaders, that we have sense to do the right thing, and we 
continue to make this the greatest country, one of the greatest 
countries and to continue to do great things around the world.
    All this we ask in your name. Amen.
    Please join me in the pledge of allegiance.
    All. I pledge allegiance to the Flag of the United States 
of America, and to the Republic for which it stands, one 
nation, under God, indivisible, with liberty and justice for 
all.
    Chairman WILLIAMS. Good afternoon, everyone. I now call the 
Committee on Small Business to order.
    Without objection, the Chair is authorized to declare a 
recess of the Committee at any time.
    I now recognize myself for my opening statement.
    Welcome to today's hearing, which will focus on two recent 
reports examining fraud in the COVID-19 pandemic-lending 
programs. These contradicting reports, one from the SBA's 
Office of Inspector General and the other from the Small 
Business Administration were released within hours of one 
another on June 27th.
    The SBA Inspector General report concluded the SBA 
disbursed more than $200 billion in potentially fraudulent 
loans through pandemic relief programs while the SBA reported 
the fraud in these programs is closer to $36 billion. This 
large discrepancy, more than $160 billion, certainly demands 
answers.
    And given the drastically different figures in these 
reports and the lack of an adequate plan to recoup these stolen 
taxpayer funds, we invited SBA Administrator Guzman to join us 
here today, but as you can see by her empty seat, she declined 
the offer. You would think that a report from a nonpartisan 
watchdog claiming hundreds of billions of dollars were 
disbursed to criminals through the SBA would warrant her 
showing up to this Committee today, but that obviously isn't 
the case for Administrator Guzman.
    During the pandemic, the SBA oversaw an unprecedented 
amount of lending. While there was an understanding that 
getting money out quickly could lead to higher levels of fraud, 
nothing of this magnitude was ever imagined. The OIG report 
estimates that roughly one in five loans, I repeat one, one in 
five loans disbursed through the pandemic programs have been 
labeled as potentially fraudulent. This after-action report 
shows the SBA was not up to the task when the American people 
needed their help the most, and we must have this track record 
in the back of our minds as the agency looks to take on 
additional responsibilities.
    The American people need accountability and transparency, 
and if a small business accounts receivable were as high as the 
SBA's, they would take all action possible to get this money 
back. It belongs to them. Unfortunately, it does not appear 
that the SBA is taking every action possible to get these 
stolen funds from back from the taxpayers.
    So we cannot sweep this under the rug or write it off. All 
this fraud is a loss for the taxpayers' bottom line.
    So Inspector General Ware, thank you for taking time to 
join us today, and we look forward to your examination of these 
reports and their discrepancies. And also, the Honorable Guzman 
is not here, but her chair is there.
    We understand the failures with the SBA are independent of 
you and your office, but on behalf of Main Street America, it 
is our responsibility to hear about your findings and work 
toward a solution to combat fraud moving forward. We must 
obtain a better understanding of what went wrong, how to fix 
these issues, and what we can do to recover these stolen 
taxpayers' dollars, which we must begin to go forward and 
recover what we can.
    We stand ready to work to ensure the SBA is the oversight 
metrics in place to fairly report their past mistakes, and 
hopefully to restore integrity in the agency.
    In closing, I would like to take note that the SBA provided 
a formal letter declining our invitation in which they, again, 
accused the OIG of significantly overestimating the fraud and 
misleading the public. Misleading the public, they say. I ask 
unanimous consent for that letter, as well as the two reports 
we will be discussing today, one from the OIG and one from the 
SBA, to be entered in the record.
    Without objection, it is so ordered.
    So I also ask unanimous consent to waive the Chairman of 
the Select Subcommittee on the Coronavirus Pandemic, Dr. Brad 
Wenstrup, for the purpose of asking questions in his hearing.
    Without objection, that will be so ordered.
    So with that, I will yield to our distinguished Ranking 
Member from New York, Ms. Velazquez.
    Ms. VELAZQUEZ. Thank you, Chairman Williams.
    Welcome back to the Committee, Mr. Ware.
    First, let me thank you and the federal employees who work 
for the Office of the Inspector General. The past 3 years have 
been extremely challenging for the SBA and your office as well. 
The agency executed 14 years of lending in 14 days to help keep 
small businesses afloat in the pandemic. It is important to 
note the impact of the agency's effort on America's small 
business.
    Since President Biden took office, entrepreneurs have 
started a record number of small businesses that have created 
jobs at a rapid pace. Small firms have paved the way for some 
of the lowest unemployment rates in recent times, and we got 
more good news yesterday, as annual inflation dropped to 3 
percent--its lowest rate since 2021.
    Despite these successes, any program of the magnitude of 
SBA's COVID-lending measures is bound to encounter serious 
issues, and your office has been working around the clock 
issuing reports and launching investigations to combat the 
potential fraud in the pandemic relief programs.
    Turning to your report, your office estimates that there is 
$200 billion in potentially fraudulent COVID, EIDL, and PPP 
loans, which is unsettling. The SBA issued a report the same 
day and found that $36 billion of the $1.2 trillion in pandemic 
relief was likely obtained fraudulently. Further, 86 percent of 
the fraud occurred in the first 9 months of the pandemic under 
the Trump administration.
    The findings in these two reports are widely different and, 
quite frankly, confusing. I understand there will be 
discrepancies in the reporting, but I am concerned over the 
degree to which the estimates vary.
    If our committee is going to conduct proper oversight of 
the SBA, we need to be assured that the reports we are 
receiving, whether from the OIG or SBA, are measured 
accurately. I also look forward to continuing to work with the 
GAO on its findings as a nonpartisan entity. It is our duty to 
drill down and to ensure we are prepared in the event of 
another global catastrophe.
    To date, your oversight and investigative work has resulted 
in over 1,000 indictments, over 800 arrests, nearly 550 
convictions, and approximately $30 billion in aid was seized or 
returned. Your efforts are to be commended, but more work will 
need to be done to hold wrongdoers accountable and recover 
taxpayers' dollars.
    As you know, I sponsored bipartisan legislation to extend 
the statute of limitations for fraud in the PPP and EIDL 
programs, which became law. This sent a strong message that 
unscrupulous behavior will not be tolerated, and those that 
committed fraud will be held accountable in the years to come.
    To capitalize on these two new laws, I understand you will 
need the full fiscal year 2024 budget request. Unfortunately, 
Republicans in Congress want to pair funding back to fiscal 
year 2022 levels, and the most recent proposal provides $32 
million for the OIG, hindering your ability to recover 
fraudulent funds.
    I appreciate your oversight and investigative work, and 
that is why I am supportive of the President's increased 
funding request for your office. I am fully committed to 
working with my colleagues to oppose any short-sided cutbacks. 
With that said, I fully expect that you will work closely with 
the SBA to further refine this data and help to close the gap 
between the two estimates.
    In closing, I would like to request that the SBA's response 
to your invitation to testify before the Committee today and 
their response to the OIG's white paper be entered into the 
record.
    Mr. Chairman?
    Chairman WILLIAMS. So moved.
    Ms. VELAZQUEZ. Thank you, and I yield back.
    Chairman WILLIAMS. Thank you.
    Now it is my honor to introduce our witnesses. Of course, 
our first witness, Isabella Guzman, as we heard, did not come 
today. She chose not to come. She was asked more than once to 
attend to defend her position. So she chose not to do that. So 
we have an empty seat for her.
    Secondly, the Honorable Mike Ware is here, and Inspector 
General Ware holds a Bachelor of Arts degree in accounting from 
the University of the Virgin Islands. In May of 2018, following 
his confirmation by the U.S. Senate, Mr. Ware was sworn in as 
the Inspector General of the Small Business Administration. 
Prior to his appointment, Mr. Ware served as the Deputy 
Inspector General.
    Mr. Ware has over 30 years of experience in the OIG 
community. In 1990, he joined the Department of Interior, OIG's 
Virgin Islands field office as an auditor, and later became the 
field office supervisor. Mr. Ware later moved to the DOI Office 
of Inspector General's Office of Management and served as the 
Deputy Assistant Inspector General for Management.
    In his current role as Inspector General, Mr. Ware is 
responsible for the independent oversight of the Small Business 
Administration's programs and operations, which normally 
encompass more than $100 billion in guaranteed loans and nearly 
100 billion in federal contracting dollars.
    Mr. Ware recently testified before the Committee in April, 
and I would like to welcome him back. Inspector General Ware, 
thank you for joining the Committee once again. I am looking 
forward to our conversation.

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

    Mr. WARE. Thank you.
    Chairman Williams, Ranking Member Velazquez, and 
distinguished Members of the Committee. Thank you for inviting 
me to testify before you today and for your continued support 
of the Office of Inspector General.
    SBA's role in the nation's pandemic response presented an 
unprecedented oversight challenge, one that we are continuing 
to meet both independently and objectively to improve the 
performance of SBA's programs and services for the benefit of 
the American people. I am more than proud of the 
accomplishments of the hardworking men and women of my office 
in detecting, deterring, and combating fraud while also keeping 
both the Congress and the Administrator fully and currently 
informed.
    Our office knew from the onset of pandemic relief that SBA 
would face a delicate balancing act of preventing widespread 
fraud while ensuring timely disbursement of relief funds to 
Americans in immediate need. The biggest concern for our office 
was SBA's quick delivery of capital to qualifying small 
businesses without first establishing the internal controls 
necessary to decrease the risk of fraud. This is why we issued 
two reports prior to the first PPP loan, or EIDL, being 
disbursed, stressing the importance of upfront program controls 
to mitigate the risk of fraud.
    We proactively recommended internal control measures to SBA 
and policymakers in real time to address the allure of easy 
money that created the golden opportunity for even otherwise 
law-abiding citizens to commit fraud. To date, we have issued 
33 pandemic-related reports with dozens of recommendations and 
provided about 100 congressional briefings, both to supply 
corrective action and strengthen the internal control 
environment.
    Over the course of the pandemic, SBA disbursed 
approximately $1.2 trillion of COVID-19 EIDL and PPP funds. 
Using our investigative casework, prior reporting, advanced 
data analytics, and additional review procedures, we estimate 
SBA disbursed more than $200 billion in potentially fraudulent 
loans. This estimate represents approximately 17 percent of 
disbursed funds in those programs.
    In conducting the fraud landscape review, our office 
unleashed the power of data analytics in our oversight 
function. Fueled by the expertise and experience of our 
criminal investigators, auditors, and analysts, the report 
identifies 11 fraud indicators that we use to signal potential 
fraud. I have offered additional insights on the various fraud 
indicators from the report in my written statement.
    Our office was able to reduce potential false positives by 
using link analysis. This allowed us to prioritize our focus on 
loan clusters highly suspected of being fraudulent. Our 
auditors, analysts, and investigators whittled down numbers by 
conducting additional reviews using sampling and professional 
judgment, taking into consideration prior experience and 
investigative casework across the entire law enforcement 
spectrum.
    The transparency afforded by the fraud landscape report and 
our well-founded recommendations for corrective action served 
to mitigate fraud. In fact, SBA, indeed, made significant 
progress to reduce fraud risk and prevent further losses in its 
pandemic programs. We look forward to continuing to partner 
with SBA to combat fraud within these programs.
    Our collaboration with the SBA, the U.S. Secret Service, 
other federal agencies and financial institutions has resulted 
in about $30 billion in COVID-19 EIDL and PPP funds being 
seized or returned to SBA. With our law enforcement partners, 
we have taken the fraud directly to the doorstep of wrongdoers. 
Our investigative work has resulted in over 1,000 indictments, 
over 800 arrests, and over 550 convictions as of June this 
year.
    And it is important to note that we aren't alone in the 
fight. We are on every Department of Justice national strike 
force, and multiple U.S. Attorney task forces across the 
country. We continue to work hand in hand with the PRAC, the 
FBI, the Secret Service, IRS Criminal Investigation, Homeland 
Security investigations, the United States Postal Inspection 
Service, TIGTA, and OIG. Too many to mention.
    It is also important to note that our oversight capacity is 
dependent upon the availability of sufficient budgetary 
resources to continue addressing the fraud within SBA's 
pandemic response programs. Absent the total budgetary 
resources requested for us in the 2024 budget, we will not have 
a sufficient operating budget to combat the fraud within SBA's 
programs or to provide trusted and effective oversight over its 
flagship programs.
    Critically, we would not have a sufficient operating budget 
to capitalize on the new laws you wisely passed last year 
extending the statute of limitations to 10 years for fraud in 
the PPP and EIDL programs. The nation once again can depend on 
us to provide independent, objective, and timely oversight of 
SBA.
    Thank you for the opportunity to speak to you today. I am 
happy to answer any questions you may have for me.
    Chairman WILLIAMS. Thank you very much. And you know that 
you--you know the drill. When the light turns red, your 5 
minutes is up, okay?
    We will now move to the Member questions under the 5-minute 
rule. I recognize myself for 5 minutes.
    Before I get started, I want to reiterate how disappointed 
I am the Administrator did not show up today. This is a big 
deal. And I would assume she would have an army of her staff 
here coming to defend her work and the SBA as a whole, but not 
even the army is findable. So, but today, we are having this 
hearing with her seat as being empty.
    Shortly after you released your fraud report, the SBA 
released a statement that expressed its concern that the OIG's 
approach contained serious flaws that significantly 
overestimate fraud and misleads the public. I don't know if I 
ever remember a time an agency ever accused their nonpartisan 
watchdog of misleading the American people and the 
congressional committees that are charged with their oversight.
    So Mr. Ware, question: Did you and all the employees within 
your office put together this report to lie about what occurred 
within these pandemic programs? Was that your goal?
    Mr. WARE. Absolutely not. Our goal, as we have demonstrated 
from the beginning of the pandemic is to keep--is to be 
independent, and keep an objective eye so that you can properly 
oversee these programs along with us, and I think that we have 
done that. I am super confident in this report.
    Chairman WILLIAMS. The two total fraud numbers that are 
presented in these reports are drastically different, both 
unacceptable. Either one is wrong. Can't accept it. The SBA 
claims that they had a more diligent process that ruled out 
much of the fraud that your team has flagged.
    I have a few questions about these claims. First, who has 
access to more data to more accurately find the levels of 
fraud? The OIG or the SBA?
    Mr. WARE. The Office of the Inspector General does.
    Chairman WILLIAMS. Okay.
    Secondly, your review of the estimated fraud didn't start 
at $200 billion. What was the initial value of the potential 
fraud you looked at before you got it down to $200 billion?
    Mr. WARE. $650 billion.
    Chairman WILLIAMS. Has your office ever communicated that 
starting figure to the SBA?
    Mr. WARE. We have.
    Chairman WILLIAMS. Reporting from outside news 
organizations, researchers claim the levels of fraud were much 
higher than even your number. Your report says that the $200 
billion figure is conservative. So do you think it is possible 
that you are underestimating the fraud numbers rather than 
overestimating, as SBA is claiming?
    Mr. WARE. I believe that as the datasets become available, 
more and more datasets to us, that the number could be 
calibrated. It could go up. It might go down. But I am telling 
you that we have a cap on where we believe that fraud level is 
currently, and that is at the two and--a little over $200 
billion.
    Chairman WILLIAMS. So we must get an accurate picture of 
what money was obtained illegally so we can bring the criminals 
who took advantage of taxpayers to justice and get money back 
to the Treasury Department, and we are not just talking about 
this. We are talking about doing this.
    So while it is good to identify the fraud that occurred, it 
is going to all be in vain if we don't get this money back for 
the American people and just talk about it and don't deliver.
    So Mr. Ware, we have seen the SBA take some deliberate 
actions that will make it harder to get back some of the 
illegally obtained funds, such as their decision not to collect 
on PPP or EIDL loans under $100,000. Can you tell us what 
actions the SBA could take immediately that would get more of 
these illegally obtained funds returned for the taxpayers?
    Mr. WARE. Let me state that we have partnered hand in hand 
with the agency to pull back the $30 billion that we have 
pulled back thus far. There is even more in the shoot right 
now. We are just working through the agency to try to 
streamline the process for getting that money back. We are 
still going after this. The Secret Service is still working 
with us on our individual cases. Together with the Secret 
Service, we pulled back $1 billion.
    And there are, like I said, quite a bit still in the shoot. 
We will be working with the U.S. Postal Inspection Services to 
do that as well.
    Chairman WILLIAMS. You know, to the taxpayers, $100,000 is 
still a lot of money. So just to ignore it is another problem.
    So I now recognize the Ranking Member for 5 minutes of 
questions.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    Mr. Ware, the SBA asserts that 86 percent of the likely 
fraud originated in the first 9 months of the pandemic under 
the Trump administration. Does your report include such 
detailed information on when the likely fraud occurred? Yes or 
no?
    Mr. WARE. No.
    Ms. VELAZQUEZ. Does your report indicate that the Biden 
administration put internal controls in place to combat fraud 
almost immediately upon taking over?
    Mr. WARE. Yes.
    Ms. VELAZQUEZ. Yes or no?
    Mr. WARE. Yes.
    Ms. VELAZQUEZ. Do you agree that the vast majority of the 
fraud occurred in the first 9 months of the pandemic? Yes or 
no?
    Mr. WARE. Yes.
    Ms. VELAZQUEZ. Did the antifraud controls that the Biden 
administration put into place successfully reduce the potential 
for fraud? Yes or no?
    Mr. WARE. Yes.
    Ms. VELAZQUEZ. Your approach puts an open limit on the 
potential fraud. With future investigative work, you may weed 
out a number of loans that produce a false positive. Yes or no?
    Mr. WARE. Yes.
    Ms. VELAZQUEZ. Will you then lower the estimate? Yes or no?
    Mr. WARE. It could lower or go up. It could go both ways. 
So it is difficult for me to answer yes or no. I am going to 
tell the truth. That is what I am going to do. Whatever the 
number is, that is the number.
    Ms. VELAZQUEZ. We are all here for the truth so that we 
could enact legislation to correct the shortcomings of what was 
in place.
    Your estimate of potential fraud is much higher than SBA's 
estimate. In fact, SBA expressed concerns that the approach 
contains serious flaws that significantly overestimate fraud 
and mislead the public. How do you respond?
    Mr. WARE. I respond that SBA is mistaken, and I think they 
know that. We have--there are two main reasons for that. One, 
we are the independent watchdog. We have demonstrated that 
throughout the pandemic and long before that as one of your 
original 12 Offices of Inspector General.
    Ms. VELAZQUEZ. Okay.
    Mr. WARE. Secondly, we have access to datasets that they 
didn't have access to.
    Ms. VELAZQUEZ. Okay.
    SBA conducted a four-part antifraud control framework to 
prevent and detect fraud. SBA identified 3.4 million files 
totaling $400 billion as potentially fraudulent, and a human-
led review lowered this number to $36 billion in likely fraud.
    Did your office conduct a manual review of each and every 
file like SBA did?
    Mr. WARE. I will assert that SBA's manual review does not 
meet the qualifications of a manual review for our office.
    Ms. VELAZQUEZ. SBA reported that it had 7,300 employees and 
contractors reviewing these files, and some were easy to clear. 
For example, if a borrower uploaded a fake driver's license, 
SBA could identify that loan as fraud quickly.
    I also understand that SBA's level of review will not be as 
in-depth as the OIG review, which can take up to 250 days, but 
SBA's review honed in on the amount of likely fraud, as opposed 
to reporting on the upper limit of potential fraud.
    Is there a reason you issued this report on potential fraud 
given the significant discrepancies? You say that you have been 
working hand in hand up to this point yet two reports show a 
clear discrepancy in terms of the number. Rather than work with 
SBA to come up with a better estimate for likely fraud, why did 
you issue the report?
    Mr. WARE. So this is not just semantics in terms of likely 
and potential. Likely fraud for us is $650 billion. That is no 
assurance. Potential fraud to us means that we will open an 
investigation on every single one of them that we have 
identified if we have the resources.
    Ms. VELAZQUEZ. Okay. That is the point. If you have the 
resources going forward, we have 10 years, right, that we gave 
you through the law that we enacted as a result of the work 
that we did. Based on the budget that the Republicans are going 
to pass that is calling for fiscal year 2022 levels, you will 
not have the resources, would you?
    Mr. WARE. I will not have if I don't have my '24 budget.
    Ms. VELAZQUEZ. Thank you.
    I yield back.
    Chairman WILLIAMS. Next I now recognize Representative 
Luetkemeyer from the great State of Missouri for 5 minutes.
    Mr. LUETKEMEYER. Thank you, Mr. Chairman.
    And Mr. Ware, thank you. Inspector General, thank you for 
being here today. I appreciate your hard work and the integrity 
of that work.
    I have got a quick question for you here with regards to--
the Chairman talked a little bit a minute ago about the 
$100,000 level of--the SBA not going after those folks 
underneath that. Are you going after that at all? Are you 
identifying those folks yourself?
    Mr. WARE. Yes, well, if they show up as a fraudulent actor 
for our office, they go through the same triage process as 
anything else in terms of our prioritization on strategy. So, 
yes.
    Mr. LUETKEMEYER. Okay. So they say it is not cost effective 
to do this. They don't have the manpower to do this. Is there 
any thought to maybe handing these over to a collection agency?
    Mr. WARE. I would have to yield to the SBA on this. Our 
position on it in the PPP report on the same matter and coming 
in the EIDL report is that they have not done a sufficient 
study to determine whether or not it is cost effective.
    Mr. LUETKEMEYER. Well, okay. So we need to go back to the 
SBA, Ms. Guzman, who conveniently is not here today, to be able 
to ask that question. And if they don't think it is cost 
effective for them, hand it to a collection agency. And you 
have the IRS to be able to also be a backup to be able to get 
those funds, do you not? Do you have an idea roughly of what 
the recoverable amount would be in that $100,000, less than 
$100,000 range?
    Mr. WARE. No, that would be very difficult for me the to 
provide.
    Mr. LUETKEMEYER. Thank you for that.
    In your report, you say certain lenders added to the fraud 
risk by prioritizing quickness and potential profit over a 
thorough review of applicant eligibility for government aid. 
Can you tell me who those certain lenders are?
    Mr. WARE. I could definitely get back to you on the names 
of the certain lenders, but they were in certain industries.
    Mr. LUETKEMEYER. Certain industries. Okay, so in other 
words, if I am not mistaken from previous testimony in this 
Committee, the Fintech industry was the main culprit here, was 
it not?
    Mr. WARE. Right. In many instances, yes.
    Mr. LUETKEMEYER. And I know that the SBA is getting ready 
to expand some of the programs to allow Fintech to be able to 
participate in them. Is that not correct?
    Mr. WARE. This is true.
    Mr. LUETKEMEYER. Are you working with the SBA to make sure 
that the Fintech folks, that our problem children here are not 
going to be problem children in the new program?
    Mr. WARE. I am on record with SBA on this matter in 
ensuring that they have the same rules that properly regulate 
the more traditional lending institutions to apply here as 
well. That is all we are after. It doesn't matter to me whether 
it is a Fintech or not a Fintech. It matters to me that they 
are playing on a level playing field, and the internal control 
environment is set correctly to avoid what happened.
    Mr. LUETKEMEYER. Well, I appreciate that, but it is very 
concerning to me whenever they are allowing basically the folks 
who were bad actors in the previous program to be able to 
participate it in again. That makes no sense to me.
    Another question for you here with regards to the money 
that is clawed back. Is that money going to Treasury?
    Mr. WARE. It depends. So for the EIDL program, that money 
more went back to SBA, their account within the Treasury, 
right. And for PPP, a lot of that money went to the banks. It 
goes back to the banks as the lenders.
    Mr. LUETKEMEYER. Okay. So are you tracking those dollars?
    Mr. WARE. We are.
    Mr. LUETKEMEYER. Are they all going back to where they need 
to go? Have you tracked all $30 billion I guess is the 
question?
    Mr. WARE. Yes, that part is tracked, but we have others, 
and we are still working with the agency on creating a better, 
more efficient way to track the money that is clawed back.
    Mr. LUETKEMEYER. So you're telling me that you haven't got 
all the money tracked yet?
    Mr. WARE. The agency does not have all the money tracked. 
We know of money that is still in the pipeline. Where that 
money is to go and exactly where to pull it back--we issued a 
report on this, on giving them some recommendations on how 
better to do this. We are still working with them.
    Mr. LUETKEMEYER. Well, this is my concern is that we have 
got $30 billion running around here and we don't know where it 
is at.
    Mr. WARE. No, that $30 billion, we know where that is at.
    Mr. LUETKEMEYER. You know where it is?
    Mr. WARE. Yes.
    Mr. LUETKEMEYER. On where it is headed?
    Mr. WARE. Yes.
    Mr. LUETKEMEYER. You know where it has been recovered?
    Mr. WARE. Can I look back at one person real quick? If I 
could look back.
    Mr. LUETKEMEYER. All right.
    Mr. WARE. Yes, we know. Yes. Yes, we know.
    Mr. LUETKEMEYER. Okay. All right. I trust you, Inspector 
General. I have been working with you long enough to know that 
you are square shooter.
    I have one more question before my time runs out here. In 
the SBA's data, in the May 22, '23 report, it shows that about 
1.6 million COVID, EIDL totaling 54 percent of active 
performing loans are past due, delinquent, or in liquidation, 
totaling $114.2 billion.
    Are you aware of that number?
    Mr. WARE. Yes. That is the number the agency provided to 
us.
    Mr. LUETKEMEYER. Okay. So we have got $114 billion more in 
these EIDL programs that while not being fraudulent, is in 
really big trouble. Would that be a way to----
    Mr. WARE. I am not certain about that. I am just certain 
about the number that----
    Mr. LUETKEMEYER. Well, it says past due, delinquent, or in 
liquidation. To me that means they have got some problems 
there.
    Mr. WARE. Oh, no doubt.
    Mr. LUETKEMEYER. And not just fraudulent problems, but we 
have got some problems with the fact that those dollars are 
going to people who either can't pay it back or won't pay it 
back.
    Mr. WARE. Right.
    Mr. LUETKEMEYER. Okay.
    With that, I yield back. Thank you, Mr. Chairman.
    Chairman WILLIAMS. Next I now recognize Representative 
McGarvey from the great State of Kentucky for 5 minutes.
    Mr. MCGARVEY. Thank you, Mr. Chairman.
    Thank you, Mr. Ware, for being here. I know you are from 
the Virgin Islands, but I understand you have some family in 
the great Commonwealth of Kentucky. So two great places there.
    Thank you for being here. I thank you for the incredibly 
important work that your office carries out to protect the 
Small Business Administration and, in this case, taxpayers' 
dollars.
    We are here today talking about fraud that happened during 
the pandemic in fraud and pandemic relief programs. So I am 
glad that you have an opportunity to talk about what kind of 
fraud controls work and how we can recover fraudulent loans 
issued during the pandemic. No one on this Committee wants 
money going out to fraudulent businesses or fraudulent lenders.
    So I also want to take a second to set the stage and 
remember what it was like when the pandemic started. This was 
an unprecedented program where, you know, we were putting 
together things literally in 2 weeks and saying we have got to 
get money out to these businesses. I know the businesses in my 
community, many of whom got this money, and that is why they 
are still here today.
    Between the Biden and Trump administrations, the SBA set up 
programs and issued over $1 trillion of loans. And according to 
SBA's analysis, only a small percentage of that money went to 
fraudulent buyers. According to your analysis, even a vast, 
vast majority of it went to people who needed it.
    Just this week, I met with Headliners Music Hall in my 
office as they were up here on another issue. Headliners Music 
Hall would not be here today if it weren't for a successful 
program like this that enabled this business to be here. These 
programs saved our economy, and they saved the businesses in 
our communities that we cherish.
    There are some bad actors that took advantage of this, and 
we have got to make sure we go after them, but as you have 
already testified today, the vast majority of the fraud took 
place in the first 9 months, and I will point this out, of 
2020, so between March of 2020 and January of 2021.
    Who was the small business administrator at that time, Mr. 
Ware? It wasn't Ms. Guzman, was it?
    Mr. WARE. Oh, no.
    Mr. MCGARVEY. No, it wasn't? Okay.
    Mr. WARE. Carranza. Carranza.
    Mr. MCGARVEY. Was it----
    Mr. WARE. No.
    Mr. MCGARVEY. It wasn't?
    Mr. WARE. Ms. Carranza.
    Mr. MCGARVEY. Ms. Carranza.
    I guess there is an empty seat here for them, too, because 
they are not here to answer why all of this fraud took place 
under their watch, and so I am glad you point that out.
    Mr. Ware, the SBA analyzed the EIDL repayment data and 
reported that 74 percent of COVID EIDL borrowers already made a 
payment, and once the 30-month deferral period lapses, the SBA 
expects 85 percent of borrowers will have made a payment. This 
information contradicts your findings that $136 billion worth 
of COVID EIDLs are potentially fraudulent.
    Why didn't you take into consideration the repayment data, 
which would have lowered your estimate of fraud in the EIDL 
program?
    Mr. WARE. Let me say two things about that. That data that 
you are talking about, they gave that to us probably like 2 
days prior, and then came with the other information after. 
But, so repayment data for us was not a factor for EIDL. It is 
a factor for PPP, where those loans were intended to be 
forgiven and basically become a grant. So if you don't come 
back for forgiveness or you don't try to--you know, and don't 
try to repay, clearly that is an indicator. Within EIDL we are 
arresting people almost daily that are making payments.
    So our criminal investigations across the nation are 
telling us that fraudulent actors do repay those loans and we 
know why. They could be like businessmen that fraud is their 
thing, right. So they are conducting business, and they are 
paying the loans back never to be found.
    Also, in the plea agreements, to try to get--to show good 
faith to U.S. Attorneys and everything else, people pay their 
loans. And with all the publicity that this is getting, that we 
are coming and that there is a whole-of-government approach to 
this, people pay so as not to be discovered.
    Mr. MCGARVEY. I am glad you bring that up because, again, 
we want to go after the fraudulent actors. We want to make sure 
that we are getting this money back if it was used 
inappropriately, particularly by people who are taking 
advantage of a successful program during a time we needed it.
    So the vast majority of the fraud took place during the 
Trump administration, and in 2021, Administrator Guzman and the 
Biden administration reinstated the longstanding antifraud 
controls and new safeguards while also reviewing the previously 
answered loans flagged as fraudulent.
    Can you take a moment to just let us know, are these 
security measures like the SBA's four-part antifraud control, 
are they being effective, and are they combating fraudulent 
borrowing since implementation?
    Mr. WARE. We do know that it has curved the tide. To what 
extent, we are still reviewing that, and we have reviews that 
are coming to an end real shortly on exactly how those controls 
performed. More importantly, if the controls promised were, 
indeed, implemented as they promised.
    Mr. MCGARVEY. And thank you. I appreciate that.
    In our closing comments, I appreciate you being here. And, 
you know, this is a Committee that works together to stop 
activities like this. I hope your presence here is not a 
partisan attack on the administrator.
    Chairman WILLIAMS. Okay. I now recognize Representative 
Meuser from the great State of Pennsylvania for 5 minutes.
    Mr. MEUSER. Inspector General, great to be with you.
    Mr. Chairman, thank you.
    So we are not really trying to assign blame here over on 
this side of the aisle. We would like to try to find some 
answers and solutions. You know, the numbers that are being 
offered by my colleagues are not just accurate. I mean, the 
EIDL was the primary loss from fraud. The PPP, as stated, was a 
heroic savior of our economy. 70 percent of the PPP went out 
under the previous administration where about slightly over 30 
percent under the other.
    So if we want to--you know, there is a lot of blame to go 
around, but, my goodness, it is just a shame that that is the 
majority of the time being spent.
    Now, it does not, it does not dismiss the fact that the 
Administrator Guzman, under this terrible situation, okay, 
where fraud exists is not here. I know damn well if I was the 
SBA administrator, if this was the case, I would be sitting 
there trying to help solve the problem and explain it to the 
American people how this occurred and where things are and what 
we are being--what is being done to create the--to gain the 
collections and what is being done to those who committed the 
fraud, whether it is institutions, whether it is Republicans or 
Democrats.
    That is why, Mr. Inspector General, we appreciate you being 
here and your forthrightness and your honesty and your courage 
in moving this to help solve some of these issues.
    So let me ask you this, sir: Did you work with the banks 
and the lending institutions to gain the information to figure 
out which buckets the $200 billion in estimated fraud came 
from?
    Mr. WARE. In some instances, yes, we were able to obtain 
lender files and conduct reviews to validate our findings.
    Mr. MEUSER. Okay. And so the banks, obviously, were 
cooperative in saying even though I had known the customer or I 
didn't know the customer, you probably worked that data as 
well?
    Mr. WARE. The banks were incredible partners to us to route 
oversight of these programs. As a matter of fact, probably 
within the first month the banks had given me 5,000 fraud 
referrals in the first month.
    Mr. MEUSER. Did you finally know the customer was better--
less fraud than the lack thereof?
    Mr. WARE. Yes. Yes, I did. I found that that is how the 
banks were able to quickly identify, and not only identify, but 
basically gift wrap cases, or at least the evidence for the 
cases for us.
    Mr. MEUSER. And that is probably why the EIDL was a heck of 
a lot higher, right, $135 billion estimate out of I think 300. 
And meanwhile, PPP was nearly almost $880 billion, and we had--
still a lot, a big number, but $60 billion or so of potential 
fraud.
    Mr. WARE. Well, that was part of it for sure. Different 
rules as well, different requirements for--you know, self-
certification was an issue.
    Mr. MEUSER. So the SBA working in cooperation with banks 
knowing the customers proven to show a tremendous level--less 
percentage of fraud?
    Mr. WARE. I think so.
    Mr. MEUSER. Yes.
    So what about the Fintech's--one hearing we had it said 
that 85 percent of the Fintech's fraud, that came from Fintech 
anyway, came from five players. Have those players been 
arrested?
    Mr. WARE. I cannot speak to the ongoing investigations, 
unfortunately.
    Mr. MEUSER. Some arrests have been made? Some have been 
brought to justice?
    Mr. WARE. The arrests that have been made are public. So 
they are out there, and I can't specify in this forum.
    Mr. MEUSER. Okay. Thank you.
    Mr. WARE. Sorry.
    Mr. MEUSER. No, that's fine.
    So what would you like to see us help you with in order to 
claw back and provide resources to you as we are working to 
bring these fraudulent people to justice? As well, I would like 
to ask, can you provide the data? I am sure you have to the 
SBA. Those are huge discrepancies. I mean, that is another 
reason that Administrator Guzman should be here. I mean, $160 
billion in difference here.
    Mr. WARE. There are a couple of things to point out.
    Mr. MEUSER. 500 percent.
    Mr. WARE. Administrator Guzman and I are normally in 
lockstep. We have worked together. We work together very, very 
closely. I actually was surprised about the report, about the 
report or that like those words would be used. We meet every 
other week. We discuss these things, and we are very 
transparent and open with each other. We can have heated 
discussions.
    Mr. MEUSER. And you probably were a little perplexed that 
they so quickly refuted your findings.
    Mr. WARE. Caught a little off guard, yes.
    Mr. MEUSER. All right, sir.
    Mr. WARE. But support. Let's talk about--can we get to 
support?
    Mr. MEUSER. Yes. Yes, please.
    Mr. WARE. We obviously need full support for our 2024 
budget, but there is one other thing, and it is access to 
already available government data.
    Mr. MEUSER. I will call you on that, and we will discuss it 
if it is all right with you. Thank you very much.
    I yield back, Mr. Chairman.
    Chairman WILLIAMS. I now recognize Representative Chu from 
the great State of California for 5 minutes.
    Ms. CHU. I have worked with Administrator Guzman on 
numerous occasions at various events, and I have known her to 
be nothing but conscientious when invited to meetings, and I 
certainly know that had she been apprised of some alternate 
date, she would have been here, as she has been at your 
numerous meetings during this entire time. And, in fact, I 
would like to submit for the record the letter to Chairman 
Roger Williams which says that Administrator Guzman was unable 
to testify due to previously scheduled commitments that 
required her to be outside Washington, D.C. on this date. So I 
would have hoped that there would have been some consideration 
for her schedule.
    So let me say, Mr. Ware, I do find it unsettling that your 
white paper estimates $200 billion in potential fraud, and the 
SBA report is so different with the $36 billion in likely 
fraud. Now, I know that in the SBA's letter, they state that 
nearly 86 percent of all pandemic funding originated under the 
previous administration without important controls in place. 
That is why the Biden and Harris administration took action to 
rebuild and strengthen antifraud controls, such as checking the 
Treasury do-not-pay database and verifying tax income.
    SBA learned from the mistakes of the 2020 implementation of 
PPP and COVID EIDL to design the two major relief programs that 
launched in 2021, the shuttered venue operator grant program 
and the restaurant revitalization fund, which both achieved 
estimated fraud rates of well below 1 percent.
    Mr. Ware, do you acknowledge that that is true?
    Mr. WARE. I cannot validate--we are conducting work right 
now on restaurant revitalization and shuttered venues. So our 
work will dictate what that is.
    But I could tell you that they had--they did implement many 
of our recommendations like do not pay, like the taxes. These 
are recommendations that we made in writing to everyone, and 
they have been a very willing partner in doing this.
    Ms. CHU. Okay.
    I would also say SBA's first sweep actually found over $400 
billion worth of further investigation, they would say, but 
then they continued beyond that initial automated screening 
with additional layers of review from data analytic treatment 
to human-led manual review in order to weed out false 
positives, and that is where they got their $36 billion figure. 
And they argue that your white paper's estimate of $200 billion 
is so high because that figure is based on only an initial 
automated screening, and therefore, includes false positives.
    What do you say to that?
    Mr. WARE. I think that is absolutely false. I think it is 
important to be on record as stating that the only 
investigations that SBA can conduct are those conducted by the 
investigative arm of SBA. We are the law enforcement authority. 
Fraud is our--this is our business. Fighting fraud is what we 
do. We are fully equipped to opine on what the potential fraud 
and the program is.
    SBA does not have access to the datasets that we have 
access to, number one. Number two, they don't sit in the middle 
of the fraud fight across the nation and U.S. Attorneys' 
Offices in every single State and the Department of Justice 
working with the task forces, working with all the different 
law enforcement entities.
    Ms. CHU. Well, you do say that you periodically refine your 
overall fraud numbers to eliminate false positives, correct?
    Mr. WARE. Which we did in this report.
    Ms. CHU. But can your office reconcile the differences with 
the SBA in order to provide the Committee with a more 
consistent estimate of the likely fraud?
    Mr. WARE. I believe like--honestly, with the reconciliation 
of those numbers, they are never going to be possible. They 
cannot have access to many of the datasets that we have access 
to for law enforcement purposes. I could provide the SBA every 
loan number that I can provide to them under the IG Act, and 
under U.S. Attorneys' rules and everything else. That is what I 
can do.
    However, more importantly, which is why it was surprising 
that it would be such an attack on the number, I think we get a 
little sidetracked with the number when we should be talking 
about the controlled environment that is necessary in any 
future program going forward and our ability to claw back as 
many--as much funds as we possibly can.
    I would be as upset and passionate if I found that the 
number was $36 billion, but I am sitting in the middle of the 
fight, and $30-something billion is just not a logical number.
    Ms. CHU. I yield back.
    Chairman WILLIAMS. I now recognize Representative Salazar 
from the great State of Florida for 5 minutes.
    Ms. SALAZAR. Thank you. Thank you, Mr. Chairman.
    I am Maria Salazar. I represent the City of Miami, and you 
know, the SBA and having a small business is so important 
because most of my constituents are first generation Americans 
and they love the system. So I am going to talk to you as if I 
were one of them.
    You see, they listened on television what is happening. 
They hear 36 versus $200 million. That is a big difference--
billion, I should say, $200 billion. So the SBA's 
administrator, she is saying that you are misleading the public 
and that they have a more diligent process to investigate the 
fraud. In other words, that you are an incompetent. That is 
basically what she is saying.
    And you are the Inspector General for the U.S. Small 
Business Administration. So I just want you to tell me how do 
you respond when openly, in public, everyone is listening, that 
your report is really not that good. What do you say to that?
    Mr. WARE. I don't believe that that is the administrator's 
intent. I meet with her often.
    Ms. SALAZAR. Well, I am going to repeat the words. 
Misleading the public. If someone tells me that I am misleading 
the public, I am not really going to like it because that is 
putting a dent or a sort of--compromising my reputation.
    Mr. WARE. I get that, but I still would give her the 
benefit of the doubt because I know her.
    Ms. SALAZAR. Good. You know her, but if you know her and 
she is not sitting next to you and she is the administrator, 
and we have $36 billion here and $200 billion over there and 
you are the guy that has the resources in order to find out 
what really happened with the money.
    Mr. WARE. Can I say this?
    Ms. SALAZAR. No, tell me.
    Mr. WARE. I think the Committee, based on my track record 
before this Committee, know that I am an independent broker of 
the truth.
    Ms. SALAZAR. I am not talking about that. I am talking 
about the relationship you have with the administrator. And the 
administrator is questioning your report publicly, and on top 
of that, she is not sitting next to you. What do you say to 
that?
    Mr. WARE. I have spoken to the administrator up to last 
week.
    Ms. SALAZAR. And what has she said to you?
    Mr. WARE. The administrator and I have a passionate 
disagreement on this subject. The administrator being here 
today would not say I am misleading the public. I can tell you 
that.
    Ms. SALAZAR. Well, she said it, that you are misleading the 
public.
    Mr. WARE. Well, I am an independent broker of the truth. I 
have no reason----
    Ms. SALAZAR. We know that. We know that but you said that 
you do have to work with her. So for that--my constituent, they 
are saying, I don't quite get this. The guy who is supposed to 
be the watchdog is doing his job, and then the lady who is 
supposed to be supervised doesn't like it. So there is 
something fishy here. Don't you think that the public will say 
that? All right.
    Not only that, she has you, as you said, that the 
administrator reached out to you to review the disparity 
between these two figures. So the question is, has she asked 
you, Hey, by the way, how did you get to 200 and we only got to 
36?
    Mr. WARE. Yes, we have had these discussions, very heated 
discussions.
    Ms. SALAZAR. And what did she say to you to prove her case 
that you are wrong?
    Mr. WARE. Well, it is evident that they cannot prove that 
case based on their response to the report. If you read their 
response----
    Ms. SALAZAR. So if there is no proof, then what else is 
there? If the empirical evidence does not accompany you, then 
what else is there? My opinion?
    Mr. WARE. It is difficult for me to say. It is difficult 
for me. Mine is based on fact. Mine is based on cross-link 
analysis. It is based on criminal investigative work. It is 
based on audit-sampling technique.
    Ms. SALAZAR. Sure.
    Mr. WARE. It is not just a data analytic exercise.
    Ms. SALAZAR. It is on rigor. It is on rigor. It is on 
evidence.
    All right. So you forewarned her, sir, that so much money 
going out so fast could be opened up for fraud. And what did 
she say?
    Mr. WARE. Well, it wasn't--she was not the administrator 
when I was warning that at the beginning.
    Ms. SALAZAR. Okay. All right.
    Mr. WARE. Right. At the time, it was pretty much the same 
argument. You are not right.
    Ms. SALAZAR. I am not sure if the public knows this, that 
90 percent of the loans that were given by the SBA, 90 percent 
are valued at less than $100,000, correct? Less than $100K, 90 
percent. And the SBA has decided not to put any effort in 
collecting the money that you guys believe that was stolen, 
because that is the only word we can say, 90 percent of those 
loans.
    So how do you--explain to us that we are not going to 
pursue to try to recoup that money on some of the money less 
than $100,000--or any loans that is less than $100,000?
    Mr. WARE. I should have clarified this earlier.
    Ms. SALAZAR. Please do.
    Mr. WARE. SBA asserts that any loan with a hold code, a 
fraud code on it are not in the number that they will not 
pursue collections on of the hundred.
    Ms. SALAZAR. Give it to me simpler because I didn't get it.
    Mr. WARE. So if there is a fraud, a potential fraud 
assigned to the loan, $100,000 or less, they pursue those. 
Those do not go away. That is what they have asserted.
    Ms. SALAZAR. So okay. So basically they are going after 
every penny.
    The last one--thank you, Mr. Chairman.
    SBA has created an ad hoc committee. That is their own 
investigation, and they are saying that they are interviewing--
--
    Chairman WILLIAMS. The Member's time is up.
    Ms. SALAZAR.--3,000 people a day. Do they have the 
personnel----
    Chairman WILLIAMS.--the Member's time is up.
    Ms. SALAZAR.--the rigor to do that in a rigorous fashion?
    Chairman WILLIAMS. Time is up.
    Ms. SALAZAR. Sorry.
    Chairman WILLIAMS. I now recognize Representative Thanedar 
from Michigan, the great State of Michigan for 5 minutes.
    Mr. THANEDAR. Thank you, Mr. Chair.
    Mr. Ware, thanks for your work and your testimony here.
    Despite the fraud, which is certainly concerning, it being 
a dark spot in the COVID relief program, our recovery has been 
nothing short of remarkable. We are able to keep businesses 
afloat and save jobs. As a result, our recovery has been faster 
than any other industrialized economy. However, we must address 
concerns regarding fraud to prevent future abuse from 
transpiring.
    You know, I represent--my name is Shri Thanedar. I 
represent the city of Detroit and the 13th District, and I have 
spoken--I am a city entrepreneur myself, having, you know, 
started small businesses, grown small businesses, and the 
pandemic has been especially hard on small businesses in my 
district.
    And when I look at these fraud numbers, whether it is $35 
billion or $200 billion, it worries me and bothers me that many 
of my small businesses in my district were denied any kind of 
assistance for one reason or the other, while billions of 
dollars got defrauded, some domestic, some overseas.
    And many of the genuine small, hardworking entrepreneur 
business owners in my district suffered through because they 
could not qualify or get any assistance. And some, 
unfortunately, lost their livelihood, their businesses. So that 
is a concern of mine, and it just doesn't seem fair for the 
hardworking businesspeople who could not get federal assistance 
while the bad actors walked away with billions of dollars.
    My question to you is, how can the Small Business 
Administration restore confidence in its operation and rebuild 
trust among the public following the massive fraud that 
occurred during the pandemic, particularly under the Trump 
administration? Because it appears that a large majority of the 
fraud did happen under the Trump administration.
    Mr. WARE. So I tend to stay away from any discussion of 
administrations, right, because to me it really makes no 
difference.
    Mr. THANEDAR. But you are agreeing, right? The majority of 
the fraud happened under the previous administration.
    Mr. WARE. It happened at the beginning when there were 
almost no controls. So that is just what happened. Everything 
was calibrated to speed.
    Mr. THANEDAR. Just the facts. Just the facts. It did happen 
in that period.
    Mr. WARE. It happened in that period, but I will tell you 
this. Relative to restoring of the trust, I think that under 
Administrator Guzman, working closely with our office, I think 
that we have built an internal control environment that is 
vastly superior to what it was all those couple years ago, 
right. So I believe that Administrator Guzman and her teams are 
moving towards that end.
    However, we have not fully tested the controls, and more 
importantly, because of my experience with SBA, whether or not 
the controls were actually followed and implemented thoroughly. 
So that would be the test, and we have quite a bit of work that 
will be coming to inform on this.
    Mr. THANEDAR. All right. Thank you so much.
    I yield back.
    Chairman WILLIAMS. Now I recognize Representative Alford 
from the great State of Missouri for 5 minutes.
    Mr. ALFORD. Mr. Chair, I yield 30 seconds to the gentlelady 
from Florida, Ms. Salazar.
    Apparently she left. Sorry. I think she had a follow-up.
    Thank you, Mr. Chair. And thank you, Ranking Member, for 
holding this important hearing today. And thank you, Inspector 
General Ware, for actually showing up and doing your job. We 
very much appreciate that.
    The stolen PPP and EIDL funds are stolen taxpayer dollars, 
and that is money that is stolen from the constituents of 
everyone here, the people that we represent. In my case, the 
Fourth Congressional District of the great State of Missouri.
    The Inspector General estimates the fraud as over $200 
billion, as you have said, and the SBA administrator says it is 
somewhere in the neighborhood of $36 billion. This calls into 
question why the SBA should increase their scope to oversee 
more lending, especially with Fintech.
    In November, America elected a Republican House majority 
because they were sick and tired of the incompetence and 
blatant disregard shown by the Biden-Harris administration. A 
core job of this Committee is to conduct oversight, and we all 
showed up today to do our job. It is time for the administrator 
to show up and do hers, to answer us, to answer to the American 
people.
    The title on that name card starts with ``Honorable.'' 
There is nothing honorable about not showing up to do your job.
    So I am going to ask her questions anyway. She needs to be 
here, and hopefully, wherever she is, she will hear these 
questions.
    Administrator Guzman, the report you released estimates the 
fraud to be around $36 billion while the Inspector General's 
report says it is closer to $200 billion. What is the reason 
for the large discrepancy?
    Administrator Guzman, the Inspector General's Office has 
decades of experience doing this and are subject matter experts 
when it comes to fraud, waste, and misuse. Why is your team no 
better than the actual experts?
    These concerning numbers, Administrator Guzman, come during 
a time the SBA wants to oversee more Fintech lending, much of 
what contributed to the fraud. Why should this Committee be 
confident in the SBA's ability to act as a regulator for 
Fintech?
    Thank you, Administrator Guzman.
    Now moving on to you, Inspector General Ware. Again, thank 
you for showing up today.
    Did President Trump cause this fraud, $200 billion worth of 
fraud?
    Mr. WARE. Not that I know of, no.
    Mr. ALFORD. Thank you very much, because there seems to be 
some in this room who want to blame Trump for everything. He 
did not bring down the Hindenberg. He did not sink the Titanic. 
He did not cause this fraud. We are here to get to the bottom 
of it and get the money back to the taxpayers.
    Do you feel the same way?
    Mr. WARE. I feel that I want to get the money back to the 
taxpayers and get to the bottom of the fraud, yes.
    Mr. ALFORD. At the outset of COVID, the House and Senate 
came together to get money out the door fast. The goal was to 
move fast, so it was expected there would be some fraud. But 
that was over 3 years ago, and Biden has taken minimal efforts 
to recoup these funds during his 2 years in office.
    In the last 2 years, from what you have seen in the 
investigation, has the SBA enhanced any of their internal 
controls or improved any of their efforts to mitigate, 
reassess, and get that money back for the taxpayers?
    Mr. WARE. Yes, they have. My report actually goes down a 
list of the many things that they have done, especially in 
response to the recommendations that we have worked hard to 
resolve with the agency.
    Mr. ALFORD. Do you feel confident that we are moving 
forward and can move forward should this happen again, that we 
will have the tools in place, the regulatory tools in place to 
limit and mitigate fraud?
    Mr. WARE. I feel confident that we are moving in that 
direction. There has to be a focus on eliminating self-
certification in these type of government programs.
    Mr. ALFORD. Well, Inspector General, again, I thank you for 
being here today. It is very disappointing that someone that we 
pay out of the federal taxpayers' dollars, now the U.S. 
Treasury, cannot be here to answer questions in the primary 
oversight, the capacity that we have, to help us all do better, 
to help Americans, to help small businesses. It is just a 
shame, and I am very disappointed. I am very disgusted.
    Thank you. And I yield back.
    Chairman WILLIAMS. I now recognize Representative 
Gluesenkamp from Washington, the great State of Washington for 
5 minutes.
    Ms. GLUESENKAMP PEREZ. Thank you, Mr. Chair.
    And thank you for being here, Inspector General Ware. It is 
great to have you back.
    I would like to start by asking about the fraud landscape. 
Through your investigations, did you find any trends about the 
size of loans that you determined to be potentially fraudulent? 
Like, are we basically talking about mom and pops, or are we 
talking about larger operations that receive more significant 
funding?
    Mr. WARE. It ran the gamut. So it was all of it, but there 
was quite a bit of larger--people that went after, you know, 
larger numbers. I don't know if they even existed in many of 
the cases, right. So but went after larger numbers that would 
be more large than a mom-and-pop shop would get.
    Ms. GLUESENKAMP PEREZ. Okay.
    Did you consider the size of potentially fraudulent loans 
being prioritized, which ones you are going to go after, or are 
there other factors that you determined which allegations to 
pursue or how you prioritized?
    Mr. WARE. Size is one of the factors. So we have a 
prioritization framework within our office. It takes into 
account our hotline data; it takes into account the task forces 
that we are working on. But we could look at, like, much 
smaller amounts, particularly if it is involved in an intricate 
criminal ring.
    Like, for example, one of the flags in the report was IP 
addresses, right. And in an instance where we find that there 
was maybe 500 loans that went to one place, we would know that 
they gave like 13,000 out here, 50 here. And ordinarily, we 
wouldn't go after them unless there were public trust issues, 
violent criminals or of the like, but put them together and we 
have pulled down a whole lot.
    Link analysis helps us with that and data analytics. We 
have cases that start with one person and explode out to 800.
    Ms. GLUESENKAMP PEREZ. Wow. Thank you.
    I also wanted to touch on the role of technology in your 
investigations. Last time you were here you spoke about the 
indicators of pandemic relief fraud being durable. I believe 
you said something about less like footprints in sand, and more 
like footprints in concrete.
    In your testimony, you talk about the use of certain 
automated technology to aid in your investigative work and 
about your office's recent establishment of the technology 
solution division to use machine learning and artificial 
intelligence to identify outliers in the portfolio for 
investigation.
    Could you expand on the kind of data that you are using to 
investigate these cases of potential fraud and how your office 
has utilized or may continue to improve upon the use of certain 
kinds of technology to go after fraudsters?
    Mr. WARE. Yes. Thank you for that.
    Well, the way we use it the most right now, the only place 
that we are using the machine learning right now is within the 
hotline, because we went from 800 hotline complaints a year to 
250,000. So we needed to be able to get to the bottom of that, 
and Pandemic Response Accountability Committee really helped us 
a great deal with that in first giving us bodies and then 
giving us access to their data analytics group before we were 
able to stand up ours and move on our own.
    That is how we were able to find common identifiers, based 
on the casework. So that is what we are using, the loan files 
and everything like that, overlaying them with the hotline 
information and being able to determine what is actionable, 
most likely actionable. So that is one way in which we are 
doing it.
    But in terms of data analytics, the link analysis, which 
really helps to validate the numbers in this report because it 
deals with common fraud clusters that start maybe in one place 
and then we could put it to the next program. Because 
fraudsters didn't start and stop with just PPP, right. If we 
found it there, you will find it in EIDL. And to be quite 
frank, you will find it in unemployment insurance, and you will 
find it in the other programs as well.
    Ms. GLUESENKAMP PEREZ. Could you--so well, thank you very 
much for being here. I am deeply appreciative of the work that 
you are doing and your office. Thank you very much. As a 
taxpayer, as a small business owner, I sincerely appreciate the 
leadership you are showing here.
    Mr. WARE. Thank you.
    Ms. GLUESENKAMP PEREZ. So thank you very much.
    Mr. Chair, I yield back.
    Chairman WILLIAMS. Yields back.
    And now I recognize Representative Bean from the great 
State of Florida for 5 minutes.
    Mr. BEAN. Thank you very much, Mr. Chairman. Good afternoon 
to you. Good afternoon Small Business, and welcome Inspector 
General Ware. Glad to have you here.
    Mr. WARE. Thank you.
    Mr. BEAN. A few weeks ago, a few months ago we had a 
meeting here where SBA came to talk about changes to the SBA 
program, and I labeled Washington, D.C. crazy town, because 
only in crazy town would an agency that has lost billions of 
dollars come before us and ask for more to expand programs and 
go forward. So only in crazy town would you ask for more money 
when you can't handle the money that is has given to you. 
Sorry.
    Only in crazy town would you ask for more money--thank 
you--more money when you can't handle the money we are giving 
you now and do it with a straight face. That is crazy.
    One of the most disturbing stories to come out of the SBA 
during COVID is the PPP and EIDL scams that involve the Barbie 
face doll scam. Now, everybody knows one of America's favorite 
dolls is Barbie. We love Barbie. We love Malibu Barbie, 
presidential Barbie. You know, you can get Doctor Barbie or 
even lawyer Barbie.
    But it seems con men have hijacked Barbie, and I present to 
you swindler Barbie. How about that? This is actual faces, 
Committee Members and ladies and gentlemen, actual faces. 
Barbie was taken hostage and created swindle Barbie where 
people up to no good used Barbie and other dolls to create fake 
identities to steal taxpayer monies.
    So clearly, someone at SBA is living in swindler Barbie 
world. I say before you that we are not just living in crazy 
town, but we have moved into Barbie's $200 billion crazy town 
dream house on Looney Toon Lane.
    So IG Ware, I appreciate you coming forward with your 
testimony, and I love that you are a man of truth.
    I think we all know that it is going to take a lot of work 
to claw back all of this money. In fact, according to your own 
report, of the more than 250,000 hotline complaints you have 
received since the start of the pandemic, more than 90,000 of 
them were actionable leads. This represents, according to your 
data, 100 years of investigative casework. Let me say that 
again. It is 100 years of investigative casework. Only in crazy 
town does this happen.
    Will you be able to, IG Ware, to keep the Committee updated 
on how much money is clawed back as you begin this century's 
long casework load?
    Mr. WARE. Absolutely.
    Mr. BEAN. Very good.
    What is your plan? We talked a little bit before and you 
said there is a plan. What is the plan to begin clawing back 
this money?
    Mr. WARE. So our plan--it is important to be on record with 
this. The numbers that I have given in terms of what the 
results of our office are, are not the only results in 
government. There is more. So the FBI has their own cases, 
Secret Service, FDIC, OIG. I can go on and on and on and on. 
The PRAC has some.
    So the number is really a lot larger and it is magnified--
maybe even exponentially more impactful with the DOJ strike 
forces and the U.S. Attorney task forces.
    Relative to my office, though, right, we have a 
prioritization framework that allows us to go after the most 
egregious actors fast, and that is how we have been doing this.
    Mr. BEAN. Right. And some of these egregious actors have 
hundreds of loans under their name or under a single fake 
number. Is that correct?
    Mr. WARE. Correct. A single case. And we have had a single 
case cause 800 hotlines, hotline complaints. So it could work 
like that.
    Mr. BEAN. Should--for those that have stolen money from the 
taxpayers, should they be worried right now?
    Mr. WARE. I think you should be worried. We have a 10-year 
statute of limitations and we are bringing--I am just one part 
of the enforcement activity that is taking place across the 
nation.
    Mr. BEAN. Now, we have been told. We have been told that if 
you stole less than 100 grand, we are not going to worry about 
you anymore. We are just going to let it go and a pretend it 
didn't happen.
    What say you to somebody that stole--still stole but below 
that threshold? Are we going to go after them, too, Inspector 
Ware?
    Mr. WARE. I believe we had a recent, a very recent press 
release with 13,000. So it depends on where it falls, right, 
but we weigh it all.
    Mr. BEAN. Are you familiar with swindler Barbie now? Have 
you heard that before?
    Mr. WARE. Not in that way, but I did get pulled up to speed 
on this today.
    Mr. BEAN. Inspector Ware, thank you so much for coming 
forward.
    I yield back the remainder of time, Mr. Chairman.
    Chairman WILLIAMS. The gentleman yields back.
    And now I recognize Representative Phillips from the great 
State of Minnesota for 5 minutes.
    Mr. PHILLIPS. Thank you, Mr. Chair.
    Welcome, Mr. Ware. Let me start with gratitude to you, to 
the many thousands of employees at SBA who do this important 
work. Many of the same ones did it under the Trump 
administration that are doing it right now, and I don't think 
we express enough gratitude to those who are doing what we want 
people to do, which is to look after taxpayer dollars.
    I like this Committee when the spirit is to restore faith 
in government. Casting stones and blame is absurd. Donald Trump 
didn't cause the fraud, nor did Joe Biden.
    I want to make sure that we go after the fraudsters. All of 
my colleagues on the other side of the aisle want to do the 
same. What troubles me is that President Biden requested $47.7 
million to appropriate dollars to this effort, and my 
colleagues on the Financial Services Committee and in the 
general government appropriations bill, trimmed that by $16 
million. So it is just a little incongruent, I might say, to 
say we need to go after this and yet not appropriate the 
resources to do it.
    I would like to make the case to all of my colleagues that 
we should appropriate the dollars necessary to go after the 
fraud.
    So if I could just ask you, Mr. Ware, does that $16 million 
shortfall impact your ability to do so?
    Mr. WARE. It impacts my ability tremendously. It is 
important to understand----
    Mr. PHILLIPS. Can you say it one more time?
    Mr. WARE. It impacts my ability to go after the fraud 
tremendously.
    Mr. PHILLIPS. Thank you.
    Mr. WARE. It is important to understand that the 
supplemental funding that we had for our office runs out in 
2024. We had a lot of term criminal investigators. A lot of 
them would have to go home. It would be depleting us at the 
time when the fight is the hardest.
    Mr. PHILLIPS. Mr. Chair, I have great respect for you. I 
would ask that we try to appropriate the resources necessary to 
do what we all want to do, which is to eliminate the fraud and 
repatriate the dollars, reclaim, and claw them back, please. 
That $30 billion has been done so already.
    Mr. Ware, one thing I suspect, anecdotally and otherwise, 
is that a number of companies overrepresented their employee 
counts to obtain PPP and EIDL loans. Your written testimony 
provides an example of a bad actor who was caught doing exactly 
that.
    Can you shed some more light on that practice of companies 
exaggerating their employee counts and whether the SBA has been 
effective in your recommendations to crack down on the 
practice?
    Mr. WARE. Sure.
    Well, at the beginning, we were dealing with self-
certification as a general rule. And to be fair, that is what 
the law called for, to be fair. It was self-certification. You 
couldn't review tax records. You couldn't review much of the 
employee information as well, and, you know, for speed.
    But since then, those things have been tightened up quite a 
bit, but the way it worked, it was pretty simple. I am self-
certifying. So there is nobody checking. So, you know, I could 
easily say 50.
    The fraud triangle is a well-known concept. There was 
pressure, financial pressure. Everybody, you know where we were 
as a nation, and then, there was the opportunity with the lack 
of controls, and then you rationalize it in terms of, well, why 
not? Everybody is doing it.
    Mr. PHILLIPS. You spoke about data-sharing between agencies 
to support your work. I presume that would include the IRS?
    Mr. WARE. Yes, it would.
    Mr. PHILLIPS. Are their systems and structures and 
technologies up to par right in a way that is necessary to give 
you the information you need on a timely basis?
    Mr. WARE. I don't know that it is, but I know that when we 
worked through certain agreements, we were able to get it.
    But I would argue that not just oversight entities with 
some of these agencies could communicate when it comes to 
issuing government funds.
    Mr. PHILLIPS. I would just argue that it might not be wise 
to reduce funding to the IRS when we need to go after both 
fraudsters and tax cheats.
    But let me just wrap up by one more time just saying we can 
distill this entire hearing down into a simple question. We all 
agree that there is fraud. We all agree we should go after it. 
We should also all agree to resource it to the level that the 
administration has asked. We should not be cutting it by $16 
million. It makes this entire hearing, unfortunately, 
nonsensical.
    With that, Mr. Ware, I want to thank you. I know hundreds 
of PPP and EIDL recipients in my own district say thank you. 
Thousands of businesses and millions of employees around the 
country say thank you. When we did this, we were under duress. 
We knew it would be complicated. We knew there would be fraud. 
I was here when we did this. I am so glad we did because if you 
look at our economy right now, the highest GDP ever, the best--
the lowest inflation now in the entire G7 universe, the lowest 
unemployment in my lifetime. My goodness, and the highest wage 
growth in a long time.
    I think we did a darn good job. Businesses around the 
country thank you, and I hope you can extend that gratitude to 
those that work with you.
    Thank you, sir.
    Mr. WARE. Thank you.
    Chairman WILLIAMS. I now recognize Representative Van Duyne 
from the great State of Texas for 5 minutes.
    Ms. VAN DUYNE. Thank you very much, Mr. Chairman.
    And Inspector General Ware, it is good to see you again. I 
really appreciate you taking the time to be with us today. It 
is clear you understand the importance of today's hearing, and 
I just wish that we were being joined by Administrator Guzman 
as well.
    We have heard a lot of conversation today about pointing 
fingers. I kind of want to figure out when that money was 
spent, how much SBA had to spend, and what the resources were.
    So in 2019, do you know what the SBA's budget was?
    Mr. WARE. No, I do not know off the top of my head.
    Ms. VAN DUYNE. Do you know if it was increased in 2022? I'm 
sorry, in 2020.
    Mr. WARE. I don't think so.
    Ms. VAN DUYNE. You don't think it was increased in 2020?
    Mr. WARE. I think that was a time when we were all asking 
to be flatlined. I don't know.
    Ms. VAN DUYNE. Well, in 2020 is when we had the pandemic. 
So did SBA receive any additional funds?
    Mr. WARE. For the pandemic? I think supplemental funding 
was given at some point. I know I got----
    Ms. VAN DUYNE. The answer is yes. The answer is they were. 
It is about 100 times as much that they had been given and then 
some.
    Mr. WARE. Okay. Thanks.
    Ms. VAN DUYNE. So, you know, the fact is that when we look 
at when the money had been given out, doesn't it make sense 
that it was given out during the pandemic, at the beginning of 
the pandemic?
    Mr. WARE. Yes, that is when the----
    Ms. VAN DUYNE. That is when the money was supposed to have 
been sent out. That is why there was an emergency.
    Mr. WARE. Fourteen years of revenue in 14 days.
    Ms. VAN DUYNE. If we had taken 2 years to do it--Mr. 
LaLota, I am going to ask you to move your head just a little. 
No, the other way, the other way.
    If we had taken 2 years to do it, it really wouldn't have 
been an emergency, would it? I mean, the whole point was to try 
to get that money out faster.
    We know that a tremendous amount of roles of responsibility 
were given to the SBA who really had a skeletal staff at that 
point, and they were expected to give out tens of millions, 
hundreds of millions of dollars, billions of dollars without 
having, you know, adequate--but we wanted to make sure that 
that money got out because it wanted to do the best good at a 
time when everybody was in an emergency pandemic.
    We are now facing, what, 3 years later? And we know that 
how much money are we expecting has gotten out fraudulently, 
was stolen from taxpayer dollars?
    Mr. WARE. Potentially over $200 billion.
    Ms. VAN DUYNE. Okay. So does it make sense that we would 
actually, I don't know, try to avoid this in the future?
    Mr. WARE. Absolutely. That is why I am here.
    Ms. VAN DUYNE. And does it make sense that we try to go 
after the bad actors who have stolen over $200 billion of 
taxpayer dollars?
    Mr. WARE. Absolutely.
    Ms. VAN DUYNE. So does it make sense that we sit here and 
we spend a whole lot of time during this hearing on, well, that 
happened then and, no, that happened then? Does that make sense 
to you?
    Mr. WARE. Well, I can't say whether it makes sense. I can 
say that this is what I have been avoiding from the very 
beginning.
    Ms. VAN DUYNE. Yes. And I appreciate your direct answers. 
Instead of, you know, blaming the blame game, playing the blame 
game here, I would really hope that everybody on this 
Committee, everybody in this Congress would be focused on 
trying to prevent $200 billion of fraud from ever happening 
again and trying to get that money back.
    So when the SBA distributed approximately $1.2 trillion in 
COVID EIDL and PPP loans, the IG, who is trained and 
responsible for the investigatory process of the SBA, estimates 
over $200 billion was wasted. However, in order to save face to 
the public, the SBA, who has admitted they have no role in 
investigating fraud, reportedly roughly $36 billion in wasted 
spending, the $164 billion difference in wasted dollars alone 
is troubling. But what concerns me the most is the SBA who, 
again, has said that they are not an investigatory entity has 
wasted additional time in dollars to put out a completely false 
report to cover their previous waste.
    The American people deserve more. Taxpayers definitely 
deserve more, and small businesses deserve more.
    Mr. Chairman, I seek unanimous consent to enter into the 
record Administrator Guzman's response to our letter sent on 
April 19, 2023, relating to the fraud and the pandemic relief 
program where the SBA told us that, quote, ``when it comes to 
investigating fraud and recovering taxpayer dollars, it is 
important to note that SBA is not an enforcement agency. The 
SBA reports suspected fraud and identity theft to the Inspector 
General, and we collaborate with law enforcement authorities on 
their investigations,'' end quote.
    Mr. Chairman?
    Chairman WILLIAMS. So moved.
    Ms. VAN DUYNE. Mr. Ware, just looking at typical fraud 
investigation case, on average, how long does a standard OIG 
fraud investigation take?
    Mr. WARE. About 250 days.
    Ms. VAN DUYNE. Just do you agree with the SBA that they 
were able to meaningfully process 3,000 human letter reviews of 
potentially fraudulent loans per day.
    Mr. WARE. Absolutely not.
    Ms. VAN DUYNE. So 2 months ago, you testified in front of 
the Subcommittee on Oversight Investigations and Regulations 
where you shared your concern, the SBA's decision not to 
collect on PPP and EIDL loans under $100,000. Do you maintain 
that position.
    Mr. WARE. I do.
    Ms. VAN DUYNE. Has SBA communicated to you whether they 
intend to pursue fraudulent loans if they are less than 
$100,000.
    Mr. WARE. Yes, they have. That is their intention to----
    Ms. VAN DUYNE. Thank you.
    Mr. WARE.--pursue those that have a fraud hold.
    Ms. VAN DUYNE. Excellent. I yield back.
    Chairman WILLIAMS. All right. Next I now recognize 
Representative Stauber from the great state of Minnesota for 5 
minutes.
    Mr. STAUBER. Thank you, Chair Williams, and thank you to 
Inspector Ware for being here.
    Inspector, every time I hear you testify, you become more 
and more impressive. Thank you for being here.
    Mr. WARE. Thank you.
    Mr. STAUBER. In March, 10 more people were indicted for the 
Feeding Our Future scam, a supposed nonprofit in Minnesota 
meant to feed children that used $250 million of COVID-19 
federal funds to buy luxury cars, real estate, and other 
unlawful futures. This brings the total up to 60 people 
indicted. It is considered the largest COVID-19 fraud scheme in 
the nation.
    Our agencies must make recouping taxpayer dollars a 
priority. On July 27, 2023, the Small Business Administration 
Inspector General issued his report underscoring how vulnerable 
the PPP and idle programs were to fraudsters. Not 3 hours 
later, the SBA administrator's office released a contradicting 
report. Three hours later. Unfortunately, the SBA and the Biden 
administration have failed to provide a detailed account of how 
this significant misappropriation of taxpayer funds occurred 
and how they plan recover these stolen items, or funds, rather. 
Given the roughly $160 billion discovery sheet the OIG report 
and the SBA report, it will be pertinent to hear from both 
parties as to why the discrepancy. Unfortunately, as indicated 
by the empty chair next to the Inspector General right there, 
she had declined to come before this committee. The Small 
Business Administrator who we talk about small business being 
the engine of our economy. She was notified in time to be here, 
under the rules, and she has failed the request by the Chair of 
this committee to answer questions on behalf of the American 
people. Like where is the discrepancy and why the discrepancy?
    On multiple occasions, the Office of the Inspector General 
has described SBA's data tracking environment as informal and 
ad hoc. As the designated investigatory body for the SBA, the 
OIG holds the authority to shed light on this matter. 
Therefore, I would appreciate some insight on the following:
    Inspector General, where aside from the Inspector General's 
General Office, do you consider the SBA to be the subject 
matter experts in fraud investigation?
    Mr. WARE. No.
    Mr. STAUBER. How much weight should we give to the SBA's 
assessment of your fraud investigation?
    Mr. WARE. Well, I would say that SBA is not positioned to 
define fraud for the Office of Inspector General.
    Mr. STAUBER. If Administrator Guzman were present, it would 
have been beneficial for her to provide us with her perspective 
on why she believes her report is more accurate despite finding 
substantially less fraud. I wanted to be able to have the 
dialogue and question both of you. Why the discrepancy? Only in 
Washington, D.C., would an administrator not show up when there 
is $160-billion discrepancy. I mean, how does that happen? The 
American people want to know why the discrepancy? Why the 
fraud? And the administrator doesn't show up, so we can ask 
questions and get answers for the constituents, the taxpayers 
of this country. What is the likelihood of the SBA recovering 
most of that money?
    Mr. WARE. Most of that money is tough to stay what the 
likelihood is. I could tell you that we have a 10-year statute 
of limitations, and we will not stop coming. And I believe that 
is the case for all our law enforcement partners across the 
nation.
    Mr. STAUBER. The American public deserve answers, and we 
deserved answers from the Administrator Guzman today, and her 
failure to testify alongside you should not go unnoticed. It is 
a slap in the face of the taxpayers who are out $200 billion.
    Chair Williams, thank you for holding this hearing. Thank 
you for making the notifications on time within the rules. And 
to the small businesses across this country who are on the back 
side of this COVID that is starting to ramp up, it is beyond me 
why this small business administrator would not come here and 
testify to the $200 billion in fraud. I yield back.
    Chairman WILLIAMS. The gentleman yields back. I now 
recognize Representative LaLota from New York--from the great 
State of New York for 5 minutes.
    Mr. LALOTA. The great state of New York.
    Chairman WILLIAMS. The great State.
    Mr. LALOTA. Yes, sir.
    Chairman WILLIAMS. I caught myself.
    Mr. LALOTA. Yes, sir. And thank you, sir, for your 
leadership on this important issue. And it is important that we 
get down to the issue of hundreds of billions of dollars being 
fraudulently stolen from American taxpayers.
    Mr. Ware, sir, thank you for being here and for your 
leadership and being accountable to this committee and to the 
American people. Despite the SBA administrator being timely and 
properly invited numerous times, the head of the very agency 
with so much fraud in it sadly is not here today to answer our 
important questions.
    As a result of the administrator's absence, my constituents 
can be left with no other reasonable conclusion that the SBA 
losing $200 billion. It is simply not important enough for the 
SBA administrator to be accountable to this Committee and to 
the American people.
    The effects of the fraud are not limited to just $200 
billion of taxpayer money being lost. There are countless 
stories of innocent people being victimized by SBA's 
carelessness.
    One such example, Inspector, occurred in my district. A 
constituent in my district fraudulently had loans take taken 
out in her name in excess of $90,000. My constituent did not 
find out about this fraud until way after it was initiated too 
late to reverse when the bank sent her a note in the mail 
indicating her of that fraud.
    The criminals who stole $90,000 in her name used a fake 
license and a Social Security card to open that account. The 
lender told her that they had not run a credit check because 
the SBA is required to pay them back even if the borrower does 
not. As a result my constituent, ultimately, had to freeze her 
own credit for 7 years because of these incidents.
    This severely limits her freedom to do things like buy a 
car, buy a home, and acquire insurance, or even cell phone 
service. My constituent is far from the only victim of COVID 
fraud. And SBA must make it a priority to continue to 
investigate those who have committed fraud and recover as much 
of the money as stolen as possible.
    Mr. Ware, sir, the Office of the Inspector General and SBA 
have recovered about $30 billion of the potentially $200 
billion of fraud. That is only about 15 percent. What is the 
SBA doing to recover the other $170 billion? How can the SBA be 
more successful in getting more taxpayer money back? And how 
much does the OIG expect it will be able to recover? And what 
is the timeline for these investigations, sir?
    Mr. WARE. Thank you. So it is important to note that it is 
the responsibility of the Office of Inspector General to carry 
out law enforcement activity to make arrests and to attempt to 
recover along with SBA. Because there could be other reasons 
SBA is recovering money. It could be people trying to give back 
the money real quick.
    And so, it is not just for fraud that money would have been 
recovered. So it is interesting because it seems like that is 
$30 billion of the $200 billion, but we don't necessarily know 
yet, right?
    But we have a prioritization document within our 
organization. And we are working with law enforcement entities 
across this nation to bring fraudsters to justice, and to claw 
back as much money as we can. We have an agreement in principal 
currently with the United States Postal Inspection Service. 
They will help us with our seizures. The Secret Service did 
them before.
    Mr. LALOTA. Sir, would you talk a little about the timeline 
and your expectations of when a month from now, 6 months from 
now, 12 months from now, you will be able to ascertain the full 
scope of the issue and be able to provide a remedy to it?
    Mr. WARE. Right, so the remedy to it is these programs are 
finished. Like was said earlier, the evidence is footprints in 
concrete. So once we get to the evidence, once we start to 
investigate each of these potentially fraudulent instances, 
that is when you will see the results. So that is continuing. 
It is basically--I mean, it is rare that we open a case, and it 
is not what it is.
    Mr. LALOTA. Would you keep us posted as to your progress, 
sir----
    Mr. WARE. Absolutely.
    Mr. LALOTA.--and it can be helpful to help you make more 
progress?
    Mr. WARE. Yes.
    Mr. LALOTA. With my remaining time, sir, there is a 
discrepancy we have been told about wherein the SBA claims that 
$30 billion in return funds was not retrieved pandemic lending 
fraud money despite OIG reporting that it was. Could you 
explain the discrepancy, sir?
    Mr. WARE. Yeah, the discrepancy is for two reasons, sir. 
And it was--an important one is, my office is the independent 
arbiter of the facts here. So we bring forward what we find 
based on our criminal investigative work. It wasn't just a data 
analytics exercise for us. Criminal investigative work and our 
audit work came to bear in this thing. And we have access to 
datasets that they simply cannot have access to. And it is a 
good way to see whether the discrepancy is valid, or even 
logical is in their response, the agency's response to the 
report and the rebuttal contained inside of it.
    Chairman WILLIAMS. The gentleman's time is up.
    Mr. LALOTA. Thank you. I appreciate your time, and I 
appreciate you being here accountable to us, sir.
    Mr. WARE. Thank you.
    Mr. LALOTA. Thank you, Chairman.
    Chairman WILLIAMS. I now recognize Representative Molinaro 
from the great State of New York for 5 minutes.
    Chairman MOLINARO. It is convenient, too, from the great 
State of New York. Sadly, however, one of the States with some 
of the greatest cases of fraud. But that said, Mr. Chairman, 
grateful to you for your leadership. Mr. Ware, thank you for 
being here.
    I, too, want to echo the comments of my colleagues that the 
SBA administrator would choose simply not to be here. It is 
insulting, it is embarrassing, and it is absurd. It is not 
insulting to this committee or to Congress, it is insulting to 
the American taxpayers, the families, the farmers, the small 
businesses who for 2-1/2 years struggled through a pandemic and 
an economic shutdown that was well beyond their capacity to 
manage. It is insulting to the people who pay every day their 
taxes to support an institution and a government meant to 
provide for their best interest. It is insulting that the 
administrator of the SBA doesn't think that the issue of 
monumental fraud for an agency its size is worthy of presenting 
before Congress.
    Now I say this not simply as some Member who just got here. 
I say this because for the last 12 years I was a county 
executive in the State of New York. It was my job to stand in 
front of countless residents and businesses and explain to them 
why their government was shutting them down and what resources 
and support would be available to them. In fact, my county was 
among the first in the State to secure SBA loan capacity so 
that we could move effectively to support businesses. And we 
worked with the chambers of commerce and others to be sure that 
they had access to the resources they need.
    And for me, this is important, because like countless 
families across America, I, too, lost a loved one. My father 
lost his life to COVID in April of 2020. And in response to 
that loss, so many families like mine tried to muster up what 
we could to be of help to the people who lived on with great 
struggle. It is embarrassing, it is insulting, and it is absurd 
that the SBA wouldn't be represented here today, despite 
adequate notice, and as importantly, that they wouldn't be a 
part of an effort to secure what has been lost.
    And so I worked hard to ensure with my colleagues both in 
Congress and in State government to ensure that assistance and 
rapid delivery of that assistance would be made available to 
small businesses. Never did we think there would be so little, 
however, vetting and security procedures in place. Especially 
since we knew early on that there were red flags, and we were 
able to identify them. But the SBA failed to implement basic 
safeguards, even as warnings and reports of fraud were 
published.
    Can I ask you, Mr. Ware, it was suggested that you are 
unintentionally misleading the public as to the magnitude of 
fraud. Are you unintentionally misleading the American 
taxpayers?
    Mr. WARE. Absolutely not.
    Mr. MOLINARO. Are you intentionally misleading the American 
taxpayers?
    Mr. WARE. Absolutely not.
    Mr. MOLINARO. Do you believe that the SBA lost track of 
$200 billion?
    Mr. WARE. I believe that there is potentially over $200 
billion in fraud in these programs.
    Mr. MOLINARO. In my own State of New York, there was a case 
in 2021 where nearly 20 public, State, and municipal employees 
conspired together to submit and process false applications and 
defraud the SBA of over $1.5 million. Now schemes like this 
were all too common, and, of course, resulted in this at least 
$200 billion in outstanding fraudulent payments.
    Now, I certainly know that Congress could make better use 
of $200 billion, but more importantly the American taxpayers 
could make better use of $200 billion. And so at this point, we 
are challenged with how to recover these dollars. It is your 
agency. It is you. Your investigatory capacity, the criminal 
prosecution, and the partners that you will work with obviously 
to secure recovery.
    Can you speak to though, however, the deficiencies in any 
collaborative effort that has been going on with the SBA, and 
what strategy may or may not exist to recover the fraudulent 
payments?
    Mr. WARE. Yes, I can, which is surprising, again, because 
we work really closely with the SBA to set up the controls and 
to go after seizures and forfeitures. This is something that we 
partner really well with. I do believe that Administrator 
Guzman is serious about it. She has implemented numerous of our 
recommendations to ensure that the controlled environment is 
stronger. So that discrepancy is kind of still puzzling to me 
in light of all the work that we have done together.
    Mr. MOLINARO. So a collaborative effort has been in place, 
yet the failure to acknowledge the problem will lead to the 
inability to solve the problem?
    Mr. WARE. Well, I think quite honestly, the internal 
control environment doesn't really shift whether it is--
whatever the billion they said and the $200 billion. It is the 
same.
    Mr. MOLINARO. So my time is up, Mr. Chairman. I will follow 
up certainly after. But I thank you, Mr. Ware. And on behalf of 
those of us who led during the COVID pandemic, we are grateful 
for your stewardship.
    Mr. WARE. Thank you.
    Mr. MOLINARO. I yield back.
    Chairman WILLIAMS. I now recognize the Chairman of the 
Select Subcommittee on the Coronavirus Pandemic, Dr. Brad 
Wenstrup, from the great State of Ohio for 5 minutes.
    Mr. WENSTRUP. Well, thank you. And, Mr. Ware, thank you so 
much for being here today and for your work. Chairman Williams, 
thank you for allowing me to waive onto the committee today to 
ask a few questions. I am grateful for the work of this 
committee. And we are trying to have the U.S. be prepared for 
the next time, that there is a next time and to do better, and 
in this case, help small businesses if there is another 
pandemic in the future.
    As Chairman of that committee, as was mentioned, we are 
charged with investigating and finding solutions for any waste, 
fraud, or abuse with, you know, pandemic-era relief programs. 
And essentially, throughout the broad task of this 
subcommittee, it is an after-action review and lessons learned, 
and so we can create a path forward that does better and look 
at the things that maybe worked and those that didn't work, and 
be honest with ourselves about that. Because, you know, we are 
going to have to, for our committee, look at what we hear from 
our victims, look at what we hear from the committees, from the 
agencies, hopefully administrators, and definitely from you. So 
thank you very much for that.
    You know, when the pandemic hit, no one knew. No one knew 
what to do. I mean, this was--it is called novel for a reason, 
right? I mean, you know, and the science and everything else 
and what it was going to do to the economy and what we were 
going to do next. People were often flying blind, there is no 
doubt about it. We had to move quickly to help businesses 
survive. And that was bipartisan agreement, too, that we needed 
to, including getting money out the door quickly. But, 
unfortunately, as these things often do, there is an 
opportunity for people that have nefarious measures in mind. We 
have got fraud and abuse. We don't want that to happen again.
    So your report acknowledges that the SBA relaxed its 
internal controls to get money out the door quickly, and that 
allowed for a lot of this fraud to occur. I don't know that 
anyone disagrees that the money had to get out the door 
quickly. I can remember Secretary Mnuchin being pretty much in 
a panic that we had to do something fast.
    In your estimation, which of the SBA's relaxed controls 
contributed most to--most directly, I would say, to these high 
fraud rates?
    Mr. WARE. Self-certification.
    Mr. WENSTRUP. Thank you. I am on the Ways and Means 
Committee, and that was a debate we had there that that was a 
problem. And we continued that going forward, unfortunately, 
for some other programs.
    Moving forward, which of these of internal controls are 
easy and effective enough to implement that would enable SBA to 
get money out the door quickly while still preventing fraud?
    Mr. WARE. So that is the challenge, right?
    Mr. WENSTRUP. Yeah.
    Mr. WARE. So it is about setting up--first of all, getting 
rid of self-certification.
    Mr. WENSTRUP. Okay.
    Mr. WARE. Having quick verification measures and learning 
from the hold flags that we established, not having a procedure 
in place to clear them. Just ask a follow-up question. My 
biggest thing from in the beginning was ask a follow-up 
question. You are getting people who normally don't commit 
fraud. You ask one question, they are gone. They are not coming 
back to answer a question when they figure you are on to them.
    Mr. WENSTRUP. Yeah.
    Mr. WARE. So I thought that that would be very, very 
important.
    Mr. WENSTRUP. I appreciate that input. Are there additional 
controls SBA should implement? And, I guess, maybe you just 
answered that. Any others that you can think of?
    Mr. WARE. I am pretty sure I can get back to you with a 
list.
    Mr. WENSTRUP. Well, I appreciate that.
    Mr. WARE. Yeah, I would.
    Mr. WENSTRUP. Yeah. Thank you. For the record, if you would 
do that.
    Mr. WARE. Yes.
    Mr. WENSTRUP. And while most controls deal with risk 
management, are there any that we can implement to make 
detecting and more prosecuting fraud easier after the fact? You 
kind of gave me an example where you might sniff somebody out, 
but in the actual prosecution of the fraud, any suggestions 
there?
    Mr. WARE. Right, again, the doing away of self-
certification. Because once people certify, right, with their 
documents that this is what it is, it is much easier in terms 
of prosecution in that regard. It is much more difficult when 
it is just they could say anything.
    Mr. WENSTRUP. Got it. Real quick. There are some things--
what safeguards did PPP lenders have against fraud that EIDL 
did not.
    Mr. WARE. The Bank Secrecy Act is one of them. The know 
your customer under that was a big, big deal. The banks, like I 
said earlier, that we got over 5,000 referrals from the banks, 
basically, gift wrapped. Like these are fraud. Like we know it. 
We know these people don't have a business. That came quickly.
    Mr. WENSTRUP. Real quick, should the SBA partner with 
private sector, do you think.
    Mr. WARE. I think that is--what do I call that? That is for 
the----
    Mr. WENSTRUP. The fraud control I am talking about.
    Mr. WARE. Right. Well, it is difficult for me to answer 
that question. Because, you know me, I provide oversight. I 
don't want to build a program for them I can't oversee it then.
    Mr. WENSTRUP. Well, I appreciate it. You know, you are 
being honest and fair. And thank you very much for your time. 
You are very helpful.
    Mr. WARE. Thank you.
    Mr. WENSTRUP. Thank you.
    Chairman WILLIAMS. Thank you, Dr. Wenstrup. All right. I 
would like to thank our witnesses today, and I would like to 
also say again to Ms. Guzman, we wish she would have been here 
to account for questions we all had for her. Maybe we can try 
again. But thank you, Mr. Ware, for being here.
    Without objection, Members have 5 legislative days to 
submit additional materials and written questions for the 
witness to the Chair, which will be forwarded to the witness. I 
ask the witness to please respond promptly. And if there is no 
other further business, without objection, the committee is 
adjourned.
    Mr. WARE. Thank you very much.
    [Whereupon, at 4:13 p.m., the committee was adjourned.]

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