[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
HEARING ON THE GREATEST THEFT OF
TAXPAYER DOLLARS: UNCHECKED
UNEMPLOYMENT FRAUD
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 8, 2023
__________
Serial No. 118-2
__________
Printed for the use of the Committee on Ways and Means
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
53-008 WASHINGTON : 2024
COMMITTEE ON WAYS AND MEANS
JASON SMITH, Missouri, Chairman
VERN BUCHANAN, Florida RICHARD E. NEAL, Massachusetts
ADRIAN SMITH, Nebraska LLOYD DOGGETT, Texas
MIKE KELLY, Pennsylvania MIKE THOMPSON, California
DAVID SCHWEIKERT, Arizona JOHN B. LARSON, Connecticut
DARIN LaHOOD, Illinois EARL BLUMENAUER, Oregon
BRAD WENSTRUP, Ohio BILL PASCRELL, Jr., New Jersey
JODEY ARRINGTON, Texas DANNY DAVIS, Illinois
DREW FERGUSON, Georgia LINDA SANCHEZ, California
RON ESTES, Kansas BRIAN HIGGINS, New York
LLOYD SMUCKER, Pennsylvania TERRI SEWELL, Alabama
KEVIN HERN, Oklahoma SUZAN DelBENE, Washington
CAROL MILLER, West Virginia JUDY CHU, California
GREG MURPHY, North Carolina GWEN MOORE, Wisconsin
DAVID KUSTOFF, Tennessee DAN KILDEE, Michigan
BRIAN FITZPATRICK, Pennsylvania DON BEYER, Virginia
GREG STEUBE, Florida DWIGHT EVANS, Pennsylvania
CLAUDIA TENNEY, New York BRAD SCHNEIDER, Illinois
MICHELLE FISCHBACH, Minnesota JIMMY PANETTA, California
BLAKE MOORE, Utah
MICHELLE STEEL, California
BETH VAN DUYNE, Texas
RANDY FEENSTRA, Iowa
NICOLE MALLIOTAKIS, New York
MIKE CAREY, Ohio
Mark Roman, Staff Director
Brandon Casey, Minority Chief Counsel
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C O N T E N T S
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Page
OPENING STATEMENTS
Hon. Jason Smith, Missouri, Chairman............................. 1
Hon. Richard Neal, Massachusetts, Ranking Member................. 3
Advisory of February 8, 2023 announcing the hearing.............. V
WITNESSES
Gene Dodaro, Comptroller General, Government Accountability
Office......................................................... 4
Larry Turner, Inspector General, Department of Labor Office of
the Inspector General.......................................... 39
Michael Horowitz, Chair, Pandemic Response Accountability
Committee...................................................... 69
MEMBER QUESTIONS FOR THE RECORD
Member Questions for the Record to and Responses from Gene
Dodaro, Comptroller General, Government Accountability Office.. 447
Member Questions for the Record to and Responses from Larry
Turner, Inspector General, Department of Labor Office of the
Inspector General.............................................. 451
PUBLIC SUBMISSIONS FOR THE RECORD
Public Submissions............................................... 454
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THE GREATEST THEFT OF TAXPAYER
DOLLARS: UNCHECKED UNEMPLOYMENT
FRAUD
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WEDNESDAY, FEBRUARY 8, 2023
House of Representatives,
Committee on Ways and Means,
Washington, D.C.
The committee met, pursuant to call, at 10:02 a.m., in Room
1100, Longworth House Office Building, Hon. Jason T. Smith
[chairman of the committee] presiding.
Chairman SMITH. The committee will come to order.
Today's hearing has been a long time coming. For more than
two years, Republicans have been sounding the alarm about the
greatest theft of taxpayer dollars in American history: the
massive fraud perpetrated in the unemployment insurance program
that skyrocketed with the COVID-19 pandemic. While many
Americans who actually qualified for these benefits were left
struggling to reclaim their benefits and their identity,
upwards of tens of billions of taxpayer dollars had been
stolen.
The unemployment benefits passed in the CARES Act came at a
time when millions of Americans were losing their jobs
overnight, as government shut down businesses and ordered
people to stay at home. Livelihoods were ripped away. There is
no question, folks needed help, which is exactly why Congress
should have protected this program and those who needed it
against the criminals who exploited it to commit fraud.
UI fraud is not a victimless crime. For example, a Utah
woman lost her job after a cyber criminal stole her identity,
bank account information, and weekly benefit check. Many more
Americans have stories just like hers. Unemployment insurance
met to help them get through temporary joblessness was stolen.
Their most sensitive information compromised by criminals,
while Democrats in Washington turned a blind eye.
In addition to run-of-the-mill thieves, international crime
rings took advantage of our national crisis. Law enforcement
busted several rings that made off with millions, often using
Americans as money mules to launder money offshore. The Biden
Administration's Department of Labor's inspector general
believes significant fraud played a role within its estimate, a
new estimate, $191 billion in improper payments.
The range of estimates alone is sufficient reason for
today's hearing. ID.me, an identity verification company hired
by many states, estimated an astounding $400 billion, $400
billion, in fraud. That suggests thieves may have stolen almost
half of the $878 million taxpayers spent on unemployment
insurance. The White House itself acknowledged that tens of
billions were made in improper payments. They estimate $104
billion lost.
More recently, the Government Accountability Office
released its own report, making an early estimate that at least
$60 billion went to criminals. In just one example of fraud,
one example of fraud, one individual was able to file an
unemployment claim in 29 different states, and received over
$500,000 in fraudulent benefits.
With these varying estimates, it is clear that the Biden
Administration and Congress are in the dark about the size and
scope of the greatest theft of taxpayer dollars in American
history.
The new Republican majority is turning on the lights. We
tried when we were in the minority. As early as 2020,
Republicans raised the alarm about fraud based on red flags
from the Department of Labor's inspector general and the Secret
Service.
As the evidence of fraud escalated, I am sorry to say that
Democrats continued to turn a blind eye. They ignored two
requests from House Republicans on this committee to hold an
oversight hearing just like the one today. Democrats blocked a
congressional resolution to get answers about what the
Department of Labor knew about funds going to international
crime rings. Democrats even voted to end the identity
verification requirements and phase-outs of emergency UI
programs they had previously supported in December of 2020.
Republicans proposed amendments to protect taxpayers and
those who needed to get unemployment benefits. Democrats
rejected them outright. Instead, they unilaterally extended
unemployment benefits in their so-called bailout bill. They did
this, even as most businesses had already reopened at a time
when the Congressional Budget Office projected the economy to
return to pre-pandemic levels of growth by the middle of 2021,
and unemployment to steadily decline without any further
stimulus spending.
The Biden Administration has been asleep at the wheel. In
his last State of the Union, the President bragged about
appointing a chief pandemic prosecutor 14 months into his
Administration. That position has sat vacant for months. The
Biden Administration then changed the rules to make it easier
for states to sweep potential cases of fraud under the rug.
Those with their identities stolen weren't the only
victims. Democrats' unrestrained COVID unemployment insurance
programs fueled a labor shortage that punished American
families and small businesses, and denied individuals the
paycheck and dignity that came from a job. Just two days ago,
small business owners in West Virginia shared with this
committee their struggle to find workers because Congress made
a government check more valuable than a job.
One of our highest responsibilities as legislators is to be
good stewards of the American people's hard-earned tax dollars.
This hearing is so important and, sadly, long overdue. I look
forward to hearing from our witnesses today on exactly what the
Biden Administration is doing, and what Congress should have
done and must do to go after criminals and make right this
multi-billion dollar wrong.
Chairman SMITH. I am pleased to recognize the gentleman
from Massachusetts, Mr. Neal, for his opening statement.
Mr. NEAL. Thank you, Mr. Chairman, and I want to say a word
of thanks to our witnesses today.
So as Joe Friday might have said in a different age, ``just
the facts,'' because that is what we intend to focus on this
morning.
On March 11th of 2020, Dr. Fauci gave his warning as to
what was coming. Within 3 months, 20 million Americans had lost
their jobs. That is the reality. Today, not only have all those
jobs been returned, but, just as importantly, there are still
11 million jobs that go unanswered every day in America. Just
the facts.
I know, I helped write this legislation, and I didn't write
it with just Speaker Pelosi. I wrote it with Secretary Mnuchin
in the room over eight days. Much of this legislation was
written by the previous Administration.
So just the facts: $849 billion of unemployment insurance.
Of that number, it is estimated that 7.1 percent was
fraudulently spent. We do not, on the Democratic side, defend
fraud. We want the Justice Department, we want our witnesses
today to pursue aggressively any of that criminal element that
did what they did. But let us not conflate the need for
unemployment insurance with what happened during the course of
the pandemic.
Twelve million jobs have been created under President
Biden, 517,000 last month. And the unemployment rate in America
is now 3.4 percent. So the Paycheck Protection Program worked.
The unemployment insurance program worked. The relief that we
gave to hospitals where people were in the hallways on
ventilators, it worked.
So when I asked Secretary Paulson, a Republican who
couldn't have been any more cooperative in helping us to devise
the program, or we asked Secretary Mnuchin, or we asked
Secretary Rubin, Secretary Yellen, and Secretary Lew as to how
to proceed, they gave us the advice to get cash into the hands
of the people at the bottom of the economic scale who really
need it.
So, what did we do? We devised an initiative to make sure
that the community bankers were in the middle of it, because
they had good credit histories with the people that needed the
money.
How about the idea of what we were able to do with the
credit unions and CDFIs? What we did overwhelmingly worked. And
to pick on people today, of the 20 million who lost their jobs,
and to suggest that they stayed home during the pandemic--the
number of women who have not come back to the workforce because
they couldn't find childcare, those are the issues that the
committee should be focused on this morning.
Nobody condones fraud. We want those to be pursued who
participated in a criminality that relates to fraud. But the
idea that there is a massive number of people staying home
because they can collect unemployment insurance? Tell that to
the members of the AFL-CIO and the trade unions that had to
stop construction jobs during the course of the pandemic. Tell
that to the hospital workers who came to work exhausted every
single day to make sure that we got past the pandemic.
If the reporters who covered the early stages of the
pandemic, when they pointed out the issues, they said early on,
``oh, China is doing a great job.'' I don't think anybody who
looked back in the last six months would say that China did a
better job than the United States.
Then we used the example of what a great job New Zealand
was doing compared to the United States. The prime minister
just stepped down last week, the approval rating 39 percent.
We restored the jobs that were necessary in America. It
should be a banner of success that we are celebrating this
morning, Republican and Democrat.
But just another key phrase here to point out. Much of the
unemployment insurance was passed out during the Trump
Administration. That is a fact.
The idea once again that there is this group that is out
there in America that doesn't want to work because they can
secure unemployment benefits in Florida, $250 a week in
unemployment insurance, that is nonsense.
And the other part of this I think is important.
Unemployment insurance is like a trampoline. You hit it on the
downside, and you bounce back up into the mainstream of the
American economy. And that is precisely what has happened.
So, from our witnesses today, we hope that they will
outline precisely what it is they are doing to secure charges
of criminality, but understand in terms of proportionality what
really happened here. Overwhelmingly, the American economy
rebounded because of what we did. And much of it, by the way,
came in this committee, and most of it unanimously. It was
passed through the doors of this room.
So I am proud of what we did, and I hope the focus today is
going to be on the role that unemployment insurance made in
making sure that people could keep the lights on, turn the heat
on, and make it to the grocery stores to buy the sustenance of
what they needed every single day.
As I started, and we will conclude, just the facts this
morning.
Chairman SMITH. Thank you----
Mr. NEAL. Thank you, Mr. Chairman.
[Applause.]
Chairman SMITH. Thank you, Ranking Member. I will now
introduce our witnesses.
Thank you all so much for taking your time out of your busy
schedules for being here.
Gene Dodaro is the comptroller general of the United
States.
Larry Turner is the inspector general of the Department of
Labor.
And Mr. Michael Horowitz is chair of the Pandemic Response
Accountability Committee, and the inspector general of the
Department of Justice.
Mr. Dodaro, you are recognized for your opening statement.
STATEMENT OF GENE DODARO, COMPTROLLER GENERAL, GOVERNMENT
ACCOUNTABILITY OFFICE
Mr. DODARO. Thank you very much, Mr. Chairman. Ranking
Member Neal, members of the committee. I am very pleased to be
here today to talk about the uninsurance--unemployment
insurance program during the pandemic.
The program helped millions of Americans in need, but there
was widespread fraud that occurred. And I would like to focus
my opening remarks today on three reasons why I believe that
happened.
Number one, neither the Labor Department nor the states
were prepared. In 2016 we worked with this--with the Congress
to pass the Fraud Reduction and Data Analytics Act. That was
intended for Federal agencies to be prepared to prevent fraud
in the first place, which is the most effective way to deal
with this issue. The Labor Department, like many Federal
agencies, were slow to implement these framework principles
that GAO had outlined on best practices in the Federal
Government. Therefore, they were not as prepared as they should
have been before the pandemic.
States had antiquated IT systems. Many of them had known
this, some of them dating back decades. And also, right before
the pandemic, the unemployment rate was very low, so the
staffing levels of the state employment agencies were low. So,
they weren't as prepared, either.
We made recommendations to the Labor Department. They
haven't implemented those fully yet. They are beginning to work
on them, but they need to fully implement our recommendations,
and be in accordance with the law.
Secondly, the urgent need to get the money out led to
trade-offs that limited the ability of the government and the
states to achieve the accountability and transparency
objectives of the legislation Congress intended. This was due
to allowing people to self certify their result--their
eligibility for programs; eliminate or reduce the need for them
to provide supporting documentation for their claims of
eligibility; reducing the waiting time that was normally in
place at the states before they provided the first unemployment
check.
Now, Congress rectified these issues in December 2020, when
they passed the Consolidated Appropriations Act, and then
required more documentation for eligibility determinations. The
states started taking corrective measures. But this was too
late; hundreds of billions of dollars had already been spent.
And while they are welcome, and they need to be fully
implemented, and congressional oversight is needed to make sure
this happens, they were not taken as early as possible in the--
into this--reduce the susceptibility to fraud.
And as a result of these trade-offs, self-certification in
particular, these programs were more susceptible to fraud than
they would have been otherwise during the program.
Lastly, third, I would--there was an improper payment
problem before the pandemic occurred in the unemployment
insurance program. The rates often were in double digits in
terms of improper payments. These are payments that should not
have been made, or were made in the wrong amounts. And there
was also fraud in the unemployment insurance program ahead of
time, as well.
Both of these should have been harbingers to alert the
Labor Department and the states that they needed to take
stronger measures, particularly with the huge amount of claims
that occurred during a period of time.
As Ranking Member Neal mentioned, you know, millions of
people became unemployed at the same time. This really has
happened in our economy, where so many people have applied for
uninsurance and been out of jobs in almost every sector of the
economy during this period of time. So, more measures should
have been taken.
Now, we have made recommendations in many cases to have
this underlying improper payment problem--and it doesn't happen
just in the unemployment insurance program, it happens in
Medicare, Medicaid, and 86 different programs across the
Federal Government's activities. But it was there, it should
have been dealt with. And if we can't deal with the Federal
Government and the states level to reduce improper payments in
normal times, then you are bound to have problems when there
are emergencies, and there will be future emergencies, and so
people need to get prepared.
So, I would urge this committee to continue their oversight
to make sure the labor departments and the states take action
on our recommendations so that we are much better prepared next
time to deal with these emergency situations.
So, thank you very much, Mr. Chairman and members of the
committee. I would be happy to answer questions at the
appropriate time.
[The statement of Mr. Dodaro follows:]
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Chairman SMITH. Thank you, sir. Thank you, sir.
Mr. Turner, you are now recognized.
STATEMENT OF LARRY TURNER, INSPECTOR GENERAL, DEPARTMENT OF
LABOR, OFFICE OF THE INSPECTOR GENERAL (DOL-OIG)
Mr. TURNER. Thank you. Good morning, Chairman Smith,
Ranking Member Neal, and distinguished members of the
committee. Thank you for the opportunity to testify today.
Although the OIG oversees all DoL programs, my testimony
today focuses on our oversight of the unemployment insurance
program. The views expressed in my testimony are based on the
independent work of the OIG, and are not intended to reflect
DoL's position.
Mr. Chairman, the OIG remains committed to assisting DoL
and Congress in improving the efficiency and integrity of the
UI program. In our view, strengthening the program to prevent
and detect fraud are key objectives to ensuring that unemployed
workers quickly receive needed benefits, while safeguarding
taxpayer dollars.
For many years, the OIG has highlighted significant
concerns with DoL and states' ability to deploy UI benefits
expeditiously and efficiently, while ensuring integrity and
adequate oversight. The pandemic compounded these challenges,
creating the perfect storm.
As the OIG reported, states were not prepared to process
the historic volume of claims, resulting in significant delays.
And this reliance on claimant self-certification rendered the
PUA program extremely susceptible to fraud, and the
unprecedented infusion of Federal funds gave fraudsters a high-
value target to exploit. That, combined with the ease of
identity theft and system weaknesses previously identified by
the OIG, allowed criminals to defraud the program.
DoL recently reported an annual improper payment rate of
21.52 percent for fiscal year 2022. When applied to the
approximate 888 billion in benefits paid during the pandemic,
we estimate that at least 191 billion in pandemic UI payments
could have been paid improperly, with a significant portion
attributable to fraud.
Indeed, following the passage of the CARES Act, fraud
against the UI program exploded. Since April the 1st, 2020, the
OIG opened more than 198,000 UI investigative matters. This
represents 1,000 times the increase in the volume of our UI
work.
The OIG took immediate action to respond to this crisis.
Less than a month after the CARES Act was passed, we issued an
advisory report identifying initial areas of concern for DoL
and the states to consider. Since then, we have released
several additional reports.
We also hired additional investigators, strengthened our
data analytics program, and worked with DoJ to create a
National UI Fraud Task Force.
We leveraged our CIGIE and PRAC resources, implemented
outreach and education with the states, and collaborated with
the PRAC, DoJ, and the Secret Service to recover fraudulent
funds.
We also engaged with international law enforcement partners
to pursue transnational organized criminal groups.
The OIG efforts have resulted in more than 700 search
warrants executed, and 1,200 individuals charged with UI fraud.
These charges have resulted in more than 500 convictions,
11,000 months of incarceration, and $905 million in
investigative results.
We also identified $45.6 billion in potentially fraudulent
UI benefits paid in 4 high-risk areas.
In response to our recommendations, DoL instituted efforts
to improve the UI program. However, several OIG recommendations
remain unimplemented regarding OIG's access to UI data, state
staffing and IT modernization, guidance and assistance to
states, and controls for improper payments.
Mr. Chairman, I want to take a moment to highlight three
challenges impacting our work.
First is access to UI data. For many years, the OIG has
requested access to data proactively to monitor the program.
Given the magnitude of the issues we saw at the start of the
pandemic, we took the unprecedented step of issuing IG
subpoenas to all 50 states, territories, and jurisdictions. The
data allowed the OIG to identify billions in potential fraud.
However, the subpoena process took months, and delayed our
ability to detect fraud.
Second, the statute of limitations associated with the
pandemic UI fraud will start to expire in early 2025. UI crimes
often include complex schemes that require significant
resources and time to investigate. As such, we recommended last
year that Congress extend the statute of limitations from 5 to
10 years.
Third, our work is being impacted by resource limitations.
The OIG received $38.5 million to oversee the close to 1
trillion in expanded programs. However, most of the funding
will be fully expended by fiscal year 2024. Combined with more
than expected fiscal year 2023 appropriations, our funding is
not sufficient to maintain the level of oversight deployed
during the pandemic.
Mr. Chairman, thank you for your opportunity to testify
about our overseeing the UI program.
I also want to thank the dedicated OIG employees who worked
tirelessly to accomplish the oversight mission.
I look forward to answering any questions you or members of
the committee may have. Thank you.
[The statement of Mr. Turner follows:]
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Chairman SMITH. Thank you, sir.
Mr. Horowitz, you are now recognized.
STATEMENT OF MICHAEL HOROWITZ, CHAIR, PANDEMIC RESPONSE
ACCOUNTABILITY COMMITTEE (PRAC)
Mr. HOROWITZ. Thank you, Chairman Smith, Ranking Member
Neal, members of the committee. Thank you for inviting me to
testify today.
The PRAC was created by Congress to provide independent
oversight of the approximately $5 trillion in pandemic relief
spending, and to help coordinate and support inspector general
oversight. Working with our local, state, and Federal oversight
partners, including the comptroller general and IG Turner, we
are helping to reduce fraud in pandemic programs and hold
accountable those who have stolen from them.
We are also advancing transparency through our website:
PandemicOversight.gov, by allowing the public to use
interactive tools to see how their money is being spent.
Indeed, on PandemicOversight.gov the public can find a
spotlight section detailing the over $800 billion on--spent on
pandemic unemployment insurance programs, and includes an
interactive map on state reporting of their program integrity.
The PRAC raised concerns about pandemic unemployment
insurance program integrity shortly after the first programs
were adopted. In June 2020 we convened stakeholders in a
virtual listening forum to hear from state workforce and
unemployment agency leaders about the massive increase in UI
claims, resulting in a strain on their systems and the need for
greater Federal-state cooperation on data sharing. We have
worked closely with our state and local counterparts on these
issues, including providing them with regular briefings and
fraud alerts.
In December 2021, we issued a capstone report that can be
found on our website that shares 4 common challenges that
states faced in managing the pandemic unemployment insurance
programs.
First, programs faced severe staffing shortages as claims
surged. Between March 14 and April 18, 2020, weekly
unemployment claims increased from about 225,000 to 5.3 million
when the unemployment rate reached 15 percent, the highest
recorded rate since 1948.
Second, the claim surge exposed existing internal control
weaknesses.
Third, complex and varying fraud schemes increased as the
amount of Federal funding grew.
Fourth, states experienced challenges verifying eligibility
because of outdated IT systems and the mass influx of claims.
Then, last year, we surveyed state workforce agencies and
released a best practices report that can also be found on our
website. Among the best practices that we believe should be
replicated are increased use of cross-matching of data between
state agencies; improved coordination between SWAs and state
and Federal law enforcement, local IGs, and state auditors;
more effective use of enterprise risk management; increased IT
modernization efforts; and the use of advanced data analytics
to build multi-layer fraud defenses, including identity
verification tools.
Indeed, the PRAC itself has developed an advanced data
analytics platform to help us oversee pandemic spending. The
sophisticated work of our data scientists has been instrumental
in identifying improper payments and fraudulent activity. Just
last week we issued a fraud alert highlighting the use of over
69,000 questionable Social Security numbers to obtain $5.4
billion in pandemic loans and grants, as well as the importance
of identity verification tools. We recently received pandemic
UI data, and we will be using our analytics capabilities to
search for potential fraud across these programs.
We are also focusing on efforts to address identity theft,
a huge problem that grew exponentially during the pandemic.
In addition, we launched a fraud task force to enable us to
better coordinate OIG investigations, including those involving
UI fraud, to exchange information about fraud schemes, and to
share resources.
We also participated in the Justice Department's COVID-19
Fraud Enforcement Task Force, and have detailed a PRAC analyst
to work on the National Unemployment Insurance Fraud Task
Force.
Finally, I would like to mention three legislative
priorities for the PRAC.
First, Congress should extend, as IG Turner mentioned, the
statute of limitations from 5 to 10 years for pandemic-related
unemployment insurance fraud, as the Congress did last year for
PPP and EIDL fraud.
Second, Congress should raise the jurisdictional amount in
the program remedy--in the Program Fraud Civil Remedies Act
from $150,000 to $1 million, so IGs can more effectively pursue
lower-dollar frauds.
Finally, Congress should make permanent the PRAC's data
analytics platform. We need, on behalf of the taxpayers, that
sophisticated tool to prevent and detect fraud.
Thank you for the committee's support, and I look forward
to answering your questions.
[The statement of Mr. Horowitz follows:]
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Chairman SMITH. Thank you for your testimony. We will now
proceed to the question-and-answer session, and I will begin
first.
Mr. Dodaro, your agency released an estimate of at least
$60 billion in UI fraud, which I think we can all agree is
scratching the surface of this problem. I know our committee,
Congress, and surely the American people would appreciate GAO
continuing to investigate with your resources and size and
scope of the UI fraud. And you all have made such a commitment
to do so.
When should this committee expect to receive an updated and
more expansive review of UI fraud from GAO?
Mr. DODARO. Yes. First I want to make clear that the $60
billion estimate, as we have reported, is the low end, the low
estimate. We are working on a higher-end estimate right now. We
should have something available in--later this summer to
discuss with the committee. We are taking two approaches. One,
we are doing some modeling approaches, and we also might need
to take a sample of transactions.
Part of the problem has been there has been not even an
improper payment rate yet for the pandemic unemployment
insurance program, which we think--and others--that has a
higher level of susceptibility to fraud.
So later this summer we should have those estimates
available.
Chairman SMITH. Okay. And will you commit to coming to this
committee and requesting assistance, should you have any
challenges getting information from the Biden Administration
about UI fraud?
Mr. DODARO. Absolutely.
Chairman SMITH. Thank you, sir.
Mr. Horowitz, last year, in his 2022 State of the Union
address, President Biden announced the creation of a chief
pandemic prosecutor to serve as director for COVID-19 fraud
enforcement, and to lead criminal and civil enforcement
activities. The DoJ announced in March 2022 that Associate
Deputy Attorney General Kevin Chambers would serve in that
role.
My understanding is Mr. Chambers left the role in December,
and the position is being temporarily filled by an acting
director. We invited the acting director to this hearing, but
he declined to show up.
Besides the apparently vacant role of the chief pandemic
prosecutor, DoJ also runs the National Unemployment Insurance
Fraud Task Force. But we have been unable to get the agency to
share any updates on what the task force is doing.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
So, what is the relationship between and what coordination,
if any, exists between the Pandemic Response Accountability
Committee, the DoJ's chief pandemic prosecutor, and the
National Unemployment Insurance Fraud Task Force?
Mr. HOROWITZ. So there is several interactions.
First of all, we have been a member of the Justice
Department's task force since it was created. We attend their
regular meetings, we participate in the meetings with about 30
other law enforcement agencies to make sure we are coordinated,
and to make sure cases are handled as we and our IG partners
are developing information.
As I mentioned in my opening statement, we have also
detailed one of our pandemic response accountability analysts
to the task force that deals with national unemployment
insurance fraud to support that effort. And we are doing all
weekend with our resources to support it.
I would have to refer you to the Justice Department for
comment about when they plan to fill the vacancy. I do know
that the deputy is the acting chair of it.
Chairman SMITH. Okay. Since we could not get them to come
and testify, do you have any insight as to what DoJ is doing to
identify and recover fraudulently paid unemployment benefits?
Mr. HOROWITZ. I do know, from our work with them and my
work as Justice Department inspector general as we refer cases
to the prosecutors around the country, that they are moving
forward with them.
I think one of the challenges the Department is having and
prosecutors are having, frankly, is triaging them and--given
the resources available and the surge in cases that you have
heard about from IG Turner, as well as we know from the SBA IG
on PPP and EIDL-related fraud. So, I think that has been one of
the challenges.
One of the reasons we have asked for an increase in the
Program Fraud Civil Remedies Act jurisdictional amount is
because of our concern that lower-dollar frauds may not make it
through that thicket for prosecution. And we at least want to
make sure we can recover the money for the taxpayers.
Chairman SMITH. All right. Any insight into whether the
Biden Administration has any plan to appoint another chief
pandemic prosecutor, given that--the President's prominent
announcement last year at the State of the Union? Or was that
just a talking point in 2022?
Mr. HOROWITZ. As I sit here, they have not consulted me--
and I wouldn't expect them to--on their plans.
I would expect that to happen, and I would be happy to get
back to you, Mr. Chairman and the committee, with any data or
information you need from them if you haven't received it.
Chairman SMITH. I appreciate all the information.
I now recognize the ranking member, Mr. Neal, for questions
--
Mr. NEAL. Thank you, Mr. Chairman.
So back to the facts. The unemployment rate, as Mr.
Horowitz pointed out, in the height of the pandemic was 15.4
percent. As of last Friday, it was 3.4 percent. I think
unemployment insurance worked.
Let me give you another number with facts: $849 billion,
$60 billion--we know it is an estimate--that is 7.1 percent
that is alleged to be fraud at the moment. We have members of
the former U.S. attorney's offices here. They know how long it
takes to present these cases. So as professional as this
testimony has been, and we are indeed grateful for it, I am
disappointed that we didn't hear from any of our hard-working
people who relied upon unemployment insurance to keep their
lives afloat.
From that perspective, we know that state administrators
and workers, they dealt with a 3,000 percent increase in UI
claims. That paints a much more complicated picture.
Let me read a note from Meredith, a MomsRising member from
western Massachusetts: ``UI, with the stimulus, has saved our
family. It is something we never imagined we would need, but we
both worked as administrators in education, one of us for study
abroad companies and another finding ourselves out of work for
no fault of our own but the pandemic and having a young
daughter. We are extremely mindful of every penny, and we are
worried about the coming months, not knowing when and if we
will secure jobs. But we want to pay our mortgages as we have,
and our car payments, our food, and our medical care. Please
understand we live modestly, more than most people will ever
know, and always been responsible, financially. Our home is
small, and one of the least expensive in our town. This is the
first time in our lives that we ever could imagine the
possibility of not being able to pay for basic expenses. It is
profoundly stressful. For now, at least UI, with the stimulus,
ensured that we were able to pay our mortgage, our car
payments, our insurance, our food, and for essential family
services.''
Mr. Turner, let me say how much I appreciate the work that
you and your staff have done in trying to bring about criminal
fraud rings to justice. Your work is putting criminals behind
bars, and returning the money they stole from the Treasury. Let
me ask you about paying for the good work that you do.
We provided immediate funding and support through the CARES
Act and then ARPA, and I know that work is ongoing. You asked
for $120 million from your office, and you received only $97
million in appropriation for fiscal year 2023. I will ask you
in a moment if that is correct.
And last night, Joe Biden indicated that he intends to be
assertive and aggressive with criminal referrals from the
Justice Department.
Certainly, the proposal that we offered was not what was
agreed to in Congress in the final package.
Mr. Turner, could you talk about the impact of your work,
and what members of this committee should be doing to support
your goals?
Mr. TURNER. Well, one of the things that we try to do with
our work is to make sure that the funds that were going towards
their program is actually being used, and gets down to the
correct recipient.
So, for instance, the $888 billion that goes towards that
program, our goal is always to make sure that we conduct audits
to make sure that it is getting there effectively and
efficiently, and in a timely way, and provide oversight,
independent oversight by our investigators, to ensure that they
can deter any kind of fraud that may be taking place.
Mr. NEAL. Thank you, Mr. Turner. And I know that, based
upon the Justice Department, what U.S. attorneys do, seldom
does a would-be criminal or an individual who is suspect, if
ever, walk into a U.S. attorney's office and say, ``Hey, could
you bring me up to date on what you are doing with me?'' That
really doesn't happen, does it?
Mr. TURNER. No, it takes a lot of hard work on the part of
our investigators to actually go out and find the culprits.
Mr. NEAL. In sophisticated criminal rings, they clearly
tried to outsmart the system regularly. So it takes the Justice
Department and the good work that U.S. attorney's offices do
across the country considerable time in breaking down this
criminal activity. Is that correct?
Mr. TURNER. Yes. The more complex fraud is, the harder it
is to capture. For instance, I think someone mentioned earlier
about money mules. Money mules is one of the more complicated
schemes that are out there. And so it takes some time and some
investigative work to get to those--to get to the bottom of
those investigations.
Mr. NEAL. Thank you, Mr. Turner.
June 2020. The unemployment rate, as Mr. Horowitz pointed
out, was 15.4 percent, 20 million people had lost their jobs.
The unemployment rate, as reported last Friday after the noting
of all those jobs being created, is now 3.4 percent. Much of
what we did really worked, and I take great professional and
personal satisfaction from acknowledging there was no book on
the shelf for what we were doing. And overwhelmingly, we got
the American economy back on its feet.
Thank you, Mr. Chairman.
Chairman SMITH. I want to thank the gentleman from
Massachusetts, and I now recognize the vice chairman of the
committee, Mr. Buchanan of Florida.
Mr. BUCHANAN. Thank you, Mr. Chairman. I want to thank our
witnesses for being here today. I am glad we are finally
focusing on this crisis, which has been a magnet for theft and
boondoggle for taxpayers' dollars.
In total, GAO has found at least $60 billion stolen funds.
The DoL put the number as high as $191 billion improper
payments, with a significant amount due to fraud. Outside
experts estimate as high as $400 billion. So, it is something
we clearly need to focus on, and figure out how to do it
better.
Mr. Dodaro, let me ask you. In Florida, I can tell you it
was a disaster. There were so many dollars coming in, we
weren't prepared. We had low unemployment rate at the time. We
didn't have the capacity, didn't have the people, didn't have
the equipment. It was like the F troop. Our office is getting
hammered, everybody was getting hammered in our state.
What are--where are we at today if we have another crisis
and we have got to be able to move dollars quickly? Because
obviously, nobody can imagine--when you talk about $800
billion, no matter how you put it out there, we don't have that
kind of capacity. And obviously, it might not be that--such a
big number, but as a result of that we ended up with 300 or 400
or 200--pick a number--in fraud taxpayer monies out the door.
So give us your thought. What are we doing today to try to
fix that, so it is not as bad?
And hopefully, states are getting additional money, they
are going to invest some of the dollars, excess dollars they
have got, to make sure that we can minimize this in the future.
Mr. DODARO. I think we are slightly better prepared, but
not fully prepared for the next crisis. A number of our
recommendations at the Labor Department have been not fully
implemented yet. I think states are trying to make
improvements. There have been some improvements that have been
made, but they have all been ad hoc. There hasn't been a
systematic approach to doing this led by the Labor Department
in conjunction with the states. And I think that is needed.
Now, to make sure that Congress continues to focus on this
issue, you know, I added the unemployment insurance program to
a list of high-risk areas that we keep for the Congress and the
Administration to focus on. There are 38 areas on the list now,
and I am due to come up with an update across government soon.
But I added the unemployment insurance area.
There are problems also----
Mr. BUCHANAN. I only--I got a couple other questions.
Mr. DODARO. Okay, go ahead.
Mr. BUCHANAN. Let me get back to you.
Mr. DODARO. Yes.
Mr. BUCHANAN. Mr. Horowitz, let me mention, in terms of
organized crime, organizations outside the U.S. We have got,
obviously, some in the U.S., out of Africa, and different
parts. Not just this, ID and identity theft and everything
else.
Where is that at today? And my thought is, how much do you
estimate, and what can we get back that is--you know, it is one
thing in different states, but looking at Africa and different
countries around the world, they are taking advantage of the
circumstances, as well.
Mr. HOROWITZ. Yes, Congressman, you are exactly right. We
have--one of the biggest challenges we have is following the
fraud that occurred through overseas gang activity and
fraudsters. The Secret Service reported that they have seen
that occur through entities in Nigeria, China, Russia, other
locations. That will be our biggest challenge----
Mr. BUCHANAN. What is that dollar amount? Do you have an
estimate, or any thought of it? A range?
Mr. HOROWITZ. I don't. And one of the reasons I don't,
Congressman, is that is among the hardest fraud to find, to
track, and figure out, because it is through overseas networks.
It is a challenge.
I was a former Federal prosecutor. The process by which
getting that evidence is very challenging.
Mr. BUCHANAN. I have got one more question for Mr. Turner.
Mr. Turner, let me ask you. They claim, 70 percent of
businesses, if they could find workers they could do more
business. That is the mindset, at least, in Florida. I think I
have heard that around the country, they can't get workers.
Where are we at today in terms of getting people back to work?
Because there are--you do hear--I have heard a lot of it, where
people say, ``Well, I don't want to go back to work. I got
another six weeks of unemployment.'' But what is your sense of
where we are at today on that?
Mr. TURNER. We have done some work in that area, and part
of what we found out is that there have been instances of where
people have not gone back to work. And we have asked the
Department, which has put out a policy to address that and have
that information reported to the states when it occurs.
Mr. BUCHANAN. Yes, I just want you--I will get you the
survey, but 70 percent of companies--small business I focus on
primarily, small to medium-sized businesses--claim they--if
they had more workers, they could do more business. So, it is a
great opportunity for them. So, anything we can do to encourage
people getting back to work, setting the incentives up
properly, would be really appreciated.
Thank you, and I yield back.
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Chairman SMITH. I want to thank the gentleman from Florida,
and now I recognize the gentleman from Texas, Mr. Doggett.
Mr. DOGGETT. Thank you, Mr. Chairman.
Three years ago, with this devastating COVID-19 pandemic,
there were millions of Americans who found themselves not only
in a public health emergency, but an economic emergency.
Through no fault of their own, a sudden termination of their
paycheck, they found themselves jobless and unable to meet
basic needs. Almost overnight, it was a necessity to get access
to unemployment insurance to save their families from collapse.
I think it is very appropriate, Mr. Chairman, that this
committee exercise its oversight responsibilities to safeguard
taxpayer dollars from thieves and fraudsters.
Such fraud is hardly limited to the unemployment insurance
program. Indeed, I have never found a line item for waste,
fraud, and abuse in the Federal budget, but I have found fraud
committed and challenged and prosecuted for everyone from
defense contractors to pharmaceutical companies. Indeed, this
very week the New York Times reported that three of the five
largest Medicare Advantage insurance companies in the industry
have been accused of fraud by the Justice Department.
But what we don't need is selective interest in fraud that
seems to be more focused on the unemployment insurance program,
which is vital to our country and our families, than about
fraud which occurred in it. Indeed, that selective enforcement
was apparent with the very first piece of legislation that our
Republican colleagues offered this year, when they seemed to
have so little interest in fraud in our tax system that they
enacted legislation to undermine law enforcement, even though
it added $114 billion to our deficit.
I believe that, as we consider this program, we have to
consider not only the way the program was administered--and it
needed to be administered with less misconduct--but also the
people that were helped by that program and the challenges that
they face. An example is a fellow that my office helped in
Austin, Bill Tarabula. And Bill is a parking attendant in
Austin. And when all the events shut down at the city
facilities, he lost his job. He contacted my office in March of
2020, and it wasn't until August of 2020 that we were finally
able to get him the assistance that he needed.
The administration of the program--and there has been focus
on what the Department of Labor might have done better under
the Trump Administration and the Biden Administration. But the
administration of the program in Texas was a disaster. The
program was under-staffed. When it was apparent that the
program was not up to the task, it failed to add staff. I had
people that would set their alarms at 2:00 or 3:00 in the
morning, because they were told that was the only time that
they could get through to get unemployment benefits, and they
couldn't get through.
So, it is not a surprise to me that Texas, that failed so
significantly to meet the needs of worthy people, was not doing
its job on the fraud side, either.
I believe that, Mr. Dodaro, you have outlined things that
could have occurred and prevented some of this fraud. Because
while the prosecution is important, it never gets back all the
dollars that are lost that should be avoided through
prevention.
Now, of the many steps that you recommended ought to happen
to prevent unemployment fraud in the system at the Department
of Labor, did the Trump Administration implement any of them?
Mr. DODARO. Not fully at all. In fact----
Mr. DOGGETT. Yes----
Mr. DODARO [continuing]. We did a survey across government,
and the Labor Department reported to us that they were familiar
with the fraud framework, but they were not at a mature level.
When we went in and looked, and did more detailed work, we
found they were way short of implementing best practices to
prevent fraud.
Mr. DOGGETT. And in the Biden Administration I believe that
not all of your recommendations have been fully implemented
yet, but haven't there been a number of additional resources,
additional dollars that were provided through the American
Rescue Plan Act to try to see that we address this problem?
And in addition to acknowledging the funds that have been
allocated, what do you feel is the most important step the
Biden Administration Department of Labor should take to try to
see we never have this happen again?
Mr. DODARO. Yes. The Labor Department has put some guidance
out, some tools that have been available. They have established
an identity verification approach, and provided some grants to
states, but they haven't--all of those have been ad hoc. There
hasn't been a systematic approach.
What we call for is designating a fraud entity full-time to
focus on this, do fraud risk profiles, develop an anti-fraud
strategy, and then to evaluate how well it is working, and then
continuously make improvements.
The nature of fraud changes dramatically, and you need to
stay abreast of what is going on, and we need to prevent this.
As you point out, you--this is a cultural shift that we have
been trying to advocate across government. Because when people
think of fraud in the past, they think of the inspector
generals or GAO or others to catch the crooks. But you don't
catch everybody, and you don't certainly recover all the money.
The only way to effectively deal with this is to prevent it
up front. And when you have more technology available now to do
cross-matches, to use different tools that are available, you
should be able to get the money out quickly, but also safeguard
the Federal fisc.
Mr. DOGGETT. Thank you very much.
Chairman SMITH. I want to thank the gentleman from Texas,
and now I recognize the gentleman from Nebraska, Mr. Smith.
Mr. SMITH of Nebraska. Thank you, Mr. Chairman. Thank you
to our witnesses. This is a very timely conversation that I
will say should have happened some time ago, but did not.
But in February 2022, the Biden Administration issued
guidance allowing states to forgo due diligence and fact-
finding for large volumes of suspicious unemployment claims,
potentially involving billions of fraudulently-obtained
taxpayer dollars. The guidance provides multiple loopholes for
how states may apply blanket waivers of recovery of
overpayments.
For example, a state may accept without challenge that an
individual who responded ``no'' to being unemployed, partially
unemployed, or unable or unavailable to work is entitled to a
waiver of recovery of overpayments, with no determination as to
whether the individual was truthful in their response. This
potentially allows those perpetrating fraud within the UI
system to continue, and leaves hundreds of thousands of
unresolved claims involving stolen identities belonging to
identity theft victims, including first responders, government
personnel, and school employees.
Mr. Chairman, I would like to submit for the record a
letter that Ways and Means Republicans sent to the Department
of Labor on February 18th, 2022, nearly a year ago, requesting
an immediate stay of the effective date of this guidance, and
an explanation of how the Department would ensure the guidance
would not undermine existing investigations.
Chairman SMITH. Without objection, so ordered.
[The information follows:]
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Mr. SMITH of Nebraska. Thank you. In their response to our
letter, DoL said that the guidance was developed in response to
requests from states, which were ``seeking greater efficiencies
in the use of limited government resources. States noted that
it was taking a significant amount of time and resources to
process waivers on a case-by-case basis for overpayments.''
DoL also responded that the guidance specifically
instructed states that they may not waive overpayments due to
fraud. This response was far from reassuring. In fact, DoL's
response increased my concern regarding this waiver policy,
which is still in place today, because it suggests that states
were dealing with a backlog of suspicious claims, and DoL
provided an easy opportunity for them to forgo the
investigation and fact-finding needed to know whether they were
fraudulent in the first place. It further eliminated any
incentive for states to track down fraud.
This action is particularly reckless in light of White
House estimates the Federal and state UI program had a 22.2
percent improper payment rate for fiscal year 2022.
Mr. Turner, my question is for you. One of the questions we
asked in our letter was whether DoL consulted with your office
before issuing this guidance. Given the OIG's work on ensuring
recovery of taxpayer dollars, I would like to understand how
your work will continue, now that this guidance is in place
and, in particular, any impact on your ability to initiate and
conduct investigation and prosecution of fraudulent activity in
pandemic unemployment programs.
My understanding is that this is part of your revised
pandemic oversight plan.
Mr. TURNER. Thanks, Representative. Let me just say we do
plan on doing some work on fiscal year 2023 to review that
policy. It was a policy the Department made. It was a policy
that was a programmatic decision, which we do not have any
oversight of at that point.
Because that was their decision as--independence, we have
oversight at the end of the day. But they did consult--they did
not consult with us. They made us aware that this is what they
were doing with the policy. And so, because we could not advise
them, we did make it a point to take a look at that, because we
do believe that there is a possibility that fraud could take
place, although they did tell us that they were going to put a
waiver out. And we expect to take a look again before the year
is out.
Mr. SMITH of Nebraska. Okay, thank you. And how many of
these waivers have been issued, and is DoI collecting the data
at all, or is it just not ending up where it needs to go?
Mr. TURNER. At this point we do not know how many waivers
have been issued, as far as across the country. But that is why
that work is so important as we take a closer look at it.
Mr. SMITH of Nebraska. And so, I mean, there is no way to
know up until this point?
Mr. TURNER. Well, we were asked to take a look at it. I
think, last fiscal year, and we decided to put that on our
audit plan this year. So, in the spring we are going to take a
look and find out just the extent of the problem.
Mr. SMITH of Nebraska. Okay, I thank you.
And Mr. Chairman, I hope that, you know, in light of the
circumstances of COVID, and I think well-intended efforts on
the part of this committee and, you know, this Administration,
the previous Administration, everyone involved at the time,
that we can avoid the bad things that happened previously.
I worry that, after last night's speech, we are in a worse
place perhaps than ever before in terms of what we need to do
and what we need to accomplish working together.
Thank you, I yield back.
Chairman SMITH. I couldn't agree more, Mr.--Representative.
The taxpayers deserve that.
I am pleased to recognize the gentleman from California,
Mr. Thompson.
Mr. THOMPSON. Thank you, Mr. Chairman, and I want to thank
the witnesses for being here today and for the great work that
you do in your public service.
As was stated, starting in March of 2020, the spread of
COVID-19 crippled the global economy. We lost 22 million jobs
in this country, 2.7 million of those from my home state of
California, 22 million lives disrupted, 22 million individuals
wondering how they were going to pay their bills or put food on
the table, as Mr. Neal's constituent letter gave credence to.
In response, Congress acted in an unprecedented bipartisan
manner to quickly deliver desperately-needed relief to
families, workers, and businesses across all of our
communities. This included a temporary payment increase for
unemployment benefits, and emergency relief for small
businesses such as restaurants. It is estimated that these
measures kept more than 5 million people out of poverty in
2020, and 6 million more in 2021. Because of what we did, our
constituents were able to pay their rent, purchase groceries,
and keep the lights on.
And these dollars were spent locally, multiplying across
the community, keeping businesses open. This support provided
vital--support proved vital to our communities and foundational
to our economic recovery. Because of our efforts, by July 2022
all jobs lost during the pandemic had been recovered. And just
last Friday, the Bureau of Labor Statistics reported that the
unemployment rate was 3.4 percent, the lowest since 1969.
Sadly, my Republican colleagues are using today's hearing
to smear a critical benefit to American workers, rather than
propose any sort of agenda or idea on their own to address
these issues.
Fraud happened. No one is disputing that, and no one on
this dais supports fraud. I think fraud is bad, and we should
go after it in this case and in any other instance. But my
Republican colleagues seem more interested in disparaging the
underlying program.
Every single House Republican voted against the $2 million
for states and Federal agencies to fight fraud and recover
those taxpayer dollars that we are talking about today. These
are the very tools that enabled our witnesses today to do their
good work, to crack down on this fraud. It is important.
Unfortunately, this sounds less about Republicans preventing
fraud and more about them, as I said, disparaging a program
that kept millions of families afloat, and provided a powerful
stimulus to our economic recovery.
Mr. Dodaro, during the pandemic, unemployment insurance
gave 8,665,000 Californians, including thousands of my
constituents, a critical lifeline by keeping them out of
poverty until it was safe to return to the workforce. What did
the dozens of high-quality research studies GAO reviewed say
about the effect that providing UI benefits during the pandemic
had on our economic stability?
Mr. DODARO. Yes, we looked at 30 empirical studies that
have been done and found that it was very helpful. The
conclusion of the studies was it was very helpful for
supporting the economy, keeping the problem from getting worse,
and actually providing a lot of assistance to individual people
to, as has been mentioned, pay rent, health care, et cetera.
Mr. THOMPSON. Thank you very much.
Mr. Horowitz, you said something in your statement that
really caught my attention. You said it is your desire, your
mission, your agency's efforts to hold accountable these people
that defrauded our government and took this money.
I have yet to see many programs where--private or public
sector--where fraud isn't in existence. And we see--you can
walk across the parking lot out here in the Capitol and see
where the bricks that they put in when they remodeled don't
match, and they are all chipped. I was at the board in El Paso
last week, and I saw where the contractor who built the wall
didn't put cement in the iron pilings, and they are able to cut
right through them.
Are you going to be able to hold these fraudsters
accountable and get back a lot of this money?
Mr. HOROWITZ. Congressman, you are right. When you have
programs, no matter what the program is, you are going to find
fraud.
There were several things with the various pandemic
programs that exacerbated it, like self-certification and, as
we have talked about, lack of preparedness, given what
occurred, when it occurred, and how it occurred.
Having said that, we are using every tool Congress has
given us--and you have given us a number of important tools--to
go after fraud. We are going to use criminal tools, we are
going to use civil tools, administrative tools, suspension, and
debarment. We are going to use all of those.
It is very important, though, that some of those be
enhanced, as I mentioned, with the extension of the statute of
limitations----
Mr. THOMPSON. I understand. Thank you for the work, thank
you for your answer, and good luck.
Mr. HOROWITZ. Thank you.
Chairman SMITH. I want to thank the gentleman, and I am
pleased to recognize the gentleman from Pennsylvania, Mr.
Kelly.
Mr. KELLY. Thank you, Mr. Chairman. Thank you all for being
here today.
You know, so this hearing is supposed to be about fraud. We
can't do anything unless we get away from policy and talk about
politics, because we always got to play this game about who
struck John. In the meantime, hard-working American taxpayers
are the ones that put all this money into this system that was
stolen from them.
Can any one of you--Mr. Dodaro from Monessen, Pennsylvania,
home of the Greyhounds--can any of you tell me what the amount
of the fraud is?
Mr. DODARO. We have estimated in the unemployment insurance
area, at the low end, $60 billion. We are working on a higher-
degree estimate.
We are also trying to--and this has never been done
before--do an estimate as to the total amount of fraud across
the entire Federal Government. And we are working on that.
Maybe later this year we will have an estimate if we can have
comfort in it.
Mr. KELLY. So just a ballpark, you are saying 60----
Mr. DODARO. Well, it is $60 billion, at a minimum, and just
in the unemployment insurance area.
Mr. KELLY. Okay, so it is, you know, a billion here, a
billion there. Pretty soon it gets really heavy.
Mr. Turner, any--just give me an idea what the amount of
fraud is.
Mr. TURNER. We have estimated it to be about $76 billion,
and that is based on the latest data that we received from the
Department.
Mr. KELLY. Okay.
Mr. TURNER. The Department had 8.5 as the fraud rate that
they just released based on $888 billion for the program. So,
we believe, at the low end, it is $76 billion.
Mr. KELLY. Seventy-six billion?
Mr. TURNER. Yes.
Mr. KELLY. That is with a B. Okay.
Mr. Horowitz.
Mr. HOROWITZ. Congressman, what I have said before is, with
all of the investigations we have ongoing, as well as the
overseas work we still have to do, it is way too early for us
to give an estimate. What I have said is I am--it is in the
tens of billions of dollars. You have heard these numbers.
Mr. KELLY. Yes.
Mr. HOROWITZ. It won't surprise me if it exceeds $100
billion. And as we go along over the next several years, we
will get a better sense of exactly the scope of the fraud.
Mr. KELLY. Okay. Well, the real intention, I think, of the
meeting today, which our chairman pointed out, is we wait too
long to look into what is happening with hard-working American
taxpayers' money.
Every--all this fraud lands on the same shoulders that it
always lands on, and that is our taxpayers. And I get so fed up
to come into meetings where all we do is point fingers about
who struck John, and never come up with the answer to what the
hell are we doing to fix this.
Nobody in the private sector would run a business this way,
and I am constantly baffled by the people who own this, why
they are not outraged.
I am not blaming any of you for what you are doing. I think
you get in here every day--Mr. Dodaro, I still wonder, why are
you spending so much of your life doing all this? You are
dedicated to it, and I get that. But when we have these
hearings, what the hell? We are talking about--we are up to our
neck in alligators, and we are trying to find out who was
supposed to drain the swamp. In the meantime, this is being
funded by people who get up every day, some working two jobs
and their wife helping out, working another job to put food on
the table and a roof over their head.
We have so many huge problems with this business model, and
we know that nobody in the private sector could possibly run a
business like this, because they can't borrow endlessly, or
they can't print it if they need it. This is an irresponsible
model that continues to burn through hard-working taxpayers'
pockets, and we are sitting about--is it a Democrat problem or
is it a Republican problem? Damn it, it is an American problem.
Mr. Dodaro, you wanted to----
Mr. DODARO. Yes. I continue to pursue my public service to
be the taxpayer's friend.
Mr. KELLY. God love you.
Mr. DODARO. At GAO we return $145 to every dollar spent on
us over the last five years, on average.
Mr. KELLY. Yes, yes.
Mr. DODARO. This is a problem, regardless of the
administration. In a few months I will be--have worked at GAO
for 50 years. I have seen this problem over a period of time.
[Applause.]
Mr. DODARO. Thank you. I hope to make it.
Mr. KELLY. Yes, you are going to make. You are from around
the Pittsburgh area, and we are tough.
Mr. Dodaro. But I have--and in my statement today--10
legislative suggestions----
Mr. KELLY. Yes.
Mr. DODARO [continuing]. For Congress.
First of all, in any new program or an increase in spending
over 100 million, $100 million, it ought to be immediately
susceptible to improper payments, given the problem we have.
Right now, programs can be in operation two or three years and
never estimate the amount of improper payments. This just
doesn't make sense. And some of these programs will fully
expire before you even know early on.
And I have got other legislative solutions. So, there are
things Congress can do to make this better.
Mr. KELLY. You know what? First of all, I have run out of
time. Thank you for what you have done with your life. It is
just incredible, the service you have been to the American
people.
I would tell my colleagues; I don't care if you wear a red
shirt or a blue shirt. Start thinking about wearing red, white,
and blue, and stop pointing fingers at each other.
I know I am going beyond what you have given me, Mr.
Chairman, but if we don't stop what we are doing right now--and
look, let's fix the model, instead of trying to figure out who
it is that dropped the ball. You know, and we can't do it,
because every two years we come up for election, and we got to
make sure that we can still get that one more vote than who we
are running against, as opposed to let's fix this damn thing.
Okay, Mr. Dodaro, thank you. Mr. Turner, thank you. Mr.
Horowitz, thank you for coming here, and thank you for what you
are doing. You guys are incredible. Thank you.
Chairman SMITH. Representative, when you were talking about
the hard-earned taxpayers and small business owners, it made me
think of Ashley Bachman, our--one of our witnesses at our
hearing on Monday in West Virginia. She was asked the question,
``If you operated your business like Washington, what would
happen?'' And Ms. Ashley Bachman said, ``We would have to close
our doors down.'' And that is from a real small business owner,
and a real American.
Mr. KELLY. Yes, you know----
Chairman SMITH. So, based on your testimony, it made me
think of that.
Mr. KELLY. Yes, yes, thank you. But I am a small business
owner. I--third generation, and I remember one time we were
talking about Tax Cuts and Jobs Act. I made the comment that it
was four times in my life that I didn't pay any taxes at all,
and the rest of the committee looked at me and said, ``Well,
how the hell did you do that?'' I said, we lost money that
year.
Chairman SMITH. That is right.
Mr. KELLY. So, if you have a model that works, you use it.
But I really do, I am imploring all of us. It is not about
red and blue. It is not about Rs and Ds. It is about the people
who elected us to come here and act in their best interest. So,
I appreciate this. We have so much to look into and so much to
get done, because we are accountable to so many people who just
fund this incredible model.
So, Mr. Chairman, thank you. Witnesses, thank you so much.
Chairman SMITH. Thank you.
Mr. KELLY. I really appreciate you being here.
Chairman SMITH. Thank you, Representative. I would like to
recognize the gentleman from Oregon, Mr. Blumenauer.
Mr. BLUMENAUER. Thank you, Mr. Chairman. I think this is an
extraordinarily valuable hearing and exercise to give us a
sense of what the challenges are. And frankly, it has been an
amazing reminder for me of what we were going through during
that fraught period.
I was going to my office at 7:00 in the morning, trying to
deal with people who were desperate because they couldn't crack
the unemployment system. And that, frankly, we--all hands on
deck for that. These people were in danger of losing their
business, losing their homes. They were frantic that they
couldn't get through. Now, this was a state failure. The
Federal Government gave money. Texas wasn't the only state. I
heard this around the country. You probably had that experience
in your office, dealing with desperate people.
And so, this hearing helps us set the context, and is a
powerful reminder for me of what we were going through, being
overwhelmed by demands, a 3,000 percent increase in
unemployment insurance claims. That is the reality that we were
facing. On balance, I think I am appalled at the amount of
fraud that occurred. But given the urgency, trying to help
desperate people, I understand why we were there.
The question is, how do we make sure that we are no longer
there?
Mr. Dodaro, you mentioned that you gave recommendations to
the previous Administration, and couldn't find, in the midst of
this, that they were moving forward.
I agree with Mr. Kelly. I am not interested in pointing
fingers one way or another. But I do think it is important that
we don't lose track of the hard work of oversight, that we claw
back every dime that we can, and that we are prepared for the
next contingency, because it is coming. We know that. And we
can learn from those valuable lessons.
I think it is important, however, to put some of these
things in context. My friend, Mr. Kelly, wondered how the
business model continues the way we are doing it. I would like
to offer one other area. There is 6--there is $468 billion to
$600 billion a year of taxes due and owing that we are not
collecting. It is up to $7 trillion over the next 10 years.
There is no business in your district that would sustain losses
on that order of magnitude with the accounts receivable, with
the accounts receivable. We know where that fraud--it is fraud,
cheating, breaking the law--is. It is interesting that higher
earners like partnership income, proprietorship income, rental
income--non-compliance can reach 55 percent.
Now, I hope that the indignation that we are expressing
towards a program that was meant to save desperate people, that
that can be transferred to an area of much greater loss. There
are some people that think maybe we ought to threaten default
on the national debt because they are concerned about deficit
spending. This is up to $7 trillion. That is not new taxes, it
is not cutting programs. It is collecting money that is due and
payable to the Federal Government, and it is keeping faith with
the hard-working majority of people who actually pay their
taxes.
So, I hope that we keep this spirit of concern for
oversight and economy, and zero in on the people who cheated
the Federal Government on unemployment insurance. But I hope
there is still an air of indignation about the far greater
source of lost revenues from, primarily, rich people who forget
to declare their income. That is even more important, and this
is an ongoing loss of revenue, 500, $600 billion a year that is
lost.
Mr. Kelly, we can't keep doing business if we are not
collecting money that is due and payable. That is not keeping
faith with small businesspeople that you represent or I
represent. So, I hope we can make this a constructive effort on
oversight, but that we have a broader sense of responsibility
and reclaiming lost revenue.
Thank you. I appreciate your indulgence.
Chairman SMITH. Thank you, Representative. I recognize the
gentleman from Arizona, Mr. Schweikert.
Mr. SCHWEIKERT. Thank you, Mr. Chairman.
Mr. Turner, I appreciated reading over your testimony, but
I could really use your help in--and I know there is unknowns
here. So, your number of either fraudulent or missed payments,
was that number--what, I was seeing $198 billion was the
estimate?
Mr. TURNER. A hundred and ninety-one.
Mr. SCHWEIKERT. Okay, 191. And if the program was about
$800 billion, so your number is--about 20 percent of all the
payments that went out essentially got tagged in some fashion
or other of being a mispayment or being fraudulent.
Mr. TURNER. That is correct.
Mr. SCHWEIKERT. First off, how comfortable are you with
that 198--or, excuse me, 191, I want to make sure I quote you
properly. It is--what is the model in your head, from your
researchers, that say that number could be more? Or is it less?
Mr. TURNER. Well, I believe that is--we believe that is the
low end, and we believe that number could be more, because that
does not include the PUA, which dealt with the self-
certification in the first nine months.
Mr. SCHWEIKERT. Okay, you beat me to my punch line, so--you
take away my shtick. But there is where I want to go. What is
their--let's go on the--way outside of the tail on the curve.
Mr. TURNER. Okay.
Mr. SCHWEIKERT. What do they think it could be, total?
Mr. TURNER. I have no way of knowing that. I know the
Department----
Mr. SCHWEIKERT. Is it potentially double?
Mr. TURNER. I have no way of knowing that. The Department
is planning on putting out the rate for the PUA at the end of
the year.
Mr. SCHWEIKERT. Okay.
Mr. TURNER. And so that would give us a better
understanding of what the number may look like.
Mr. SCHWEIKERT. You see, one of the things that angers me
in our hearing right here--and we are all sinners here--is I
never want this to happen again. And I wish we would have a
much more detailed conversation of, okay, so we see a couple
hundred billion dollars, mispayments, we believe a substantial
number of that is fraud, and the number could be substantially
higher than that. How do you do it?
At some point--and I am going to ask from my inspector
general and others, send me a little chart. Send me a booklet.
Send me something so I can understand. How is the fraud
committed?
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
I actually want to understand down to the mechanics the
syndicates that flooded when--my wife, who was running a fairly
large surgery center in Scottsdale, Arizona was getting dozens
every day of unemployment claims for people who had never
worked at her surgery center. It was particularly interesting
when she got an unemployment claim for herself, when she is
running the surgery center. She brought that home, and thought
that was actually--she wanted me to fix it.
And I am just losing my mind because the numbers of folks
we had calling us saying, ``I am running a business, and I am
getting unemployment claims dramatically more than the number
of employees I have ever had,'' is that buying data sets off
the dark web? Is that the Office of Personnel Management data
breaches?
Where did they get the--first, the data sets? Did they
write bots that automatically kept filling out applications?
Then, when the checks went out, how did they get people to
actually get those addresses, collect the checks?
How do they convert those checks to cash? How did that cash
actually turn into bitcoin or something else? How did it get
offshore?
Help us understand the mechanisms in the fraud, because if
we are going to stop it, I know we have two things--and forgive
me for rambling, a lot of coffee today--I understand much of
what we look at, we need a revolution of the data, and this is
the data from the IRS, to this and that. We need to understand
that data is actually the solution.
But I also want to understand how the criminal networks
stole billions and billions from our people. I mean, am I
asking something--it is too difficult?
Mr. TURNER. No, you are not. Actually, it was a combination
of a lot of things you mentioned. But it all mostly starts with
stolen identification.
When self-certification took place the first nine months,
there was no kind of verification required to say that you
deserved those payments, and that was part of the problem the
IG notified the Department about, because we sent an alert memo
out. We said we also briefed the members----
Mr. SCHWEIKERT. But Mr. Turner, I am less concerned about
the bureaucracy telling this person, telling that person. I
am--right now want to understand the mechanism.
If--I had my state unemployment offices, and we had made it
so they had access to commercial data sets. I mean, commercial
data sets out there know what type of ice cream I used to eat,
and my favorite flavor. You know, they have--our ability to say
we are going to do red light-green light, bounce off the types
of data out there, is it is our failure to understand the
technology that is all around us because we are still promoting
archaic systems?
Mr. TURNER. Well, let me give you a better example that
would probably help clear this up.
So, for instance, stolen Social Security numbers, a lot of
time you can buy them on the dark web for $0.05. And so, a lot
of this is multi-state claims that have been filed. In one case
we had an individual file in 42 different states, and they are
getting that money back in terms of debit cards. So, it is cash
to them, and that is hard to kind of keep track of.
And so, over time, when you start getting organized crime
and street gangs involved in this, those numbers multiply.
Mr. SCHWEIKERT. That--Mr. Chairman, thank you for your
patience with me. I think it would be fascinating, either from
Oversight Committee or full committee, I would love to bring in
some of the perpetrators of the crime, you know, who have been
convicted. You know, we have done it before. Bring them in, sit
them in here, say, ``Tell us how you stole billions of people's
money,'' and we understand what the hell is really going out
the--on--in our neighborhoods.
Thank you, Mr.----
Mr. TURNER. And if I could just add one thing, Mr.
Chairman, I will give you an example how that took place. For
instance, we identified $45.6 billion--million dollars--billion
dollars, I am sorry, in potential fraud. And it happened
because they sold the Social Security numbers of deceased
individuals, federal inmates, multi-claims, and suspicious
emails. And that was potentially what took place. And we shared
that information with the states.
Mr. DODARO. Mr. Chairman, if I might ask for an indulgence?
Chairman SMITH. Very quickly.
Mr. DODARO. For years I have been trying to get Congress to
pass legislation to allow the Treasury Department to get the
total Death Master File from the Social Security
Administration. I was finally successful during the pandemic to
do the data matching that should have been done beforehand to
prevent people from--deceased people from receiving payments
and allowing people to exploit this.
I am still making a recommendation to expedite that because
Congress gave three years before it became effective. And it is
only permanently in place for----
Chairman SMITH. All right----
Mr. KELLY. I can buy that data right now on my laptop.
Chairman SMITH. Mr. Schweikert----
Mr. KELLY. I mean, it exists right now.
Chairman SMITH. Yes----
Mr. DODARO. Not the complete one.
Chairman SMITH. We need to move on. Thank you very much.
Let's recognize the gentleman from New Jersey, Mr. Pascrell.
Mr. PASCRELL. Thank you, Mr. Chairman. Mr. Chairman,
today's hearing on the monumental and lifesaving investments we
have made during the pandemic, it is important.
My friend from Arizona, could it--I agree with much of what
he has said. But we are not going to throw out the program, it
seems both sides are saying in between words, because there is
fraud in the program. But you need to do something about it to
get rid of the fraud.
No one up here is advocating fraud, stealing, breaking the
law. So, we change it. We presented changes in the original
program that we are talking about today. We know who voted for
it and we know who voted against it. Just remember that.
I think Congress acted decisively and in a bipartisan way
in the face of an historic crisis to keep America safe. Our
unemployment, our aid kept families together and saved lives.
That is a big deal.
More than 1.5 million Garden Staters--New Jersey folks--
received unemployment benefits from March 2022 to September
2021. It stopped mortgage defaults. It kept the electricity on,
believe it or not. It put food on tables and in children's
stomachs.
In March 2021 we passed the American Rescue Plan. Where
were we? Because the crisis continued. It included unemployment
and strong enforcement protections. President Biden used those
protections to prosecute frauds. You either voted for it, or
you voted against it, or you didn't vote. States recovered
nearly $100 million. Enforcement was working.
Republicans claim to care about misuse. I agree, we should
all. But every Republican Congress voted for the Trump-Mnuchin
plan that did not have fraud protections, and every Republican
voted against our fraud protections. It is the record. You
can't change that every other day, or show us a different
perspective of it. You either did it or you didn't do it.
Our plan kept people alive, one of the most successful laws
ever enacted. Last month our economy added over half-a-million
jobs. Job growth is at a 40-year high. You have heard the
chairman--the ranking member--say that many times. Unemployment
is at the 54-year low, and the Biden economy isn't doing so
bad. Every job lost during the pandemic was recovered. All our
economic output lost is regained. Our pandemic measures
exceeded expectations. We emerged stronger than any other
country.
You know, the problem of inflation did not happen--I want
to announce this--did not only happen in the United States of
America. Thank you.
I am happy to work together to ensure Federal dollars are
spent and spent well. Frauds need to be held accountable and
prosecuted. But this hearing isn't about fraud. This hearing is
about shaming workers and lying about our strong economy. You
didn't one moment last night choose to recognize that.
The truth is our actions saved lives and saved the American
people. And I say, Mr. Chairman, that this is a very good
hearing, because not only are we bringing some facts out today,
both sides, but we go back into the history of the program we
are talking about and looking at those facts.
And I yield back to the chairman.
Chairman SMITH. I want to thank the gentleman.
I want to remind the committee that this hearing is about
fraud. It is clearly not about shaming any worker. In fact,
every dollar going to fraud is a dollar that did not go to
those who needed it. And that is our responsibility, as Members
of Congress, to make sure that taxpayers' dollars are going to
the right places. So, it is clearly about fraud.
I am pleased to recognize the gentleman from Texas, Mr.
Arrington.
Mr. ARRINGTON. Thank you, Chairman. Thank you, witnesses.
I have heard repeatedly comments from my colleagues that no
one here on the committee is advocating for fraud. I agree. I
don't think fraud is acceptable to a single Democrat or
Republican.
But if we are going to talk about the facts, the fact is
there was $1 trillion still unspent from the previous COVID
relief package that was bipartisan. There were several
bipartisan relief packages that we worked on together. And the
Democrats, my colleagues, went alone with $2 trillion. And the
facts are we repeatedly, repeatedly warned them about not
including guardrails, the ounce of prevention that would be the
cure for pounds--tens, if not hundreds of billions of dollars--
in improper payments and fraud and waste. And they did not
heed. Not a single amendment.
I mean, we must have had hundreds of amendments. Not one
amendment was taken. I understand their commitment, and I
understand the extenuating circumstances. And I, quite frankly,
understand the need for speed and some of the mess that comes
with that. But we were way down the road from needing to rush
something, when we had $1 trillion still unspent, and we had
learned from the previous mistake of paying people too much,
where they were, literally, perversely incentivized to stay at
home and off the payroll. That was a mistake, but it wasn't
acknowledged. It wasn't included in our counsel, and that was a
huge mistake.
And there weren't guardrails so that we could get ahead of
this on the front end. We knew there was a lot of money, and we
knew that, with 150 some-odd billion dollars in improper
payments already, as has been discussed, this was going to be a
disastrous waste of taxpayer money. That is poor stewardship.
It just is.
So, there is a saying that used to be on a sign outside of
our former head football coach's office at Texas Tech, the
great Mike Leach. And it said, ``You are either coaching it or
allowing it to happen.'' It is a statement of accountability.
You are either coaching it directly, or you are indirectly
allowing it to happen.
So yes, I don't think that you, any of my colleagues on the
other side of the aisle, advocate for fraud. But they allowed
it to happen, and they didn't take our common-sense counsel
because they wanted to jam a partisan bill, no matter how good
their intentions were, through the process, and taxpayers have
paid mightily.
Were people helped? Sure. I am certain they were. You can't
throw $1 trillion, almost, at a problem and not help somebody,
for heaven's sakes. That is not the question. The question is,
are we acting as leaders of the greatest country in the world,
and as stewards on behalf of the greatest people in the world?
The answer in this regard is no, we failed.
I am sure my party has had their shortcomings along the
way, and I will try to readily concede when we do. That was a
failure on your part. Let's not repeat it. For heaven's sakes,
can't we agree on just that fact, if we are concerned about
facts? The facts are that we turned the trampoline into a trap,
and the safety net into a hammock because of these policies.
I got 43 seconds. The debt is amassing at an alarming rate.
A crisis related will be catastrophic. Mr. Dodaro, you know
that as well as anybody on this dais. We have to recoup this
money. Every year I hear the same numbers. We got to get our
arms around the 150 or the 160. In 2021, it was $280 billion.
But nothing ever happens. What are we going to do to recoup
America's hard-earned money so that we can help reduce the
spend, bend the debt curve, and save this country from a much
bigger crisis than what we have experienced even in the
pandemic, and maybe even any crisis to date?
And I took all the time, but if he would just--Chairman, if
you would indulge Mr. Dodaro just to make a quick response?
Chairman SMITH. Proceed, please.
Mr. DODARO. Congressman Arrington, I have said for a long
time and written that the Federal Government is on an
unsustainable long-term fiscal path. I recommended that we put
a plan in place to have guardrails, a debt-to-GDP ratio, some
kind of framework for guiding future decisions.
I have also recommended changes to the--how we set the debt
ceiling issue. I think that there is a better way to do it at
the time revenue and expenditure decisions are made in the
beginning that avoids a potential cliff crisis.
I have also said that we have problems on both ends of
revenue. As was mentioned earlier, we have got a tax gap
exceeding $400 billion that is not coming in. It should be,
under current tax law. We are sending out 200 billion that
shouldn't be sent out.
And so, we have got a lot of problems. We have got a lot of
recommendations to deal with these issues. And I think these
implementation issues of current policies can be done a lot
better and more effectively to protect the taxpayers and to
deal with our long-term deficit and debt issues.
Chairman SMITH. Thank you. I thank the representative. I
recognize the gentleman from Illinois, Mr. Davis.
Mr. DAVIS. Thank you, Mr. Chairman. As I listened to my
friend from Texas, I was reminded of a saying that the Panthers
used to use, and that was: ``you are either part of the
solution or you are part of the problem.''
Between February and May 2020, Illinois lost almost 1.8
million jobs, with over half-a-million workers left jobless in
the Chicago area alone. Our swift bipartisan response to pass
the CARES Act prevented unthinkable hardship for millions of
people in Illinois and tens of millions across the nation.
No one should get away with criminal fraud, which is why I
was proud to help provide the Biden Administration and the
inspectors general with dedicated fraud-fighting resources in
the American Rescue Plan, resources that led to over 1,500
defendants being criminally charged, and the recovery of
billions of dollars.
The actions of these criminals should not distract from the
fact that pandemic unemployment insurance kept an estimated
five million people a year from falling into poverty, met
revenue and customers for businesses that were still open,
allowed workers at high risk COVID to stay safer during a
pandemic that disproportionately killed Black and Brown people.
My staff and I took thousands of calls from constituents
who needed help. The Chicago economy relies a great deal on
tourism, hospitality, and the arts, all of whose workers needed
pandemic unemployment benefits to survive.
I am disappointed that we do not have the opportunity today
to hear from workers who relied on UI during the pandemic. So
let me just share a story from Bonnie in Chicago, and here is
what she said: ``We are a dual freelancer home in the theater/
TV industry, with two children. We had to file unemployment for
the first time in our lives. Our industry is shuttered for the
foreseeable future, with no end in sight. And with the huge
unemployment rate, nobody has even called us for an interview,
let alone a job offer. Without the extra boost, we would be
unable to cover the mortgage, pay our bills, our health
insurance, which is all out of pocket, or keep our kids fed. I
think we qualified for something paltry, like $500 a month in
unemployment, which covers virtually nothing, with the high
cost of living in Chicago.''
I am deeply proud that the pandemic unemployment assistance
provided relief during a crisis, and I reject this Republican
concern for fraud when they remain silent when the Trump
Administration failed to implement GAO's anti-fraud
recommendations, and when they opposed the anti-fraud funding
that this committee's Democrats secured.
Mr. Dodaro, in the Rescue Plan, we put $2 billion in there
to help states by giving grants to them. Could you measure what
this program actually does, and what it did?
Mr. DODARO. The program is intended to help with--combat
fraud, also to look at ways to make sure there is equity in the
program, to deliver customer service, more timely payments.
We also found some disparities in the amount of payments
that were going to different racial groups, and we are, in our
continuing ongoing work, going to be looking specifically at
what the two billion was used for, and we will be reporting to
the committee.
Mr. DAVIS. Thank you very much. Congratulations on your
long tenure.
And, Mr. Chairman, I yield back.
Chairman SMITH. Thank you, Representative. In regard to the
$2 billion that the gentleman from Illinois just mentioned
about, I actually asked my Department of Labor in the State of
Missouri to ask if it worked. And I would like to submit for
the record this letter that she presented.
It says more--one of the lines in it says, ``More recent
funding opportunities, such as the Equity and Tiger Teams
grants, provided limited flexibility to address program
integrity and ongoing fraud prevention strategies.
Without objection, I would like to put it in the record.
So ordered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman SMITH. I would like to recognize the gentleman
from Oklahoma, Mr. Hern.
Mr. HERN. Mr. Chairman, thank you for hosting this
important hearing. It has been a long time coming.
Let me be clear that unemployment fraud is not a new issue.
However, no one here can deny that since the start of the
pandemic the number of fraudulent claims has skyrocketed. I
know I am not the only one here who has experienced this
firsthand.
Now, I first shared my story during a roundtable hosted
last year by my Republican colleagues on this very topic. From
their lack of action, it is increasingly evident that the
Democrats, my Democratic colleagues, are--still aren't grasping
the scope of this issue. So let me show you.
So, this right here is a box, a 27-pound box that I had my
staff go dig out of storage, had my folks back home dig out of
storage. And it represents, from March 2020 to April 21, 789
fraudulent claims on an employee base of 324 employees that my
family business had happen to them, just 14 months. And yes, as
the ranking member said, this was prior to the current
Administration. But that should make it all the more important
of why we need to investigate the fraud that is going on across
America.
The American taxpayer does not care who is in the White
House. They want to know where their taxpayer dollars went, and
did it go to not any Americans at all, did it go to places like
India and elsewhere around the world, as we knew what went on?
These 789 fraudulent claims were of people that never
worked for me, ever, in 25 years of business had never worked
for me. And had we not done due diligence on every single
claim, they would have been paid out.
Now, I will tell you, when you look at this, we also had
people who had been continuing to work that got 1099s saying
they were not working. And yet we still do not want to have an
adult conversation about what really went on with hundreds of
billions of dollars of fraud across this country in the UI
program.
And so, when we talk about this, I really want to get to
the idea and the thought of why we can't have and why we
haven't had--I think some of you have mentioned this--that the
closer we can do this--and I know that one of you all mentioned
that we should have these conversations while we are doing the
programs, and recognize that when you are really just passing
out hundreds of billions of dollars, some would argue trillions
of dollars, in the time that has happened to us in the last 24
to 30 months, that we have the propensity, and when it is
fairly mandated, that we are going to have fraud.
We should acknowledge that, and we should do our job--it
shouldn't be political, it should be bipartisan--to sit down
and talk about where this fraud is that.
Now, I will tell you that we know that this unemployment
insurance system is deeply flawed. It has been around since
1935. People have figured out how to beat the system. It has
happened. We see it. This is a testament to it. Anybody is more
than welcome to look at it. You can't take pictures, because it
has Social Security numbers on it, but you can take a look at
them and see what we are talking about.
You know, when we look at the issue that we talked about
with workers not working, it is a fact that we know that we
send out hundreds of billions of dollars, incentivizing people
beyond the time when some states were going back to work, with
no discernible difference in the outcome of the COVID pandemic.
And yet people in the State of Oklahoma were funding fraudulent
claims in places like California and New York--and no offense
to my friends, but that is where the largest amounts of--just
from the sheer population--the fraud occurred. And I have to
answer to my friends and my constituents back home in Oklahoma
why it is okay that the United States Congress cannot hold a
hearing on fraud, and they have to continue to have their
taxpayer dollars being paid out in fraudulent claims.
Mr. Turner, what motivation do states have to mitigate
fraud, when the burden of loss falls on the Federal Government?
Mr. TURNER. Well, first, I think there is an incentive. And
part of what the Department is trying to do is also offer up a
policy of getting a five percent return on when fraud is
pointed out, and have that fraud returned back. So, I think
that is part of the incentive I know the Department is trying
to do, and we concur with that, that has been part of their
recommendations, because that would help them pursue it a
little more vigorously.
Mr. HERN. So, in following up to that, what has been done
to hold the most negligent states accountable, so that the
hard-working people of states like Oklahoma aren't paying the
price?
Mr. Turner. Well, I think the Department has really reached
out to all states, in trying to hold them accountable. I mean,
with our work, we really don't care what state someone is in.
But when there is fraud that occurs, and once it is identified,
we work with our law enforcement partners around the country to
try to address it.
Mr. HERN. Any reforms you see we should be doing so that we
don't have this happen again?
Mr. TURNER. Well, here is the biggest problem, in my
opinion. The biggest problem is that, as the OIG, we make a lot
of recommendations. And if you look back over the history, even
10 years ago, some of the recommendations that came up this
time are the same problems that went unaddressed, whether that
be our antiquated IT systems or whether it be lack of staff
training. Those are things that we have identified.
And with this new program that was out with PUA, there was
some states that--the officers were not trained properly or
didn't know, and in some cases they waived that requirement
because there was a lack of understanding of how the process
worked.
Mr. HERN. I would like to thank the witnesses, and I yield
back.
Chairman SMITH. Thank you, Representative. I would like to
recognize the gentlelady from the State of California, Ms.
Sanchez.
Ms. SANCHEZ. Thank you, Mr. Chairman, and good afternoon to
the gentlemen on our panel. I want to thank you for your
testimony today.
How to stop fraud is a very important issue, but so equally
important is how to provide help to families during a once-in-
a-century pandemic. Mr. Dodaro, did you receive unemployment
insurance at any point through the pandemic?
Mr. DODARO. No, although I would----
Ms. SANCHEZ. Okay.
Mr. DODARO [continuing]. Note for the record someone filed
a claim in my name.
Ms. SANCHEZ. Okay, I am just asking if you did.
Mr. DODARO. And the GAO people----
Ms. SANCHEZ. The question was whether you did or not.
Mr. DODARO. Okay. [Laughter.]
Ms. SANCHEZ. Thank you.
Mr. DODARO. All right.
Ms. SANCHEZ. Thank you.
Mr. TURNER, did you receive unemployment insurance at any
point through the pandemic?
Mr. TURNER. No, I did not.
Ms. SANCHEZ. Thank you.
And, Mr. Horowitz, did you receive unemployment insurance
at any point during the pandemic?
Mr. HOROWITZ. No, I did not.
Ms. SANCHEZ. Thank you, gentlemen. I asked that question
because it is increasingly apparent that this panel is missing
a critical perspective: someone who actually did receive
unemployment insurance after losing their job. Republicans
refused to hear from working families who received this
critical earned benefit when they had nowhere else to turn.
Throughout 2020, my district office was inundated by
constituents desperate for a helping hand. Many of them
contacted my office as a last resort, saying they were about to
forgo food, rent, or their mortgage payments after losing their
job. When my colleagues and I worked across the aisle to
unanimously pass the CARES Act, we got pandemic relief out the
door as fast as possible.
Was it perfect? No. But we wanted and needed to help folks
survive. And you know what? It worked. At the start of the
pandemic, one of my constituents reached out to my office. She
was an older woman who had just lost her job and was caring for
her mother in hospice. Her UI benefits were the only source of
income that allowed her to keep the heat on for her dying
mother. Without this Federal money, she, along with about five
million more people, would be living below the Federal poverty
line.
This critical lifeline also disproportionately helped older
Americans, less educated workers, and Black and Brown workers.
The point is that Federal unemployment insurance during the
pandemic was overall a major success. Again, was it perfect?
No. But it kept families fed, it kept families housed, it
allowed my constituent and her mother to continue living in
dignity.
We had to act fast. And no, we were not always surgical in
what we did, but we learned from our mistakes. But today my
Republican colleagues want to highlight the program's
shortcomings, particularly fraud.
After the passage of CARES, the GAO made several anti-fraud
recommendations to the Trump Administration. President Trump
failed to implement any of these basic safeguards, placing
American tax dollars at risk.
My Democratic colleagues and I worked to address the
criminal activity, while recognizing the vulnerabilities in our
state UI systems. The reality was that the agencies were
chronically underfunded and under-staffed. UI agency workers in
my home state of California went from working 8-hour days to
14-hour days, 7 days a week. Democrats worked to close that
resource gap.
Through the American Rescue Plan, we dedicated fraud-
fighting resources, while ensuring we were not harming critical
benefits for American workers. As a result, the Biden
Administration has already prosecuted over 1,500 defendants who
are accused of fraud.
Again, not a single Republican voted in favor of these
fraud-fighting provisions. Now they want to use the first
hearing of this committee in power to talk about the problem
that they initially refused to solve.
We cannot discredit a critical earned benefit that 1 in 4
American workers legitimately needed in 2020. So, let's not
allow the action of criminals to distract us from the fact that
pandemic UI saved millions of American families.
And before I close, I would ask unanimous consent, Mr.
Chairman, to enter into the record a letter from the American
Federation of County, State, and Municipal Employees, which
represents many of the dedicated state employees who worked
overtime and more to pay workers UI benefits that they needed
during the pandemic. They were not allowed to be heard at
today's hearing, so I hope that all of my colleagues will read
their letter and listen to the voices of the workers that they
represent.
Chairman Smith. Without objection, so ordered.
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Ms. SANCHEZ. Thank you, and I yield back.
Chairman SMITH. Thank you, Representative. I would also
like to thank the representative for highlighting why it is so
necessary that we have numerous future oversight hearings to
look at how we can make sure the integrity of the programs this
committee has jurisdiction over to continue to operate
appropriately and fairly.
I would like to recognize the gentleman from Georgia, Mr.
Ferguson.
Mr. FERGUSON. Thank you, Mr. Chairman. And I would just
like to point out that this is, in fact, our second hearing
that we have had, not our first. And I think there were so many
members on the other side that did not attend the first hearing
that maybe it just slipped their mind. So, I will just point
that out.
I also want to address the insinuations that we have not--
you know, that we are going after the individual citizen here.
This--listen, this was a huge program. We sent out money. This
place, D.C., decided to shut down the country, and we knew we
had to do something to help our fellow Americans. And we did.
But then we went back to the well again when it was unneeded.
And when we had an opportunity to put guardrails on it, we
failed to do so.
Now, I just think that is where we need to recognize and we
need our colleagues on the other side to get serious about the
oversight, and quit coming after Republicans when it is not
right. So I get that off my chest.
Mr. TURNER, in this program I think you said $191 billion
in estimated fraud. Is that right?
Mr. TURNER. That is correct.
Mr. FERGUSON. All right. And you have recovered $105
million of it?
Mr. TURNER. No, I didn't say we had recovered 105. We
actually, as far as the Labor OIG, we have $905 million that we
have not recovered, but monitored results.
Mr. FERGUSON. A hundred and five million? Is that--I am----
Mr. TURNER. No, 905 monitored results. And what that is, is
there may be court cases or admin or civil resolutions to some
of that, and some of it takes time to actually see that the
funds----
Mr. FERGUSON. All right.
Mr. TURNER. Yes.
Mr. FERGUSON. So, of those cases, what do you--how much do
you anticipate recovering? What is a good estimate? Do you have
any idea of what that may be?
Mr. TURNER. Let me make sure I understand your question.
First of all, let me just clarify. It is $191 billion that
we say is improper payment. And there are--76 of that is what
is expected to be the fraud rate.
Mr. FERGUSON. Okay, 76 is----
Mr. Turner. Yes.
Mr. Ferguson. Okay, I just--I am trying to get--make sure I
have got the numbers right----
Mr. TURNER. All right.
Mr. FERGUSON [continuing]. On there. Okay. And you said you
have exhausted all of the funds that Congress allocated to you
for those efforts. Did you--did I hear you say that correctly?
Mr. TURNER. No, you didn't hear me say that, but we are on
the verge of doing that, the----
Mr. FERGUSON. On the----
Mr. TURNER [continuing]. $38-and-a-half million that the
Labor OIG was given for oversight. Yes, we are close to
exhausting those funds.
Mr. FERGUSON. Okay. So, then there was another $2 billion
that went for fraud prevention. Is that--am I right on that
number, as well? And we----
Mr. TURNER. I think you may be talking--are you talking
about the $2 billion?
Mr. FERGUSON. Let me refer that--$2 billion?
Mr. DODARO. Yes, there was $2 billion that was given. It
could be used for fraud, it could be used for customer service,
it could be used for these Tiger Teams that went in. So, it was
multiple uses that----
Mr. FERGUSON. Okay.
Mr. DODARO [continuing]. That was that amount of money,
yes.
Mr. FERGUSON. All right. It just seems like the amount of
money we are spending on that isn't getting a really good
return on investment, overall, okay, if you--the way I look at
it. All right. So, we have got to be more efficient in that.
Now, we have talked an awful lot about fraud, okay? And as
we have said, all Republicans and Democrats up here, I think
everybody in America except the people committing the fraud are
against fraud. But there is a whole other part here, which is
improper payments, okay?
Now, we have been going after fraud, but we haven't really
talked about the improper payments. And one of the things I
would like to hear very briefly from you today about is the
improper payments. How did that happen? Why did it happen? And
has anybody been held accountable there?
We talk about holding the criminals who committed fraud
there, but what about the ineptness of a bureaucracy that is
just simply not doing its job, and issuing out hundreds of
billions of dollars in improper payments? Because, again,
improper payments, as the chairman said, a dollar that goes to
the wrong spot is not a dollar going to the right spot.
So, in some regard--I don't know that we have got so much a
Republican or Democrat problem, I am--we may have a bureaucrat
problem, because it has gone on for two administrations.
So how does--how do the improper--what is the biggest
problem with improper payments? How are you going to fix it?
And who is going to be held accountable for that, Mr. Turner?
Mr. TURNER. So again, part of the--let me just clear what
improper payment is, so everybody will be on the same page.
Your improper payments are whenever a benefit is paid
incorrectly. That could be the amount, or it could be
overpayment, underpayment, or else it could be going to the
wrong person. So that is the improper payment. And fraud is a
subset of improper payments. So, I just want to make sure that
I clear that up.
And as far as what we are doing, we are having our audit
work to take a look at that. I mean, we have had 11 audits that
we have completed throughout the pandemic. We have another 17
that are ongoing, and we have 3 that are in the works. So, we
are taking a look at that, and that is how we are holding the
Department accountable.
Mr. HOROWITZ. Can I----
Mr. FERGUSON. I am out of time. But if the chairman will
grant Mr. Horowitz a----
Mr. HOROWITZ. Can I just----
Chairman SMITH. Proceed.
Mr. HOROWITZ. Briefly on that point, I think one of the
things that is important to keep in mind--I know Mr. Dodaro
speaks about this a lot--these are--we are only talking about
54 programs being managed by 50 states, the District of
Columbia, and 3 territories.
It is very important to include in this discussion the
National Association of State Workforce Agencies and state
auditors. They are the ones on the front line, because states
are doing it differently across the country. Some are doing
better than others. I think it is very important, as we think
about this program going forward, how much control should be at
the Federal level; how much should be decentralized, as it
largely is, to the states; and how do we figure out what states
are doing better than others, and using that model to increase
the compliance rates and reduce improper payments across the
country.
Mr. FERGUSON. Thank you. I yield back, Mr. Chairman.
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Chairman SMITH. Thank you, Representative, and I also
appreciate your attendance at both of our hearings this week,
the first, and today being the second.
Mr. FERGUSON. It was an honor and a pleasure, sir.
Chairman SMITH. Thank you. I would love to recognize the
gentleman from New York, Mr. Higgins.
Mr. HIGGINS. Thank you, Mr. Chairman.
So, $5 trillion in pandemic relief was approved under two
programs that included expanded unemployment and the Paycheck
Protection Program. Both of these programs were signed into law
by both Republican and Democratic Administrations.
So, Mr. Dodaro, you have been an employee of the Government
Accountability Office for almost 50 years.
Mr. DODARO. Yes.
Mr. HIGGINS. And you have been comptroller general for 13
years?
Mr. DODARO. I am working on that.
Mr. HIGGINS. Acting two years before that.
Mr. DODARO. That is correct.
Mr. HIGGINS. Okay.
Mr. DODARO. Next month it will be 15 years since I have
been in the job.
Mr. HIGGINS. And as the Comptroller General of the United
States and head of the U.S. Government Accountability Office,
it is a $5 trillion bureaucracy. Where is your focus,
primarily, as head of that agency?
Mr. DODARO. Yes, we focus on the entire full breadth of the
Federal Government's responsibilities, you know, everything
from IRS to the Defense Department, all the agencies.
Now, we work closely with the inspector general community
to make sure that we are coordinating and making efficient use
of our resources.
Mr. HIGGINS. How much time over the past 36 months, on a
percentage basis, has been spent on waste, fraud, and abuse
under those two programs, Paycheck Protection and expanded
unemployment?
Mr. DODARO. We have issued at least 10 reports on those
individual areas. We spent a lot of time on the Paycheck
Protection Program, the Economic Injury Disaster Loan program,
both at SBA. We have added that to our high-risk list that I
mentioned earlier, as well as the unemployment insurance----
Mr. HIGGINS. So, I presume, in your 50 years, you have
never seen anything of this magnitude as it relates to your
office's responsibility to promote the integrity in the
expenditures of those dollars.
Mr. DODARO. This has been the largest package in American
history, the rescue package, in American history.
I became acting comptroller general during the global
financial crisis, so I was around for the $700 billion to
unfreeze the credit markets, the American Recovery and
Reinvestment Act before that Hurricane Katrina. This has been
the largest one, ever.
Mr. HIGGINS. Okay. The unemployment insurance program--so
2020 it was $174 billion, 2021 was $115 billion, and 2022 was
$24 billion. How bad was the fraud and abuse relative to the
benefit?
I mean, can you formulate a cost benefit analysis in your
own head about, you know, a lot of money went out, certainly
fraud is something that neither party is supportive of, and is
very intent on eliminating to the extent that it is possible,
so----
Mr. DODARO. Yes. The way I look at it, from an oversight
standpoint, is that there was great benefit to all these
programs, but there could have been even greater benefit had we
stopped the improper payment and fraud area, particularly in
the loan programs, because there is only a certain amount of
money.
Mr. HIGGINS. Yes.
Mr. DODARO. So other people were denied the loans, they
were denied assistance.
Mr. HIGGINS. Right.
Mr. DODARO. In the unemployment area, everybody that was
legitimately there got paid--not everybody on a timely basis.
Mr. HIGGINS. Right.
Mr. DODARO. But--so that is the way I look at it.
Mr. HIGGINS. So nearly 50 years of service.
You know, the greatest way to reduce unemployment
expenditures at the Federal and state level would be a
reduction in the Federal unemployment rate, which is today 3.4
percent, which is the lowest rate since 1969. That is 54 years.
It is pretty incredible.
But you also spoke at the outset of the infrastructure that
exists or does not exist at the state level. It seems as though
the Federal Government needed to do something quickly. We were
all in an emergency mode, not a lot of time to structure a
program, including the infrastructure that was necessary to
administer that program in an efficient way, reducing to the
fullest extent possible fraud and abuse.
So, is it fair to say that the majority of the
responsibility for the fraud and abuse is associated with the
antiquated systems throughout the various states that we forced
to administer this program?
Mr. DODARO. The antiquated systems were certainly a big
part of the problem. But, as my colleague, Mr. Turner, noted,
states had been on notice for years about that program. I know
New York State, the deputy comptroller said that they had been
on notice since 2010.
Mr. HIGGINS. Right, but--I get that. But----
Mr. DODARO. Yes.
Mr. HIGGINS. They were on notice to do something about
their antiquated systems. This is like, you know,
responsibility on steroids. The unemployment rate reached
nearly 14 percent.
Mr. DODARO. No, I understand. The states were overwhelmed.
That was for sure.
But I think it goes to the incentive question. You know, in
normal times this is state money that is collected from taxes
put on employers in that state. And they knew that there was
fraud. They knew there were improper payments. So, in my
opinion, looking back on this from an oversight standpoint,
they bear some responsibility for not being better prepared.
Now, whether they would have been prepared to deal with the
overwhelming issue brought by the pandemic is an open question.
Mr. HIGGINS. I yield back. Thank you.
Chairman SMITH. Thank you, Representative. I recognize the
gentleman from Ohio, Mr. Wenstrup.
Mr. WENSTRUP. Thank you, Mr. Chairman, and I want to thank
you all for being here today. I appreciate your time. I am glad
we are having this hearing to examine, really, the
unprecedented levels of fraud in the pandemic unemployment
programs.
You know, I often think about our job here, and in
situations like this I think of the song, America the
Beautiful, where we are--we ask God to help us mend our every
flaw. And I think this is a perfect example of us trying to do
that.
Mr. Turner, thank you for clarifying today, too, the
difference between improper payments and fraud itself. And $191
billion, I believe, is what is reported out from DoL.
You know, in my home state of Ohio, it is estimated $1
billion may have been paid in fraudulent unemployment claims
from March 2020 to June 2022. And the problem is so rampant
that our own governor, Mike DeWine, and his wife Fran, and our
lieutenant governor, John Husted, were notified that fraudulent
claims had been filed in their own names. It went that far. So,
it is a widespread problem. It harms Americans that it was
designed to help. And obviously, we don't want that. That is a
given.
So many of my Republican colleagues have been committed to
protecting Americans who have been victims of this fraud. In
fact, when this committee was in markup for the American Rescue
Plan, I offered an amendment to require the IRS to implement a
hold harmless process for those taxpayers whose 1099Gs are
flagged as unreported income, if those taxpayers believe they
are victims of identity theft or fraud, such that no penalties
or interest would accrue against them.
This amendment was objected to by my colleagues on the
other side of the aisle. At that time Ranking Member Neal
promised that, if I withdraw my amendment, we would work
together to address this issue. Unfortunately, it hadn't ever
happened.
And, Mr. Chairman, with your consent, I would like to
submit a copy of my amendment on that for the record.
Mr. KELLY [presiding]. Without objection.
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Mr. WENSTRUP. And so, I will say that, despite not really
investigating the root cause of the frauds during the pandemic,
we saw the Department of Labor has distributed $2 billion in
the American Rescue Plan to detect and prevent fraud, promote
equitable access, and ensure the timely payment of benefits
with respect to unemployment compensation programs. The
Department of Labor has yet to provide a full accounting of how
this funding has been used.
I think we need to circle our wagons there, and the only
available information that I have seen shows DoL has only used
18 percent of those funds for fraud identification and
recovery. So, Mr. Turner, do you have any data currently on how
many taxpayers had their identity stolen to claim IU [sic]
benefits fraudulently?
Is there any tracking the IRS does to aggregate information
from the Form 1099G about the amount of taxable unemployment
benefits that were flagged by states or individuals as
fraudulent?
I think it is an important piece of the puzzle, so if you
could help me there I would appreciate it.
Mr. TURNER. Yes, we are--this is still early in the stage.
We are still gathering the data on that.
Mr. WENSTRUP. Okay.
Mr. TURNER. But it is part of our plan. We hoped to do that
this year, but because of constraints we have pushed it off to
next year. But we do have plans to do so.
Mr. WENSTRUP. I appreciate that. As soon as we can, that
would be helpful information for us.
The State of Ohio has been able to recover more than $390
million in unemployment benefits. And despite the work being
done by the Ohio Department of Job and Family Services, and our
participation in the National Association of State Workforce
Agencies, Ohio is not receiving any portion of the funding they
have recovered, the majority of which are pandemic unemployment
assistance and Federal pandemic unemployment compensation
funds.
So, they are really trying to do their work. You know,
states like Ohio are making investments in fraud recovery and
prevention efforts as they continue to recover these fraudulent
payments. I think we should be working to incentivize their
investments in these recovery efforts.
Mr. Turner, what thoughts do you have on policy
recommendations that would incentivize states to pursue the
fund recovery work?
And you may have mentioned this earlier, and I apologize if
I am asking a question again.
Mr. TURNER. Not a problem. That is one of the
recommendations that the Department of Labor have. And we
concur with that recommendation. We think anything that would
incentivize and help people more--be more interested in
recovering those funds is a great move.
Mr. WENSTRUP. What would you suggest that incentive look
like?
Mr. TURNER. Well, five percent, I think, is what they are
proposing.
Mr. WENSTRUP. Okay.
Mr. TURNER. And we would agree with that. The only caveat
that we would add on that is that it be returned back to the UI
program, the administration of it.
Mr. WENSTRUP. Okay, thank you.
Mr. Chairman, with your consent I would like to submit a
letter from Ohio Governor DeWine to the Secretary of Labor,
Martin Walsh, for the record.
Chairman SMITH [presiding]. With no objection.
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Mr. WENSTRUP. Thank you. I yield back.
Chairman SMITH. Thank you, Representative. I would like to
recognize the gentlelady from the State of Alabama, Ms. Sewell.
Ms. SEWELL. Thank you, Mr. Chairman.
To be clear, none of us want waste, fraud and abuse in any
government program. We all were sent here to be good stewards
of taxpayers' money.
I also want to just say that the facts are that we dealt
with a once-in-a-generation pandemic, and that there were lots
of Americans, vulnerable Americans, who were left more
vulnerable because of this pandemic. In my state of Alabama
alone, 532,000 Alabamians were spared from economic disaster
because of the work done by this committee and the House of
Representatives in the early months of COVID-19.
The American Rescue Plan provided many states' unemployment
offices the necessary resources to ensure that funds got out
the door in a timely fashion to those facing the most dire
economic and health scenarios imaginable at no fault of their
own.
I will never forget the sight, the sight of family after
family lining up in cars to local charities and to churches and
to pantries to have food loaded into their cars. And do you
know why I will never forget it? Because I was bagging and
loading lots of those groceries each and every time I was at
home. These people were people who, two weeks ago, earlier,
when the pandemic started, had jobs and no fear of losing the
roof over their heads. And then, all of a sudden, they had
friends and neighbors turning to them, offering them assistance
to just get by.
I didn't want my families to just get by. I wanted them to
get back on their feet. The actions taken by the Ways and Means
Committee in a matter of weeks ensured that millions of my
constituents not only got by, but were able to pay their
mortgage, make their mortgage payments, as well as to fill
their kitchen cabinets.
While facing a crisis like this none of us have
experienced, we do know that fraud did occur. But as all of you
have said over the course of the last few hours, this was not
something that was just sprung upon us.
As you said, Mr. Dodaro, as comptroller, you understand
that we--that the states were not prepared. You said that. And
I can tell you, from firsthand experience in the state that I
represent, Alabama was not prepared.
But because we gave them resources in the CARES Act and the
American Rescue Plan, they got prepared. And as they got
prepared, it took time. They were, you know, learning how to
ride the bicycle as the bicycle was going down the road, and
there were problems with it.
But I also know that, Mr. Chairman, it is not fair to talk
about the system without actually having on this panel workers
who worked in these state agencies to be able to talk in
earnest about what went on in those state agencies.
I also note that we did give money. We gave money back when
this pandemic first got started. And the Trump Administration
did not put together an anti-fraud program that would help
prevent this.
Now, I know that fraud will happen in any program, but I
guess my question to you is what can we do to make sure that
states are more prepared, and actually assist in finding those
fraudsters that are out there?
I know that so many of the folks that work in these
departments of labor in the states are good, earnest people who
are trying to do their job. They just need more resources, more
people in order to do that, and better systems. So, what can we
do, as a prophylactic measure, to really help address the lack
of preparedness in state agencies?
Mr. DODARO. The first thing I would suggest is that--I
mentioned earlier the Fraud Reduction and Data Analytics Act
that Congress passed in 2016. That only applies to Federal
agencies, it doesn't apply to the state agencies. So I think,
if you would apply it to the state agencies and encourage and
incentivize them to implement a comprehensive anti-fraud
strategy on a continual basis, which would be effective
throughout the whole period of time, that would be the number-
one thing.
The number-two thing is, if in future emergencies there are
measures, if they have that in place, there should be not as
much of a need or a need at all for Congress to allow self-
certifications. That, I think, helped tie the hands of the
states a bit, because they weren't allowed to ask for
documentation and support.
So those two things would allow them to be prepared--manage
the normal program much better, and be prepared for
emergencies.
Ms. SEWELL. Mr. Chairman, I would suggest that we really
should have had state administrators on this panel, as well as
workers who worked in this area, that that would have given us
a more broader view about what we can all do to help prevent
fraud in the future.
Thank you, and I yield back.
Chairman SMITH. I thank the representative. Like I said
earlier, this is just the first of many oversight hearings. The
reason why we are doing it this way is because we didn't have
any in the prior two congresses, and so we are glad that we are
at least starting.
I would love to recognize the gentleman from the State of
Illinois, Mr. LaHood.
Mr. LaHOOD. Thank you, Mr. Chairman. I want to thank the
witnesses for your valuable testimony and service here today.
Mr. Chairman, I want to thank you for holding this hearing and
making this a top priority for our new majority. It is so vital
that we do this.
And I want to--I know it has been referenced, but it has
been frustrating that this is the first hearing we are having
on this. As everybody knows, COVID began, you know, in the
spring of 2020. And obviously, we have been concerned about
fraud in this space for the last two years. But this is the
first hearing we are having. And it is not for a lack of
trying.
I just want to reference two letters that at the time our
Republican leader, Mr. Brady, sent to this committee asking for
a hearing. March 12th, 2021, we write to the chairman
requesting an immediate--schedule an oversight hearing on the
Ways and Means Committee to investigate reports and--of reports
of fraud in unemployment insurance programs enacted through
COVID pandemic. No response to that at all.
So, with no response, we sent another letter 10 months
later, February 22nd, 2020, again, at the time, to the
chairperson from Ranking Member Brady--Ms. Walorski and Tom
Rice and Mr. Kelly--again, asking to investigate the size,
scope, and severity of criminal fraud in pandemic unemployment
insurance. No response, unfortunately.
I would like to submit both these--both of these letters
for the record, Mr. Chairman.
Chairman SMITH. Without objection.
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Mr. LaHOOD. Couple that with what Dr. Wenstrup just said,
we offered an amendment to get to the bottom of this on
unemployment insurance. Nothing.
So here we are today, having this hearing today. And so,
again, vitally important that we use our responsibility with
oversight to have some accountability in this program.
Mr. Horowitz, I wanted to ask you a couple of questions
here. As we have heard here today, the more time passes, the
harder it is to get these dollars back. And so, it is high time
that someone start asking questions and look into how do we
claw back billions of dollars.
My question specifically for you: obviously, you are
working in your capacity across all of government, uncovering
these fraud schemes and getting real results in terms of
suggestions for criminal prosecutions and, hopefully,
convictions and some jail sentences for those involved, which
will hopefully send a deterrent message.
A bit of a hypothetical question, but if you had $2 billion
today, how would you use those funds to ramp up efforts to
recover the funds and hold wrongdoers accountable?
Mr. HOROWITZ. Well, first off, that would be magnitudes
greater than we have gotten in the past for any of the IGs.
And--but what we would do is a couple of things: increase our
agents, the number of law enforcement and other auditors and
analytics capacity that we have, so we can find the fraud,
pursue the fraud; I would actually also then provide analysts
to the various task forces like we are doing already--the
National Pandemic Unemployment Insurance Task Force--so that we
can be a force multiplier in that regard; and then finally,
very importantly, there is going to need to be more
prosecutors, both at the Federal level and at the local level,
to deal with these cases. We can investigate them, but we have
got to hand them off to somebody who will actually go to a
courtroom and pursue the prosecutions.
Mr. LaHOOD. And is there an example of a state that has
been very proactive in terms of hiring state prosecutors to do
that?
Mr. HOROWITZ. There have been a number of states, and I
wouldn't want to leave one out. We are working with a lot of
states. We have had great relationships with a variety of
states who are dealing with these issues.
It is just going to grow, though, exponentially as we
uncover more and more fraud, and as the Labor IG, you know,
finds more and more fraud, and as we find the overseas fraud,
right? That is the hardest to find, and is going to take us the
most amount of time to get to.
Mr. LaHOOD. In your testimony, Mr. Horowitz, you provided a
recommendation that Congress should amend the Program Fraud
Civil Remedies Act----
Mr. HOROWITZ. Correct.
Mr. LaHOOD [continuing]. To raise the jurisdictional limit
for administrative recoveries of smaller claims.
Mr. HOROWITZ. Right.
Mr. LaHOOD. What is the threshold we are using now, and how
does it compare to the amounts we are talking about in fraud
from UI programs?
Mr. HOROWITZ. So, the threshold right now is $150,000. It
provides the Program Fraud Civil Remedies Act that we can use
the civil process in it through administrative means, which
means we don't have to tie up the Federal courts or Federal
prosecutors for lower-dollar fraud claims. We want to increase
that to $1 million, because we have seen the extraordinary
number of payments that went out that were below that million-
dollar amount.
And the reality is that, given the limitations on resources
at the U.S. attorneys' offices and for prosecutors around the
country at the state and local level, we are going to have
challenges getting them to take smaller fraud cases. We, at a
minimum, want to be able to use the civil processes to collect
the money back for the taxpayers. And so that is why that is so
crucial.
We have had, by the way, bipartisan support for it. It just
hasn't made its way through Congress.
Mr. LaHOOD. Great, thank you. I yield back.
Chairman SMITH. I want to thank the gentleman, and
recognize the gentlelady from Washington State, DelBene.
Ms. DelBENE. Thank you, Mr. Chairman. I would like to thank
the witnesses for being here today and for sharing your
testimony with the committee.
However, an important voice is missing from this
conversation, and that is the voice of the millions of people
and the families for whom the expanded unemployment insurance
during the pandemic was a lifeline.
I we think back to 2020, and the fear and the uncertainty
that our country was facing as that first case of COVID was
reported in my district in the State of Washington, we saw many
workers laid off, no longer receiving a paycheck. Some had to
find childcare quickly, because their kids were taking classes
at home. Small business owners were wondering how they could
keep their businesses afloat.
Overnight, our world shut down. Our nation lost nearly 22
million jobs at the outset of the pandemic. And Congress needed
to act. And we needed to act quickly to ensure that families
kept food on their tables and roofs over their heads. And that
is exactly what we did.
To address the dramatic level of job loss and hardship
caused by the pandemic, Congress passed bipartisan legislation
which temporarily increased state unemployment insurance
benefits by $600 a week, and this ensured that families had the
money they needed to stay afloat. We also created temporary
benefits to self-employed workers who were not covered by state
UI programs to ensure that these people were not left without
support. These changes and increased funds had a real impact
for the families and the workers in our communities.
I wanted to share the story of a Washington family. Lori,
who works for an education non-profit, and her husband work for
music venues. Her husband was undergoing cancer treatment, and
their family was already living paycheck to paycheck. When the
pandemic hit, Lori's husband was laid off due to the live
entertainment industry shutting down. The extra $600 in
unemployment insurance was critical to ensure that Lori's
family was able to pay their mortgage, pay medical bills, car
payments, and meet the basic needs of their teenage daughter.
Critical programs like the expanded unemployment insurance
and the Paycheck Protection Program were essential to our
record-breaking economic recovery. Because of the actions that
Congress took then, the American job market has exceeded pre-
pandemic levels, and we now have historic unemployment.
Incredible impact.
So, thank you for this hearing. Thank you, Mr. Chairman. I
yield back.
Chairman SMITH. Thank you, Representative. I would like to
recognize the gentleman from Kansas, Mr. Estes.
Mr. ESTES. Well, thank you, Mr. Chairman. And I am so glad
we are having this hearing today on this very important topic.
You know, the facts are that, as representatives, we have a
responsibility to ensure taxpayer dollars are used efficiently
and effectively. And the evidence is apparent there has been
nearly unchecked unemployment fraud.
I want to be clear. In the early uncertain days of the
pandemic, there were good reasons to help countless Americans
who faced those unprecedented economic challenges through no
fault of their own. But we are nearly three years past the
first pandemic-related legislation, and my colleagues on the
left have chosen to complete ignore the rampant fraud that has
cost taxpayers an untold amount. The estimates in some points--
in some outlets have arranged up to as high as 300 to $400
billion.
In addition to the money lost, there is evidence of gross
incompetence, including from the governor's department of labor
in my home state of Kansas that left many without assistance
who desperately needed it. Despite unemployment being a
function managed by the state, my office in Wichita received
more than 1,000 calls from constituents who were negatively
impacted by Kansas's unemployment system.
I have many stories of people impacted. For more than half
a year, one constituent waited while her legitimate claim
mysteriously ended up in the fraud department. Despite repeated
calls and attempts to resolve the issue, nobody in the Kansas
department of labor could help her.
Others reached out to let us know that they themselves have
been victims of fraud. Several received a notification in the
fall of 2020 that someone had filed claims for unemployment
under their name, and received a 1099 in 2021, claiming that
they owed taxes on the benefits someone else had received.
Today we still hear from Kansans who were victims of fraud,
or have yet to receive benefits they deserve. These are just a
few of the cases, but they point to a real problem in Kansas
and across the country: taxpayers lost out to fraudsters who
used the pandemic, massive amounts of Federal funds, and weak
state leadership to game the system.
In May of 2021, Ways and Means Republicans held a
roundtable on this subject, and I invited State Representative
Sean Tarwater to testify. As the chair of the Kansas House of
Commerce, Labor, and Economic Development Committee, he saw
firsthand the issue of fraud and unemployment. In his testimony
he said, ``We have documented over 40 times the Kansas
Department of Labor was notified, directed, and informed about
massive concerns regarding unemployment benefit frauds.''
He also said that when the Kansas Department of Labor--when
asked about the fraud, their response was they are not worried
about the fraud because the ``big money'' was in the Federal
funds, and it was mostly the Federal programs that were being
targeted, and that they would always add that they were not
held responsible for those funds so that it was not a priority.
Mr. Chair, I would like to submit to the record two audits
conducted by the Kansas Legislative Division of Post-Audit that
indicated roughly $700 million in potentially fraudulent
payments were made, with half coming from state funds and half
coming from Federal, or about $344 million.
Chairman SMITH. Without objection.
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Mr. ESTES. Despite the evidence, there is not an incentive
for states to recover those unemployment frauds, and hard-
working Kansas taxpayers are left with the bill.
Mr. Horowitz, what processes are in place for states to
help recoup funds lost to UI fraud, both state and Federal
funding?
Mr. HOROWITZ. So, I think one of the key parts of that is
working closely with IGs, local/state law enforcement, and
their state's attorneys general to make sure there are
processes by which the taxpayers can get the money back. That
is one of the things we are trying to do, is work closely and--
have focused on with state auditors.
In fact, we have a--we created the first-ever state auditor
in residence program. So, we have two Tennessee state auditors
working with the PRAC to help us, as well as the former
California state auditor, so we can develop those relationships
and work more closely with the states.
Mr. ESTES. So how are you looking at or expecting states to
recover funds that may have been a result of international
crime?
And what state or Federal jurisdiction is there, and what
has been currently done on that front?
Mr. HOROWITZ. So, the SWA is the state workforce agencies.
They are not the law enforcement arm of this, of course.
So, the key is working with local law enforcement, Federal
law enforcement. We are working with the Secret Service, the
FBI, other Federal law enforcement agencies, and trying to
develop those partnerships, because that is the key to the
success of moving forward. There has to be the interest not
only in making sure the money gets out, which is obviously
important, to the right people, but then making sure, when it
doesn't get to the right people, that there is the recovery.
Mr. ESTES. Right. Well, thank you.
And I want to thank all of our witnesses for the work that
you are doing on behalf of the American taxpayers, and helping
make sure that we get money in the right hands and that the
taxpayers are protected.
I yield back.
Chairman SMITH. I want to thank the representative, and now
I will recognize the gentleman from Pennsylvania, Mr. Smucker,
for five minutes.
Mr. SMUCKER. Thank you, Mr. Chairman. Thank you for holding
this hearing.
Oversight is an important role of this committee of
Congress. And when we know that there is at least 60 billion--
the lowest number--and perhaps hundreds of billions of dollars
that were fraudulently given to others than those who deserved
it, we should be evaluating that and looking at it, and seeing
whether the Administration did all they could to prevent that,
and see whether this committee under Democrat leadership
abdicated their responsibility to provide that oversight.
I would like to use my time to respond to a few of the
comments made by Democrats, starting with the ranking member,
who I have a great deal of respect for. He opened with a fiery
speech that conflated the idea that looking at fraud was the
same as trying to prevent benefits from going to individuals
who really needed a lifeline. And I say it is quite the
opposite.
And in fact, if--another thing we heard was that there is a
voice missing here, voices of families who benefited from those
dollars. I think they would be appalled to know that as much,
potentially, as for every dollar that they received in a
lifeline went to someone that didn't receive it, and will be
paid either by them or by their kids and their grandkids, which
is most likely, they would be appalled at that. And I think it
would be important to have their input on that.
I thought, based on the ranking member's comment, that he
perhaps misunderstood the purpose of this hearing in conflating
those two messages. And then, as I listened further to other
Democrat comments, I realized it was more than that. They were
literally trying to say that Republicans, by holding a hearing
of this sort, did not support helping individuals. And again,
that is just not true.
And they also said that we didn't vote for $2 billion worth
of fraud prevention. And I would like to remind Democrats that
that was included in a bill of about $1,900 billion that we
felt would do more harm than good. We were worried about the
inflationary impact of that bill that would harm the American
people far more than the handouts that have been provided.
And by the way, we heard that from individuals, everyday
Americans in our first hearing, where individuals said that
those inflationary pressures, they have now are hurting their
ability to provide for their families, and are threatening
their ability to be able to keep their businesses open.
And I know this has been mentioned before, but I will say
it, as well, to the ranking member and the rest of the
Democrats here. I thought it was very unfortunate that
Democrats were unwilling to leave the bubble of Washington,
D.C. and hear from real American people the impacts of our
policies. And I appreciated that the chairman put together a
field hearing, and I know we are doing more, and I hope that
Democrats will reconsider, because I think it was a very, very
valuable hearing. And I think it would be worth all of us
hearing that.
By the way, we were right in the impacts of that $1.9
trillion ARPA. We had all first voted for the CARES Act. We
thought it was--we felt was absolutely important. But it led to
the highest inflation rate in 40 years. We were right.
And if you want to talk about Biden's economic policies, I
read a newsletter this morning that I thought nailed it pretty
well. You know, Biden came in and inherited an economy that was
growing at 6.5 percent, and an inflation rate of 1.5 percent.
And somehow, he was, in two years, successful at completely
inverting those numbers. And we had 6.5 percent inflation and
an economy that is barely growing.
One additional point, and this goes back to something the
ranking member said, as well. He proposed the idea that people
did not respond--almost 40 percent of Pennsylvanians received
more on unemployment than they could have earned going back to
work. And he believed that people did not respond to that by
staying home. And that, I think, doesn't recognize the very
nature--the very characteristic of human nature: We all tend to
do what is right for ourselves, we look out for our best
interests.
And one of the arguments that we had, as Republicans,
against ARPA is that we put people in this terrible position of
needing to decide that, if they went back to work, they would
be less able to provide for their families. It is an awful
position to put people in, and we don't fault anyone for taking
available--or for taking advantage of what was available to
them. But it was a bad decision in our part. We could have done
far better, as we wanted to at that time, by incentivizing
people to go back to work.
One of the amendments that we had included on that bill--
they were all rejected, but one was to provide a $1,500 bonus
for people to go back to work. Think how that would have
changed where we are right now.
We heard directly at that hearing of individuals, of owners
of businesses who talked directly to employees and said we
won't come back to work because we would lose this benefit or
that benefit. And I have talked to hundreds of employers who
were in the same position. It was a badly-guided decision that
had--that has harmed American people far more than the
government handouts that were included with it.
Thank you, Mr. Chairman. I am sorry I am over time.
Chairman SMITH. Thank you, Representative. I would like to
recognize the gentlelady from the State of California, Ms. Chu.
Ms. CHU. I would like to start by reminding my colleagues
that the Pandemic Unemployment Assistance program was
authorized by the CARES Act and extended by the Consolidated
Appropriations Act of 2021, both in overwhelmingly bipartisan
votes.
Additionally, Ways and Means Democrats secured funding to
fight fraud and to recover taxpayer dollars in the American
Rescue Plan, which, actually, is the very reason why we have
the testimony from the witnesses before us today.
The pandemic was an unprecedented disruption of our
economy, which is why Democrats and Republicans acted together
to expand unemployment benefits as quickly as possible to
assist American families who, through no fault of their own,
suddenly found themselves without a way to provide for their
families' basic needs. This was a success, which is why the
U.S. has had a stronger economic recovery than any of our
peers.
And we learned many lessons along the way, including that
there were gaps in the distribution of these benefits for
individuals such as my constituent, Damian, a father of two who
is self-employed and also works part-time as an ambulance
driver to make ends meet. Damian didn't qualify for Pandemic
Unemployment Assistance, even though his primary employment was
self-employment, because he had a small amount of wage income
that qualified him for regular UI. So, I was proud to champion
the inclusion of benefits for mixed earners like Damian in the
bipartisan 2021 Consolidated Appropriations Act.
Likewise, I have heard from many individuals that Federal
pandemic unemployment was a lifeline for providing for basic
necessities like food and lifesaving medications. That includes
Gretchen from Altadena, California, who has been in the film
and television industry for the last 30 years and is a cancer
survivor whose medical coverage is predicated on the number of
hours worked. And Mary from Pasadena, a nursery schoolteacher
whose employers' doors closed and had to file for unemployment
for the first time in her 26 year career. And May, the primary
breadwinner for her family living in Sierra Madre, trying to
stay afloat while distance learning with her three kids.
The swift action of Congress mitigated the hardship that
jobless workers and their families suffered and was essential
in stabilizing an economy that lost a staggering 22 million
jobs in just 2 months in early 2020.
We know that there are lessons to be learned from these
efforts that can strengthen and sustain the UI system for
future emergencies, and I hope that it is the goal of this
hearing that we do not neglect our duties to protect our
workers in the midst of a global pandemic.
So, Mr. Dodaro, although this is not mentioned in today's
testimony, GAO also conducted discussion groups with recipients
of UI benefits. Is that correct?
Mr. DODARO. Yes.
Ms. CHU. Well, tell me. What are some of the things they
said in terms of what they spent their benefit on?
And did they talk about how the benefits affected their
housing and their credit?
Mr. DODARO. We conducted these discussion groups in six
states. We did 2 in each state for 12 discussion groups. And
people told us they spent their funds on rent, utilities, food,
and health care, and other essential activities during that
period of time. So, it helped sustain them through that period
of time.
They also had a lot to say about the difficulty in getting
the benefits in the first place, and we included that in our
report, as well.
Ms. CHU. And how did this affect their housing and their
credit?
Mr. DODARO. Well, it helped them to maintain, you know,
paying their bills, so I would assume that added a, you know, a
positive--or at least didn't have a negative effect on their
credit.
Ms. CHU. And what do the dozens of high-quality research
studies GAO reviewed say about the effect that providing UI
benefits during this pandemic and in past recessions had on
economic stability?
Mr. DODARO. We reviewed 30 empirical studies that were
done, and those studies indicated that it helped support the--
stabilized the economy during that period of time, it helped
prevent the situation from getting worse, and so it had a, you
know, positive effect.
Ms. CHU. Thank you. I yield back.
Chairman SMITH. Thank you, Representative. I would like to
recognize the gentleman from North Carolina, Mr. Murphy.
Mr. MURPHY. Thank you, Mr. Chairman. I appreciate you
calling the hearing today.
I can't help but think we have gotten sidetracked a little
bit. The purpose of this hearing is not to hear stories that,
obviously, we all, every single person in this chamber, can
tell us about how important these funds were. I mean, my God,
everybody can talk about how we desperately needed this
program. We are here to talk about the fact that fraud
occurred.
Let me just redirect, pull us all back, and let's just
direct in the right direction, and get the facts. I would just
like to correct a few things, I guess.
The President last night said he has added 12 million jobs,
the greatest in history. Well, he got rid of 10 million jobs
because of what we did during the pandemic. It is just actually
recapturing them. So, let's get to the facts. Let's be true.
And we talk about the unemployment rate. Yes, it is low.
But our workforce participation rate now is lower than it was
in January 2020 to the tune where more than two-and-a-half
million people are not working today who were working in
January of 2020, hence the need for workers everywhere.
That doesn't even add in the 18 million individuals who are
now receiving Medicaid benefits, who, because President Biden,
who has said the pandemic was over, continues the public health
emergency where no state is allowed to audit its Medicaid
rolls. So that is over 20 million people that we are talking
about that should be back in the workforce, and actually
contributing to Social Security, contributing to Medicare. We
would love to get those people back.
And so, we are here today to talk about fraud. Fraud. And
sadly enough, fraud occurs. It is not a Republican problem. It
is not a Democrat problem. It is an American problem. It is the
fact that when free money--when money flows freely, people take
advantage of it. Period, point blank.
In North Carolina, a citizen from the Republic of India
alleged that they obtained $40,000 in pandemic unemployment
insurance for North Carolina residents, which--by the way,
anybody who is in the resident--is in the embassy of India, by
the way, in the District of Columbia, can vote, just as an
aside to my Democratic friends. That we are going to hopefully
stop.
Second, a Federal grand jury in Greenville, North Carolina,
where I lived, indicted three individuals for conspiring to
commit wire and mail fraud for a heroin and fentanyl
distribution ring in eastern North Carolina. Again, fraud
occurs when money flows freely. It is not just balloons for
everybody. It is actual real things that happen.
Lastly, a woman in Charlotte was--pleaded guilty of $1
million in unemployment insurance fraud by defrauding the State
of Arizona.
These are real things, and I commend you guys for the work
that you have done. I attack us for not actually attacking this
earlier--$350 million in North Carolina.
And so we all know this is what we are talking about. We
are not here to tell stories of how we helped it. We did. We
could all tell those stories, because it was absolutely needed.
I just find it interesting that my colleagues across the
aisle are happy to say that President Trump's Administration
didn't put in fraud committee, while they blame him for
everything else, but then take credit for all the work that
Biden did. So, I just--I think that is kind of interesting.
So let me just ask a few questions as it is. Mr. Dodaro,
can I just--what percentage of your workforce is back to work?
Mr. DODARO. Everyone.
Mr. MURPHY. Everybody is back to work?
Mr. DODARO. Well, we were never not out of work.
Mr. MURPHY. Okay.
Mr. DODARO. We have been working all the time.
Mr. MURPHY. Excellent, excellent. I am really glad to hear
this.
The--and I ask this to Mr. Turner, and also again to Mr.
Dodaro: Does the GAO and the Department of Labor know to the
extent in which international cyber crime rings and foreign
actors were involved in targeting state systems at all?
Do we have any information about what happened against--
with cyber crime, international figures, for fraud for this?
Mr. DODARO. I think that question could best be answered by
Mr. Horowitz and Mr. Turner.
Mr. MURPHY. Okay, please do.
Mr. TURNER. Yes. It is equally spread. Well, equally may be
the wrong word, but it spread throughout--on the international
side, as well as domestic.
Mr. HOROWITZ. Yes, we have seen fraud occurring overseas.
Secret Service has testified about this, about breaking up
various rings in Nigeria, Russia, China, for example.
Mr. MURPHY. Right. And I think it is--and I will just kind
of end with this, because I don't want to beat a dead horse. We
all know that this fraud occurred, and we all know that we have
not done our job, as Members of Congress, in providing
oversight.
You know, it just seems to be an action that one side of
this body just is happy to flow the funds. And yes, our
American people need it. But for those of us who have actually
run businesses, there has to be accountability as to where our
money goes. This isn't our money. This is the taxpayers' money.
And if we don't know where it goes and where it should not be
going, then we are out of business.
And this Congress--and, my God, you know, look at our debt,
which some people don't believe exists--we would be out of
business, absolutely, if we did not commit to making sure that
our money is well spent, and that criminals, criminals, are put
back.
And let me just ask a real quick question, if you 00 just
two seconds, if you will, Mr. Chair.
Mr. Horowitz, can you expand on the suggestion to increase
the penalties for these individuals?
Mr. HOROWITZ. Yes. So, what we have actually asked for is
increasing the statute of limitations from 5 years to 10 years.
The challenge for us--and I know for Department of Labor IG--is
we are already three years since the beginning of the benefits
going out. We have got a lot of work still to do.
Mr. MURPHY. Right.
Mr. HOROWITZ. So, if it runs out in 2025 for some cases,
that is going to be a problem. We are going to need the 10
years.
Congress did this last year, bipartisan basis, extended it
for the two big SBA programs, Paycheck Protection Program,
Economic Injury Disaster Loan program. They should do the same
here.
Mr. MURPHY. Well, thank you. I hope that that is a
bipartisan effort that we can understand that fraud does occur
and that we need to enable you guys to actually investigate it
and put those criminals behind bars. Thank you.
Thank you very much, Mr. Chairman. I yield back.
Chairman SMITH. I want to thank the representative, but I
also want to tack on to his points in regards to the
unemployment numbers we have heard numerous times.
It is also important to know the fact that workforce
participation is currently at 62.3 percent, which is the lowest
since Jimmy Carter was president.
I would love to recognize the gentleman from Tennessee, Mr.
Kustoff.
Mr. KUSTOFF. Thank you, Mr. Chairman. Thank you also to the
ranking member. Thank you, Chairman Smith, for convening
today's hearing. Thank you also to the witnesses.
I know that you had--made diligent efforts to warn Congress
early on about the potential for fraud in the CARES program.
And unfortunately, we have not had these hearings until now to
examine the extent of the unemployment fraud. But we are
committed to doing these examinations.
I do want to ask, if I can, there was--relating to Mr.
Horowitz's testimony just a moment ago, Mr. Chairman, I would
like to submit for the record the very first alert on the
pandemic unemployment fraud issue that was issued by the United
States Secret Service that I believe Mr. Horowitz just
referenced. It is dated May the 14th of 2020.
Chairman SMITH. Without objection.
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Mr. KUSTOFF. Thank you, Mr. Chairman. The alert is titled,
``Massive Fraud Against State Unemployment Insurance
Programs,'' and it was directed to financial institutions
across the country. And to what Mr. Horowitz just said, it
warned them of a well-organized Nigerian fraud wing that was
exploiting the COVID-19 crisis to commit large-scale fraud
against state unemployment insurance programs.
The alert indicated--or indicated, rather--that banks at
all levels, at all levels were being targeted, and that the
fraud wing possessed a substantial database of personally
identifiable information of first responders, government
personnel, and school employees.
Mr. Horowitz, back to you for a moment. I think you
testified a week ago before the House Oversight Committee.
Mr. HOROWITZ. That is correct.
Mr. KUSTOFF. Your--some of your testimony, what you said,
is referenced, I saw, in an ABC News article from last week.
This is what it said you cited, if I can read from this report.
It says that the $5 trillion--$5 trillion total spent on
pandemic relief--throughout both the Trump and the Biden
Administrations, ``Horowitz said that the amount siphoned off
by fraud could be anywhere from tens of billions of dollars to
over $100 billion, but that it would be years before the final
numbers were tallied. The issue, Horowitz said, was that the
trillion-dollar programs had to get off the ground quickly to
prevent potential economic collapse, but they lacked key fraud
protections, including verification systems and information-
sharing with other agencies to match up Social Security numbers
with people's names and birth dates.''
So, I guess my first question, is that--that fairly
accurately reflects what you testified to last week.
Mr. HOROWITZ. It does.
Mr. KUSTOFF. You testified that the fraud could be over
$100 billion. We have heard a lot of numbers testified to
today. In fact, it could greatly exceed $100 billion, right?
Mr. HOROWITZ. I don't know. It could.
Mr. KUSTOFF. I am a former United States attorney. Mr.
Fitzpatrick is a former FBI agent. Mr. LaHood is a former
assistant U.S. attorney. I think everybody here, hopefully on
both sides, is concerned about the amount of fraud. When do we
know that number? When will we know that number?
Mr. HOROWITZ. I think it is going to be years to get a more
precise number, exactly for the reasons you just read, which
is--and as you know, having been a Federal prosecutor, and for
anybody who has been in law enforcement, to find the overseas
fraud is particularly challenging.
Mr. KUSTOFF. Yes.
Mr. HOROWITZ. You need to go through--you need the help of
other countries to find the money, because it probably isn't in
the United States anymore. It is probably somewhere overseas.
Mr. KUSTOFF. Do you have an opinion whether the biggest
fraud is committed by domestic entities and individuals, or by
foreign entities?
Mr. HOROWITZ. I think it probably depends on the type of
scheme we are talking about.
I think whenever you undertake programs like happened with
the two programs last week, the SBA programs and the self-
certification here for some of the UI programs, you are
inviting fraudsters to come in. They don't--they can be in the
United States, they can be overseas.
One of the things, by the way, we are looking at with the
data analytics we are able to use, we are looking at IP
addresses, now that we have that information. We are going to
try and figure out how much of the incoming was from overseas.
Mr. KUSTOFF. If I can, briefly, two more questions.
Again, you cited the problems with the system. Essentially,
the systems don't talk to each other. The--couldn't match up
the Social Security numbers with people's names and birth
dates. If we had another incident today like the pandemic that
called for whatever relief, are those safeguards in place
today?
Mr. HOROWITZ. So, the good news is things are improving.
The bad news is we are not there yet.
And credit to many of the state workforce agencies that
have come together to try and build identity verification
systems and share information across their agencies, because,
for unemployment insurance at least, we are dealing with 54
different entities managed at the local level, and they need to
work together better.
There are efforts underway. There is a lot more that needs
to be done to get there.
Mr. KUSTOFF. Thank you.
Mr. Chairman, if I can, just briefly?
In your written report--we talk about the--that the PRAC is
working collaboratively with Department of Justice, with the
National Credit Union Administration, and other law enforcement
agencies. You cite in your report that the data collection
effort identified about $8.75 million that may be subject to
recovery. I applaud that. But it is kind of a drop in the
bucket.
Do you have other programs with other fiduciaries, domestic
banks, et cetera, larger financial institutions?
Mr. HOROWITZ. That is what we are working with, and we are
working with the Secret Service and other law enforcement that
have been engaged with the financial institutions.
As you know, people think of the Secret Service primarily
as protecting the President and other dignitaries, but they
actually have a major role in dealing with counterfeiting and
other financial institution fraud. So they have got a lot of
relationships. We are trying to leverage off of those in our
work.
Mr. KUSTOFF. Thank you, sir.
I yield back. Thank you, Mr. Chairman.
Chairman SMITH. Thank you, Representative. I am pleased to
recognize the gentlelady from Wisconsin, Ms. Moore.
Ms. MOORE of Wisconsin. Thank you so very, very much, Mr.
Chairman.
And I want to join the bipartisan rebuke of fraud. And I
want to commend all of you for the efforts that you are making
for recovery. And, you know, as a member, I am willing to
explore ways to help with that recovery.
As many of you have indicated in your testimony, written
and verbal here today, this is not a new problem. We have heard
various dates pushed out by many of my colleagues about when
this started. But I was thinking that 2010 was when the GAO
first gave us a warning that our systems were at risk.
Is that right, sir, Mr. Dodaro?
Mr. DODARO. Well, we have--I don't--no. The--what I said
about 2010 was that the--New York's deputy comptroller notified
New York State in 2010 that their systems needed to be
improved.
Ms. MOORE of Wisconsin. Right, okay, thank you for that
clarification.
And, you know, I am from Wisconsin, and I know that our IT
systems go back to the 1970s. You know, there was a sharp drop
in eligible unemployment recipients from, like 40, 50 percent
to 28 percent. And what states like Wisconsin did, many states
did, is their staff, their trained staff, was also reduced in
proportion to that. So, no one was ready for this pandemic.
That just left things open for fraud, I would think.
And I would like to just get some clarification for Mr.
Turner.
You mentioned that, you know, a lot of the overpayments
that we saw, and maybe even underpayments, were not people's
faults, necessarily. They were states' faults, their
administrative problems that they had, given this old
technology and how overwhelming it was.
I mean, we--you know, I have a report that I am going to
ask to be entered into the record, and it talks about how, in
Wisconsin, for example, that 80 percent of the people who
called, they just let the phones ring because they couldn't
respond to it.
So would you agree that, really, stuff outside of--that,
you know, states not implementing it, the Trump Administration
not implementing your recommendations, that these things
created a glide path for fraud?
Mr. TURNER. Well, there was a lot of mistakes made from the
states. In some cases, it was a lack of training----
Ms. MOORE of Wisconsin. Yes.
Mr. TURNER [continuing]. on the part of the staff.
In the case of PUA, it was a lack of understanding the
program in some cases. And therefore, that caused some errors.
Ms. MOORE of Wisconsin. Right.
But given that, I guess the other thing that I would like
to know from you, with all of your experience, Mr. Dodaro, do
you still stand by the statement that the U.S. Government
Accountability Office reviewed 30 different empirical studies
and concluded that UI benefits created overall economic
stability and improved outcomes for individuals?
Mr. DODARO. I do.
Ms. MOORE of Wisconsin. Okay. And I just am sort of
wondering, if we had not provided--you said you were there when
Mr. Paulson showed up asking for that 700 billion. Do you think
we could have had the same kind of catastrophic events, had we
not have provided unemployment?
Mr. DODARO. I think the--yes, we----
Ms. MOORE of Wisconsin. The 54 million people. Okay, thank
you.
Mr. DODARO. Yes.
Ms. MOORE of Wisconsin. Also, you did these 30 reports, and
you said--you reported that 8 of the 12 studies reviewed
discussed whether the benefits discouraged folk from returning
to work, and they said no. Is that something that is the case?
Mr. DODARO. That is what the studies concluded.
Ms. MOORE of Wisconsin. Okay, very good.
Well, anyway, I would like, before my time expires, to
enter into the record a couple of documents, one from the
Wisconsin Public Radio: Lives on Hold: Pandemic Exposes
Failures of Wisconsin's Unemployment Insurance System. And
really, there are so many sad stories.
I have other sad stories I would like to enter into the
record from my district office that talked about people just
feeling almost suicidal and giving up hope of not getting their
benefits.
This particular publication talks about a man in Wisconsin
who moved into his car because he--you know, he checked the
wrong box. He said he was--he didn't know why he was let go of
the job. So that just sent his application into weeks and
months' long obscurity. And he was humiliated, as a man, that
he had to move in with his ex-wife and her new boyfriend in
order to survive. That is very humiliating, and I think I would
like everybody to--share that story with everybody.
Mr. Chairman, I would like to ask unanimous consent to put
in the record Lives on Hold: Pandemic Exposes Failures of
Wisconsin's Unemployment Insurance System, and some redacted
copies of the--my constituents who were affected, and I
appreciate it.
Chairman SMITH. Without objection.
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Ms. MOORE of Wisconsin. Without objection?
Chairman SMITH. Without objection.
Ms. MOORE of Wisconsin. Thank you so much, sir, and I yield
back.
Chairman SMITH. Thank you, Representative. I would like to
recognize the gentleman from Pennsylvania, Mr. Fitzpatrick.
Mr. FITZPATRICK. Thank you, Mr. Chairman.
Mr. DODARO, just to slightly revisit the issue of state
waivers from a different angle, as was mentioned earlier, I
believe, by one of my colleagues referencing the GAO report
back in March of 2021, in that report you had discussed the
issue of overpayments with the PUA program, and the report
said, keying in on one provision there, it said the DoL did not
have plans to collect data on states utilizing authority to
waive Pandemic Unemployment Assistance overpayments or the
amount of overpayments that the states may have waived.
Obviously, it is concerning that the exact amount of loss
due to fraud is not known for the reasons we discussed earlier.
But just as far as having no information about states waiving
overpayments, some of which may have been fraud, don't you
believe that that information is, in fact, needed to
effectively monitor and, ultimately, recover these
overpayments?
Mr. DODARO. Yes, absolutely. We recommended that the Labor
Department require the states to report how much money they
have recovered, how much they have waived, as well.
And so, I am always wary of waivers. And I think it is
important that the Labor Department have accurate information
from the states to monitor that effort.
Mr. FITZPATRICK. And any suggestion on a remedy there,
moving forward?
Mr. DODARO. Well, there just needs to be required reporting
of that. I think that is just proper management of the program
to be able to do that. And the Department ought to follow up
with the states.
And I think it is also appropriate to either have the state
auditors, or perhaps at the Federal level, one of us do a
sample of the waivers to make sure they were adequately
supported during the process. So there needs to be----
Mr. FITZPATRICK. Do you have the manpower to do that?
Mr. DODARO. No, but we could find some way to figure out
how to do it. But somebody ought to do it. I think state
auditors would be in the best position to do that.
In fact, I don't think the Federal Government uses state
auditors as effectively as possible for either the unemployment
insurance program or the Medicaid program, for that matter,
because each state system is a little different.
Mr. FITZPATRICK. Right.
Mr. Turner, in your testimony you had updated your estimate
of improper payments from roughly $163 billion to $191 billion,
with a significant portion attributable to fraud. Your estimate
uses DoL's reported improper payment rate of about 21-and-a-
half percent for fiscal year 2022.
Understanding Mr. Horowitz's well-made point that tracking
this stuff is incredibly difficult once it leaves our shores,
it does require cooperation with foreign governments, it is
incredibly challenging, nonetheless I think it exposes a
massive vulnerability in our system to allow it to leave our
shores in the first place.
But to the extent you haven't addressed this yet, sir,
explain why your estimate is so substantially different from
the Administration's estimate of $104 billion.
Mr. TURNER. Well, again, we take our rate from the
Department. And based on what the Department gave us, 21.5,
that is how we end up calculating it, the 191. So--and that
is--they are the ones that is responsible, as the policy
owners, to provide that rate. We can't develop it ourselves.
Mr. FITZPATRICK. Has there been any discussion with the
Administration of reconciling these numbers?
Mr. TURNER. No, there has not been.
Mr. FITZPATRICK. Okay. Mr. Chairman, I yield back.
Chairman SMITH. Thank you, Representative, and I recognize
the gentlelady from New York, Ms. Tenney.
Ms. TENNEY. Thank you, Mr. Chairman, and thank you to our
witnesses. I really appreciate you drilling down on these
numbers.
I am actually a small business owner in upstate New York.
Our business is in our 77th year, and we were greatly impacted,
and been continually impacted, like all of our friends in
business in New York by unemployment insurance, by the
mismanagement of New York through a series of governors here,
and by--and I think it is fantastic that the chairman is doing
a much-needed look into this, and having you gentlemen with
your expertise here to do this.
And, you know, our taxpayers, our employers, our employees
have paid the price for this fraud. And I just thought, you
know, there are so many numbers being thrown out here, and
since, you know, one of my favorite authors was Mark Twain, he
made a famous statement I am sure all of you in the accounting
business knows. There are three kinds of lies: lies, damned
lies, and statistics. Thank you, Mark Twain, who is buried in
New York State, for that.
But there are a lot of numbers being thrown around. And I
refer initially to the comments from the ranking member about
the unemployment. And sometimes these are misleading. There is
economic hardship right now in New York State. And you would
think that, you know, with 3.7 percent, that 96.3 percent of
the rest of the country are all working, which--we know that is
not how the numbers are calculated. So that is why we need to
drill into these statistics.
But one of the things I wanted to talk about is the recent
findings from the GAO. And I am going to address my first
question to you, Mr. Dodaro, is that there was an estimate of
fraud and--and, you know, you have answered this--$60 billion,
with some outside experts going as high as $400 billion. We
have heard $180 billion.
But the New York fraud alone is estimated at about $11
billion, and that is for fraudulent unemployment benefits since
March 2020. In fact, the survey I conducted among my
constituents and employers was that countless cases of
individuals have received unemployment forms they hadn't
requested, they have dealt with--these--they have dealt with
these ramifications without having any verification. The
payments were made, there was no look back to the employers as
to whether these people were actually employed, and many of
them were actually my family members, who were still gainfully
employed. And so, many of these problems continue to persist in
New York. And I thank you for calling out New York for some of
their systems.
But on top of that, the--New York State has an outstanding
trust fund loan of nearly $8 billion, which it has yet to
repay. Because of this gross mismanagement by the state,
taxpayers, small businesses now have to make up that
difference. And this has been devastating to especially the
smaller employers, especially restaurants forced to close
during the pandemic.
And after all these hardships for the past couple of years,
I just wonder how it could possibly be fair to now foist this
tab for this negligence and incompetence, as you pointed out,
on New York taxpayers, on our employers who can really--really
cannot afford to keep this, and so many of them have closed.
So, I wanted to follow up with you on how--I want to make
sure that our Federal policies are no longer allowing this
reckless behavior by irresponsible governments like New York
State, which you keep pointing out. And I know that my
colleague from--Mr. Higgins mentioned this, and alluded to
this, as well. But my question to you is that--is there a
recommendation from the GAO, the Government Accounting Office,
issued to the Department of Labor that has not been implemented
that would address these concerns?
And is there a mechanism to compel New York to prioritize
repaying this $8 billion of unemployment insurance loans,
outside of, say, an automatic increase in the state business
taxes, which would make us have even a larger out-migration of
people and jobs in our state?
Mr. DODARO. Yes. Well, there is a set of--we have 19 open
recommendations to the Department of Labor. Eight of them focus
on the fraud areas. The--there is a set that focused on the
need to transform the unemployment insurance program itself to
make it more effective. That may go to this issue of incentives
in the state.
One of the observations that I have had over the years is
where we are relying on states to administer Federal programs.
There is often a lot of deferential latitude that the Federal
Government gives the states to implement the programs. There is
not a lot of aggressive Federal oversight that is needed, and
it doesn't really come vividly clear until you have these types
of circumstances in place.
You know, in good times we rely on the states to take, you
know, administer these programs, and give them a lot of
flexibility. But there needs to be a better balance between the
Federal responsibilities and the states', and the Federal
Government has to have additional responsibilities.
Now, the $8 billion, the states are allowed to borrow from
the Treasury Department when they run out of money. And then,
you are right, it has to be paid back by the employers within
the state. So that is left to the states' own devices on how
they decide to repay that money back to the Federal Government.
Ms. TENNEY. Well, thank you. Can I just clarify one thing?
The fraud risk assessment framework, is that what you were
talking about with the 19 recommendations?
Mr. DODARO. That is eight of them.
Ms. TENNEY. Eight of them, okay.
Mr. DODARO. Eight of the nineteen. The other ones go to the
need to transform the whole program to make it much more
modern, efficient, and meant to deal with our modern economy.
Ms. TENNEY. Thank you. And please send that message back to
the New York State government now to save our employers. We
really appreciate that recommendation. It is 13 years ago now
since you made that. Thank you.
Chairman SMITH. Thank you, Representative. I would like to
point out that your favorite author, Mark Twain, is a good
Missourian from the Show-Me State who wrote his life about the
Mississippi in our congressional district.
So, I would love to introduce--recognize the gentleman from
Michigan, Mr. Kildee.
Mr. KILDEE. Thank you, Mr. Chairman. And to our witnesses,
thank you for your participation and your service to our
country.
As the nation responded to the coronavirus pandemic,
workers and families, as we all recall, so painfully stayed
home in order to stay safe and to keep their families safe.
Many lost their paychecks and their livelihoods virtually
overnight, through no fault of their own. In my home state of
Michigan, unemployment rose to 24 percent in April of 2020,
just 2 months after former President Trump declared the health
emergency.
In response, uninsured--unemployment insurance claims
spiked at over 388,000 per week, compared to the previous peak
of 77,000 during the Great Recession. That is why, thankfully,
Democrats and Republicans jointly acted swiftly to pass
bipartisan legislation to get these necessary benefits in the
hands of hard-working Americans as soon as they possibly could.
Both parties came together to pass and extend these critical
benefits through legislation such as the CARES Act.
Now, looking at the continued economic growth that our
country has had, these benefits did help millions of people,
preventing them from losing everything they have worked for,
and precipitating a larger crisis. The GAO has highlighted that
these payments helped keep our economy afloat and improve the
labor market. Unemployment insurance kept money in people's
pockets, and prevented our country from falling into much
deeper economic demise.
Now, some have argued that these benefits disincentivized
workers and caused--are causing the labor shortage, despite the
fact that benefits expired in September of 2021. The latest
jobs report, obviously, would indicate otherwise.
In February of 2023, the Department of Labor reported that
unemployment was at 3.4 percent, the lowest since 1969. And I
recognize the distinction when it comes to labor participation
rates, but you just have to look at the data and see that labor
participation rates are really less than a point off where they
were three years ago, at what many would have considered to be
peak economic activity.
Now, the economy grew at 2.9 percent last quarter, more
than 12 million new jobs created in just the last 2 years. Not
only were these benefits good for the economy, they were a
lifeline for workers when they most needed it. People were
worried about putting food on the table, keeping a roof over
their head, paying for basics like medicine.
I would like to just mention, you know, these are human
stories. My own constituents benefited from these important
benefits supported, again, by both sides of the aisle. Cathy
and Timothy from Flint told me that the payments were hugely
impactful. Timothy was a musician at weddings and festivals and
corporate events. Cathy's job in health insurance, they were
able to provide and care for their oldest daughter as a result
of these benefits. Timothy often worked nights to make sure
that he did not have to hire a caregiver.
These benefits made a difference. People like Carla in Bay
City, a self-employed cosmetologist, but due to the pandemic
she lost her main source of income. Without these benefits, she
would have been in a very difficult position, would have lost
everything she has worked for.
Those are just a couple of the instances. And of course, we
all know, all of us have had literally thousands of these cases
come before us.
No one, I think, ever should indicate that we think this
system worked perfectly. We know of these difficulties. We know
of the problems, and they are real, and they are serious, and
absolutely have to be addressed. But I do think it is important
that we not fall into the trap of somehow conflating the
bipartisan decision that we all made to make sure that these
benefits were quickly delivered to people at a time when, in
order to protect themselves, they had to stay at home.
Now, there is a debate in some revisionist history about
just how difficult those moments were. We didn't know what the
future was going to be. Fast forward, a million Americans died.
It would have been millions more, had we not allowed people to
make the decisions that they needed to do to protect themselves
without having to lose everything that they have worked for.
So, let's pledge that we will work to fix these problems.
Let's pledge that we can come together to try to address these
issues of fraud. The money was stolen not just from the
taxpayers, but actually from needed help to additional workers.
We need to go after this. But let's not mistake--make the
mistake of somehow deciding we never should have done this in
the first place, we never should have supplied this help. We
certainly should have. And now we need to do what we can to
make sure that we can reclaim the integrity and the aspects of
the program that actually failed.
So, with that, Mr. Chairman, thanks for holding this
hearing. I yield back.
Chairman SMITH. Thank you, Representative. I recognize the
gentlelady from the State of Minnesota, Mrs. Fischbach.
Mrs. FISCHBACH. The desks are so big, it is hard to reach.
But thank you, Mr. Chair.
And I just think Mr. Kildee had said a couple of the things
about the dollars being stolen from the taxpayers, from the
hard-working taxpayers. You know, and I think it bears saying
it again and again, where that money is coming from, because I
think the--Chair Smith had talked about, you know, the hard-
working families that this--these money came from, and I think
it is important that we remember that while we are having these
discussions.
But I just wanted to, you know, ask a little bit. Mr.
Turner, your testimony notes that DoL provided $1.3 billion for
states for UI modernization, including IT modernization, and of
the funds spent, however, states did not always take advantage
of the opportunity to modernize their IT systems. Is that
correct?
Mr. TURNER. That is correct.
Mrs. FISCHBACH. And do you know why that is, why they
didn't take advantage of it?
Mr. TURNER. In some cases, it was reported that some of
these systems were so old that they did not really mesh well
with the CARES Act in some cases. But the states that did use
it showed benefit from doing so.
Mrs. FISCHBACH. Well, so is there something more that we
can use?
I mean, so those dollars are still sitting there?
Mr. TURNER. Yes, yes, those dollars are still there. And
let me just share with you. During the Recovery Act, there was
$7 billion that was dedicated for modernization, IT
modernization. And of that, there was about two billion that
was used for something other than that. And it was allowed at
that time. But it just shows you just, for some reason, it has
not been a priority for states when it comes to modernization.
And that is one of the reasons that we have paid the price that
we have.
Mrs. FISCHBACH. So is--do you think there is anything that
we can do to encourage them to use those dollars so that we do
modernize those?
Mr. TURNER. Well, I think one of the things the Department
is doing is with performance measures they are using and
keeping it as part of their top priorities.
But I think just more emphasis on that, and continued
emphasis will make a difference.
Mrs. FISCHBACH. Is there anything in--that is attached to
that money that would prevent them from using it now?
I mean--or is it going to be taken back, or----
Mr. TURNER. Well, some of that--well, first of all, they
have established an IT modernization office. And I think part
of that is going to help them provide the oversight that is
needed by the Department.
Mrs. FISCHBACH. Okay, all right. All right. Well, thank you
very much.
I also wanted to touch base with Mr. Dodaro about the--you
have got 10 points. And I know that we have talked a little bit
about the legislation--or at least the proposals that you had,
and I looked over the 10 issues you had for congressional
consideration. And I am just wondering if you wanted to expand
a little bit, but--on some of those.
But the other issue I--if these had been enacted, what kind
of reduction to the fraud do you think would have happened?
I mean, would they have had a direct result of stopping
some of that?
Mr. DODARO. If effectively implemented, they would have had
a material effect. I don't know exact--I can't put a number on
it.
But for example, the one recommendation that the improper
payment estimate be made in the first year of the program, the
PPP program didn't estimate improper payments until 2022. The
pandemic unemployment insurance program still hasn't. Even
though it has ended, it still doesn't have an improper payment
estimate. If you had had estimates earlier, you would have been
able to take more forceful actions, and put things in place,
and compelled the states to focus on those issues earlier.
You know, the anti-fraud strategy that we have in place in
the Paycheck Protection Program, they didn't designate an anti-
fraud dedicated entity until February 2022, when the program
was almost finished. They didn't do a fraud risk assessment
until well into 2021, almost the end of the 2021. The Labor
Department still hasn't implemented the anti-fraud
recommendations that we have to them.
So, a lot of these things would have had a good effect, had
they been put in place. That is why we are urging Congress to
pass these legislative improvements.
But I would say also to this committee that, unless there
is sustained leadership attention at the Labor Department and
effective working relationships with the states combined,
combined with strong congressional oversight, these reforms
won't be effectively implemented.
Mrs. FISCHBACH. Thank you very much.
Oh, and Mr. Horowitz, you had something?
Mr. HOROWITZ. Can I add on to that? It not only would
involve fraud prevention, but you would have better delivery of
service to the people who are entitled to the benefits, more
prompt payment, reduction in identity theft--think about how
many people are dealing with identity theft issues now, as a
result. All of those cascades from improving IT modernization,
taking the steps that GAO has recommended.
Mrs. FISCHBACH. Thank you very much.
And I have eight seconds. I will--or I went over, so I
yield back. Thank you.
Chairman SMITH. Thank you, Representative. I recognize the
gentleman from Utah, Mr. Moore.
Mr. MOORE of Utah. Thank you, Chairman and Ranking Member.
The work here we are doing is very important, and I believe our
dialogue, while some differences, really has shone a spotlight
on our joint concern about fraud, right?
And I appreciate, more importantly, the witnesses--we have
all gotten the chance to get up and take a few meetings and a
few breaks--for sticking it out for a very long hearing. So,
thank you for that.
Fortunately, so for some positive here, there are lessons
that we can learn from states that have managed this very well.
In Utah, where I represent, fraud overpayments represented less
than one percent of benefits paid. I am incredibly proud of the
work done by our former governor, Gary Herbert, Governor
Spencer Cox, their administrations, and the Utah state
legislature to create systems and processes that protect
taxpayer dollars. That is our most sacred responsibility, I
believe, back here in this Federal role.
And Congresswoman Spanberger and I have introduced the
Preventing Improper Payments Act, and--which we prepared
following an excellent study by the GAO about how we can
safeguard taxpayer dollars and prevent more waste, fraud, and
abuse in the future.
Mr. Chairman, I would like to submit for the record a
report from the Pandemic Response Accountability Committee
called Pandemic Unemployment: How Much Has Been Paid to
Fraudsters.
Chairman SMITH. Without objection.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. MOORE of Utah. Thank you. This report is yet another
demonstration of how much we don't know about the size and
scope of this fraud.
Many states have produced separate reviews on their own UI
programs, and these reviews have sometimes included individual
state estimates of fraud and improper payments, and up to 21
states--this report tracked 21 states have reported
approximately $58 billion in fraud estimates across these
programs. And that is information that we have from less than--
again, less than--half of the states. So if state auditors are
coming up with those large numbers, I do believe that the
national estimate of $60 billion GAO reported is quite low.
Mr. Horowitz, I have a question for you. In these state
reports, do we know how much of the funding identified as
improper payments or fraud was Federal dollars?
Mr. HOROWITZ. So, for several of the pandemic programs, it
is Federal dollars that flowed to the states. There were other
parts of legislation enacted that were to fund and to support
already-existing state programs. So, most of it is going to be
Federal money. Some of it could be mixed in with state money.
And, as you indicated, what we found was that the work of the
state auditors was critical to this effort, but states were
calculating fraud numbers in different ways.
So, I would have--we would have to go through state by
state to break that down.
Mr. MOORE of Utah. Yes, excellent. My--the gentleman from
Oklahoma highlighted something that I think Utahns feel a lot
of times. We try to run things as responsible as we possibly
can. I know there is a good faith estimate from a lot, but we
do, Utahns often times feel like why, if we are being so
responsible and have the data to show some of this, why can't
other states figure this out? It is a continual frustration,
and it is something that I hope to represent and shine a light
on.
My estimation--my understanding was that approximately 76
percent was Federal dollars. So, we are talking a total of
close to close to $700 billion. I mean, these are sizable
numbers. These are deficit-reducing opportunities for us, which
is a huge responsibility of this committee, is to be able to
find ways to reduce deficits. There is significant bipartisan
opportunity, and we hope to be able to do that with this. We
will keep working on it.
Do you get a sense how--to what level are you confident
that states are going after this money and recovering it?
Mr. HOROWITZ. I think a lot of the dialogue has moved in a
positive direction over the last several years, from the state
workforce agencies in particular. We are seeing a lot more
effort to work together to do the kind of cross-border work
that needs to get done, and interactions with state auditors
because they are so central to this process, and important.
Mr. MOORE of Utah. And the Department of Labor's role,
where would you--how would you describe, or kind of like--I
want to make sure that they do their role as much as possible.
Mr. HOROWITZ. So, I am going to defer to the IG there on
that.
Mr. MOORE of Utah. Please.
Mr. TURNER. Repeat the question, please.
Mr. MOORE of Utah. Just to what extent would you put the
Department of Labor responsible and involved in making sure
that states can go after and recover as much of these funds as
possible?
Mr. TURNER. Oh, they are very responsible and involved.
I think one of the things that they began to take advantage
of is what we have kind of requested before, that people get
more data access to IG, OIG. And once that began to happen, we
began to see some improvement.
Mr. MOORE of Utah. Excellent. There is another quick
question to Mr. Turner, actually, about entrepreneurs, and they
were at risk of being targeted quite a bit for some of this
fraud. And we want to make sure that we are protecting that
side of it, and making sure that those that are honest, doing
the work that they need to do, that they have that capability.
Are there any measures you recommend to help implement--to
prevent fraud without penalizing these entrepreneurs?
Mr. TURNER. Well, I will be a little premature in speaking
to that now, because we actually have work going on to take a
look at that. And then I should be able to provide the
committee something in the future.
Mr. MOORE of Utah. The whole point of this is to make sure
we do this better, we shine the light, and keep working on it.
So, thank you for your time.
Chairman SMITH. Thank you, Representative. I recognize the
gentleman from Virginia, Mr. Beyer.
Mr. BEYER. Mr. Chairman, thank you very much, and thank you
for holding this hearing.
Thank you for hanging in there.
I am so glad that we are holding a hearing on the
unemployment system, which has long been neglected and
underfunded by Federal and state policymakers. I can tell you
that, like many of the colleagues here, at the height of the
pandemic that is all we did was chase down unemployment
insurance claims.
I think--you know, and every story was distressing. Each
one was grimly similar, that the enhanced UI payments were
literally the only thing that allowed ordinary Americans who
lost their work through no fault of their own to pay their
bills, to buy groceries, to support their families.
We had myriad constituent cases, I think well over 1,000
just in the first couple of months, that we are wrestling with
in Virginia with an antiquated and over-burdened state
employment commission, and it just emphasized to me how
important it was to have a program like this in a time of
crisis.
At the time, I was chairman of the Joint Economic
Committee, a bipartisan, bicameral--a great honor. And one of
the things we did was talk to the smartest economists across
the board, Democrat, Republican, you know, conservative,
liberal about what to do. And everyone started with the
unemployment insurance system and the enhanced unemployment. It
became really clear that this work was essential to the
recovery.
You know, you have heard, I am sure, through many different
witnesses that no other country in the world has recovered as
quickly from the pandemic economically, as we, with still have
a ways to go.
UI kept millions of Americans out of poverty, it saved
countless jobs, and prevented home foreclosures, which
obviously destroyed us in 2008 and 2009, and has set the stage
for this historically low unemployment, 54 years, steady GDP
growth and, although there is still a ways to go, slowing
inflation.
Every Thursday at 5:00, the governor of Virginia held a
conference call with all the Democratic and Republican members
of the Virginia delegation. So, Morgan Griffith from southwest
Virginia to Tim Kaine. And we each got our three or four
minutes with the governor. And virtually every conversation was
about the broken UI system. And he would have to explain that,
in Richmond, the software was from 1980, the codes were--nobody
knew anymore, and the hardware was from 1980, and that they
were doing the best they could with--but they had not--you
know, in January of 2020 they hadn't expected the incredible
deluge that they had.
So right away, we tried to go to work and say, look,
let's--as we are handing money out, let's make sure that we are
giving a lot of money to the states, Democratic and Republican-
led states, to invest in their UI systems, so that if this ever
happens again, we can be ready.
So, Mr. Turner, a softball question. Would investing in
highly trained state UI staff and better computer systems help
prevent the fraud that we were talking about today, and ensure
that the benefits are paid on time?
Mr. TURNER. No doubt about it. That is something that we
have included in our recommendations in the past.
Mr. BEYER. That is a very short answer, thank you.
[Laughter.]
Mr. BEYER. That is about the shortest I have heard in my
four years on the Ways and Means.
Mr. Horowitz, a similar question. And you mentioned that
multiple states experienced issues verifying eligibility for
benefits. That was a huge one for us. People would be ruled
ineligible, and that would take them weeks or months to be able
to prove their eligibility, and long delays because of that.
One of the things we provided in the American Rescue Plan,
which half of us like, was upgrading antiquated state UI
computer systems. How important is that investment for the
fraud that we are talking about?
Mr. HOROWITZ. It is critical. The states, as you indicated,
the situation with Virginia, it is not alone. It is a problem
across the country. States need to upgrade their IT systems.
We have moved light years in just the last several years on
the ability to do verification, identity verification. And so,
systems has to--have to catch up.
Mr. BEYER. Great, great. Well, I still have a minute left,
which I will yield back.
And I want to thank you for showing up, and for helping us
get our hands around this, balancing both the need to preserve
every possible taxpayer dollar from fraud, but also making sure
that we are supporting the American citizens who look to us.
Mr. Chairman, I yield back.
Chairman SMITH. Thank you, Representative. I recognize the
gentlelady from the State of California, Mrs. Steel.
Mrs. STEEL. Thank you, Mr. Chairman, and I want to thank
the witnesses for being here today, and all--for all the work
you have done to shine a spotlight on this important issue.
Today's hearing is about fraud, and this lost funds actually
came from hard-working taxpayers, and it should not happen
again.
Last Congress I led an effort to recover funds, prevent
fraud, and support the victims of unemployment fraud and
identity theft. Along with Speaker McCarthy I introduced the
Pandemic Unemployment Assistance Fraud Protection Act. My bill
would create an incentive structure to encourage states to
recover fraudulent unemployment payments, require states to
revamp and improve fraud prevention efforts in the unemployment
program, and include necessary protection for victims, those
innocent taxpayers who receive 1099K without receiving these
employment payments--unemployment benefits fraud.
My constituents, Californians, and Americans who actually
need unemployment assistance should be the ones who receive it,
not criminals.
California was one of the biggest targets for this fraud.
The State of California Legislative Analysis Office reported
that $18.7 billion, 94 percent of unemployment insurance
benefit fraud, may have occurred in the federally funded
unemployment program. An estimated $20 billion in potentially
fraudulent unemployment payments are still under investigation.
Mr. Chairman, I would like to submit for the record for--a
report by California State Auditor issued in January 2021.
Chairman SMITH. Without objection.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mrs. STEEL. This report found significant weaknesses in the
Employment Development Department's approach to fraud
prevention, which led to billions of dollars in improper
benefit payments. According to the report, EDD paid $1 billion
of $11 billion, in part due to a problematic decision to
streamline its process by removing a safeguard against paying
individuals with unconfirmed identities.
EDD, which was led by current Department of Labor Deputy
Secretary Julie Su, issued the payments to those claimants with
unconfirmed identities before discovering it had removed the
safeguards for more than a four-month period. And believe it or
not, she was just named then Acting Secretary of the Department
of Labor, so somebody who messed up in California's EDD
problems.
California made it easy for fraudsters access benefits, and
that had devastating consequences for my constituents. We
should all be on the side of good governance and protection of
taxpayer money, and the billions in fraud paid out over the
last two years is an embarrassment.
Mr. Turner, last October your agency issued a report
finding that nearly half of the pandemic unemployment benefits
may have been improperly paid, with 1 in $5 going to
fraudsters. California was one of the worst states you looked
at. One of the things your report looked at was timeliness of
the payments.
I share the concerns voiced by my friends on the other side
of the aisle about ensuring equity and access to benefits. That
doesn't mean we should prioritize speed over safeguards just to
get money out the door quickly. California stories show how
unfair and unjust the consequences can be for taxpayers and
workers.
Mr. Turner, can you talk about best practices, and what
needs to be done to modernize systems to ensure states have the
proper verification up front?
Mr. TURNER. Yes, and thanks for the question. I think one
of the things that we don't do enough and utilize enough is
data analytics. Data analytics has helped us. It has been a
game changer and a force multiplier, and it was one of the
things that allowed us to identify the $45.6 billion in fraud
from those 4 high-risk areas that I mentioned earlier. So that
is one thing.
I think also maybe we need to look at probably a central
database. One of the things that helped this fraud get
perpetrated was the fact that every state, all 53 states or
entities, operate different systems. So, there was not enough
cross-checking to basically catch some of that fraud early on.
Mrs. STEEL. So how are you going to make it easy between
California--especially California is the highest amount, that
fraudulent amount that, you know, you found out. So how are you
going to work with the state and Federal Government?
Mr. TURNER. Well, just giving guidance from our reports as
far as what needs to be done to be improved. I think that is a
big start.
And just emphasizing working together, and coming up with
maybe one system, because right now the biggest challenge for
the OIG is data access. And so--and that is what I believe
slowed us down in identifying some of this fraud earlier.
Mrs. STEEL. Thank you very much.
I yield back.
Chairman SMITH. Thank you, Representative. I would like to
recognize Ms. Van Duyne from the great state of Texas.
Ms. VAN DUYNE. Thank you very much, Mr. Chairman. Thank you
for holding this hearing, as well.
As my colleagues have already alluded to, this hearing is
long overdue. It is entirely unacceptable that it took a change
in control of Congress to investigate the greatest theft of
taxpayer dollars the United States has ever seen. And yet this
Administration has not shown an ounce of care.
Behind me I want you to look at the estimates of immensely
irresponsible amounts of fraud and improper payments. The fact
that the Biden Administration can turn a blind eye to this dire
level of fraud raises questions that there is no end in sight.
OMB estimates an appalling $104 billion of potential fraud.
Let's put that into perspective, because we have been throwing
out numbers like they don't mean anything: $104 billion, that
is a level of spending that is equal to the entire budget of
the Department of Veterans Affairs, the entire budget. But it
is also thought by a number of professional auditing agencies
that that number is worse. It is four times that amount. It is
up to $400 billion.
And not only is this the greatest theft of taxpayer money,
but it is borderline criminal, and certainly pure incompetency.
The oversight of this money is an absolute dumpster fire being
put out by a fireman with a garden hose.
Mr. Turner, you mentioned that you had sent correspondence
to the Trump Administration about some of these concerns. Have
you also sent correspondence communications to the Biden
Administration?
Mr. TURNER. Yes, we have.
Ms. VAN DUYNE. Do you think--do you have any reason to
suspect that there was fraud, abuse, potential outlays of
dollars that were improper after January 20th of 2021?
Mr. TURNER. Yes, there was.
Ms. VAN DUYNE. I appreciate you saying that, because I
think members on the other side of this aisle need to hear
that. We have, in the last two years, experienced a lot of
fraud. We are talking about $400 billion that, to the people
that they claim that they want to help, that dollars could have
gone into those pocketbooks.
We just released--just because they are saying that this
happened under the Trump Administration does not release
Congress from its duty to be able to protect those dollars. We
have to admit that there have been problems under both
administrations, right? We can't just stick our head in the
sand and blame Trump for everything, and pretend, like we heard
last night, that everything under this Administration is rosy
and perfect.
We have an opportunity right now today to have an honest
discussion. You would assume that getting down to fraud and
abuse and saving taxpayer dollars for those people who need it
the most would be a bipartisan effort.
All of you are well versed. You have done a tremendous
amount of investigation. You have got solutions on the table
that you want to present to us today. But instead, we are
hearing about the witnesses who aren't here, the stories of
people who have used unemployment. We understand it was used.
It was used by people who needed it the most. But we also
understand up to $400 billion was misused, and we need to get
down to that.
And I have got some questions. I know during my time on
Small Business that there were issues with PPP and EIDL, and we
thought those dollars were being spent overseas illegally. Do
we know how much money went to international organizations and
foreign actors?
Do we know if this money fell into the hands of terrorist
organizations?
And can we track how much money actually went overseas?
And probably the biggest question I have got for any of
you: Do we have any hope I have ever seen these dollars again?
Mr. Dodaro.
Mr. DODARO. History will tell us that there will be a very
low percentage that would likely be recovered from fraud. And
that is just the fact of the matter.
Ms. VAN DUYNE. Mr. Turner.
Mr. TURNER. I would agree. And let me just say it is going
to take a while. As you know, the--a lot of the fraud is still
out there. We still have 162 open investigations that we
haven't looked at. And so it is going to actually take quite a
while to ever figure out exactly how much.
Ms. VAN DUYNE. Mr. Horowitz.
Mr. HOROWITZ. The recovery rate is clearly going to be far
below what the fraud rate is. Having said that, the public
should know we are going to do everything we can in our powers
to try and track down and find every dollar. And Congress has
given us tools to do that. We are asking for some more, and we
are going to do everything we can.
We are going to also, by the way, use suspension and
debarment authorities and others to try and make sure that
crime doesn't pay to the best extent possible we are able to do
it.
Ms. VAN DUYNE. Do you think it is important to us that we
start that as soon as possible, and not have kind of this
political theater?
Mr. HOROWITZ. Oh, absolutely. Look, this--and we are doing
it. We have been doing it for three years, and we are going to
keep doing it.
Ms. VAN DUYNE. I appreciate that answer. Thank you very
much.
And I yield back.
Chairman SMITH. I want to thank the gentlelady and
recognize the gentleman from Pennsylvania, Mr. Evans.
Mr. EVANS. Thank you, Mr. Chairman. Mr. Chairman, my
comments will be to the point.
First, I want to thank the ranking member for what he has
said, because I believe he has summed it up. And when you talk
about just the facts, that is what I believe that it should
come down to. That is where I believe that we are.
So, I encourage my colleagues to consider these distressed
constituents, and remember that unemployment insurance saved
the economy and kept families out of poverty. So, I believe
that what he said, he summed it up.
And I yield back the balance of my time.
Chairman SMITH. Thank you, I thank the gentleman. I
recognize the gentleman from Iowa, Mr. Feenstra.
Mr. FEENSTRA. Thank you, Mr. Chairman Smith. Thank you also
to each of our witnesses for your testimony. I greatly
appreciate it.
Obviously, we have talked about, you know, what has
happened at the height of the pandemic, with 15.4 percent
unemployment, 23 million people unemployed. The circumstances,
obviously, demanded a resolution, and we did that. But with
that created risk. And now we are responsible. We are
responsible for oversight of the risk that occurred in giving
these unemployment benefits.
What is interesting to me is that we never had oversight,
or never had hearings in 117th Congress, despite the warnings
that were noted last March from the Department of Labor that we
had $163 billion of improper payments.
So, I am grateful. I am very grateful and thank Chairman
Smith for holding this hearing. And I also want to thank you
again as witnesses for doing so and being part of this.
Mr. DODARO, it is very important, I think, that we continue
to assess the exact scale of the problem. I mean, we really
need to know the exact scale. And I know you have been working
on that. I greatly appreciate it.
The GAO's report last month noted that this is a little
difficult concerning the false positives and false negatives.
We are not sure. Also, due to the lack of consistent and
reliable estimates that cover all UI payments during the
pandemic, it is not currently possible to combine existing
estimates and measures to make a meaningful statement about the
extent of fraud and UI programs during the pandemic.
So, in your testimony you noted GAO has committed to build
on existing evidence with its own modeling to calculate a more
precise estimate. Can you talk about that?
How do we refine our estimate, and what would be the
barriers in refining that estimate?
Mr. DODARO. Well, first, the Labor Department, for a number
of years, has what is called the--the acronym is BAM, Benefit
Accuracy Measurement program. So, they estimate a national
fraud rate and a national improper payment rate. So far, they
have not measured the improper payment rate for the pandemic
unemployment insurance program. That was the one for self-
employed people, a brand-new program. We all think that the
rate, fraud rate, is higher for that program than probably the
more traditional unemployment insurance program because there
was--allowed for self-certification rate.
So, what we are trying to do is to look at that program, in
particular. We will see what the Labor Department comes up with
their estimate, which is due this year, and then we will do
some sampling of that particular program. We are going to look
and do some modeling of other areas. So, we are going to take a
modeling approach. We are also going to try to sample some of
the estimates.
Mr. FEENSTRA. Yes.
Mr. DODARO. And it is important to remember that our
estimate of 60 billion is the low end.
Mr. FEENSTRA. Correct.
Mr. DODARO. We have said that that is the low end. We are
working on a higher rate now.
Mr. FEENSTRA. So, when do you think you can have a more
accurate number? At what point----
Mr. DODARO. I mentioned earlier late this summer.
Mr. FEENSTRA. Late this--okay, late this summer, okay.
Mr. DODARO. Late this summer. If we do it earlier, I will
obviously let you know.
Mr. FEENSTRA. Yes.
Mr. DODARO. But I think it is important----
Mr. FEENSTRA. It is.
Mr. DODARO [continuing]. to note that there are a lot of
numbers out there.
Mr. FEENSTRA. Yes.
Mr. DODARO. But they are all bad.
Mr. FEENSTRA. I hear you. An accurate number would be
wonderful. Then we know what we are dealing with, right?
So, another question. So, I come out of State of Iowa. I
was chair of ways and means. I handled unemployment, the tax
tables and stuff like that, understanding the nuances of
unemployment tax. So, when I look at empowering state auditors,
I really think we can do this. I think we can use state
auditors, but we have got to empower them.
So, Dodaro, and even Mr. Turner, what are your ideas to
empower them? Because they are just not going to say, oh, I am
going to do this, right? I mean, they could care less about the
Federal Government. It's like--but we can do things to empower
them. What are your thoughts on that?
Mr. DODARO. I think we should have specific audit
requirements for state auditors to look at the unemployment
insurance program and the Medicaid program. These are two
programs on our high-risk lists. Medicaid is one of the
fastest-growing programs.
Right now, there is hardly any auditing done of the managed
care portion of Medicaid. And----
Mr. FEENSTRA. But do they care? I mean, I look at the state
going--and they are--I mean, I--we use our tables, and it is
like, what do we care about--why should I do this for the
Federal Government? I mean----
Mr. DODARO. Well, but I think in both of those programs
states provide their own money.
Mr. FEENSTRA. Yes, right, that is true.
Mr. DODARO. And so there are some incentives for them. I
mean, the Medicaid program is probably a third of each state's
budget, at least, in the program.
Mr. FEENSTRA. Right, right. So, do you think that is enough
carrot? I mean, I just----
Mr. DODARO. Well, all you got to do is turn an auditor
loose, and you give them some money to pay for----
Mr. FEENSTRA. There is the key. You hit it on the head. You
give them a little incentive of money, don't you think?
Mr. DODARO. Right. You have to provide support.
Mr. FEENSTRA. Yes.
Mr. DODARO. Now, right now, there are single audits that
are done by state auditors.
Mr. FEENSTRA. Yes.
Mr. DODARO. But they don't focus enough on the detailed
aspects of fraud and mismanagement. They are starting point for
accountability----
Mr. FEENSTRA. Yes.
Mr. DODARO [continuing]. But they are not the answer.
Mr. FEENSTRA. No, no. Well, I want to thank you for that.
I just want to quickly note, I mean, when you work in
business, you pay people to collect debt. That might be a clue
for our first eight auditors for the Federal Government.
Thank you, and I yield back.
Chairman SMITH. I thank the representative. I would like to
recognize the gentlelady from the State of New York, Ms.
Malliotakis.
Ms. MALLIOTAKIS. Thank you very much. Thank you so much for
your testimony. It was very informative.
And we have heard today of the massive figures of improper
unemployment payments, many fraudulent, which could be as high
as $400 billion, some of which could have been prevented if we
had put in the proper guardrails in place in--particularly in
the last $1.9 trillion American Rescue Plan that the Democrats
jammed through.
My home state of New York--unfortunately, but not
surprisingly--ranks near the top of the list, with an estimated
$11 billion in fraudulent unemployment payments--I mean,
payments alone. These taxpayer dollars went to fraudsters, many
who are from overseas, as far away as China and Russia and
Nigeria, who bought luxury cars, condos, watches, designer
goods.
As you could see, I mean, a nice graph here, because we
haven't talked about that today. It is shocking to my
constituents when we tell them that this pandemic relief money
shamefully went to purchase 18 carat Rolex watches, luxury
condominiums, Louis Vuitton and other designer goods, a $10
million villa in the Dominican Republic, $3.5 million mansion
in New Jersey, chartered jet services, luxury vehicles, from
Porsches to Mercedes Benz to Ferraris to Bentleys. One person
even received $1.5 million over a span in 10 months.
This is absolutely unacceptable, and I am glad to hear
today that there is bipartisan support to crack down on this,
and we must do what we can to recoup this money.
But to make matters worse, my district offices in Staten
Island and Brooklyn worked with dozens of constituents who have
had their identities stolen and could not get the unemployment
benefits that they desperately needed. Because the department
of labor in New York failed to prevent fraud at the outset of
the pandemic, the Unemployment Insurance Trust Fund was
drained. And for the last two years the state has had an
outstanding loan to the tune of $8 billion from the Federal
Government. My colleague mentioned this earlier. I am concerned
that New York small businesses are going to be left holding the
bag.
And my question, if you can clarify, if New York continues
to fail to repay its Federal advance due to its failure to
limit this fraud, will their per-worker tax keep increasing
year after year, and by how much?
Mr. DODARO. I can provide an answer for the record for it,
but I would say offhand that that is up to the state to decide
how to repay the money.
Now, some of the pandemic money was available for states to
use to repay their money that they owed to the unemployment
insurance program. So, I even think there is money, you know,
in the coronavirus relief fund that was given, $350 billion to
the states, I believe--don't hold me precisely to this, but if
my memory serves me right, some of that money could be used to
help repay the program.
So, it depends on the decisions made by the governors and
the state legislatures on how to repay that money.
Ms. MALLIOTAKIS. Well, that is a good point, and it is
about $100 billion that is unspent in COVID relief funds. So
perhaps the Federal Government can take action there.
Which states did it right? Okay, New York, obviously, did
it wrong. My colleague talked about his state of Utah, that
they had good preventive measures in place. What states, Mr.
Horowitz, do you think are model states that we should be
looking at on how to prevent this type of fraud?
Mr. HOROWITZ. What we have seen are evolving actions by the
states over the last several years. And so, what I would want
to do is get back to you on sort of which ones perhaps are
leading the effort.
There are several, though, as part of the National
Association of State Workforce Agencies, that have come
together to, for example, implement identification
verification, identity verification tools that have been very
important because--you mentioned identity theft. We at the PRAC
often talk about identity theft creating three victims: there
is the public at large, because it is the public's program that
gets the money stolen from; there is, obviously, the person
whose identity is stolen, who has credit issues, other issues
they have got to deal with; but then there is the person, as
you mentioned, who was the intended beneficiary.
And we have heard testimony about individuals, as you said,
who went to get benefits, whether it is from unemployment
insurance or other programs, and were turned down because the
agencies thought they were the fraudsters.
Ms. MALLIOTAKIS. No, I appreciate that.
Mr. HOROWITZ. The fraudster beat them there.
Ms. MALLIOTAKIS. And I want to--just 20 seconds left with--
on that point.
Mr. Dodaro, your testimony notes that as of October 2022
there have been 41 states using the Identity Verification
Service that provides new data sets to conduct enhanced
unemployment claim and identity verification, as was discussed
here, and contains cross-matching with Social Security, the
Death Master File, to identify the use of deceased persons.
Can you please talk about that? Why are--and should all
states be using this service, number one?
And do we have an estimate of how many dead people received
unemployment benefits?
Mr. DODARO. I don't know if Mr. Horowitz knows that, or Mr.
Turner, but I don't have the estimate for the total number.
But I do know that it is an appropriate cross-match to
make. And one of the easiest targets for fraudsters is to get a
Social Security number from a deceased individual. A lot of
this information, as Mr. Turner mentioned earlier, is on the
dark web. And they can do that.
And I know my own mother received--she passed away,
unfortunately, right before the pandemic, so she received an
economic incentive payment from the Treasury Department. Now,
my sister returned it, because she called me and said, ``What
to do?''
I said, ``Send it back.''
And so, you know, Treasury--this is a problem at the
Federal Government, too. Treasury sent $1.4 billion to an
estimated 1.2 deceased individuals in the economic incentive
programs. Now, due to our recommendation, I got about half of
that back, so about $700 million.
The--right now, the Treasury Department Fiscal Service is
not allowed to use the Social Security full Death Master File
to check before they make a Federal payment. Now, that is
something I have been trying to get for years. Congress finally
passed it. It is due to take effect next year around this time.
But I think it should be expedited and made prominent on the
basis.
I mean, there is no reason that we should be doing this.
Ms. MALLIOTAKIS. Thank you.
Mr. TURNER. Just if I could add on that--the Death--Social
Security numbers of dead individuals, we do have that
available. I don't have it broken down for me right now, but we
can provide that to you at a later time after the hearing.
Ms. MALLIOTAKIS. Thank you. I am sure everyone on the
committee would like to know that, the answer to that.
Mr. TURNER. Yes, we can provide that.
Ms. MALLIOTAKIS. Thank you.
Mr. HOROWITZ. And we will, you know, work to get that data.
But I would say, just picking up on Mr. Dodaro's comment,
we--on our fraud alert we just released, when we matched PPP
and EIDL information with the Social Security Administration,
we have several thousand deceased individuals who got PPP and
EIDL loans. Our job now is we are trying to figure out if they
were alive at the time of application. My guess is some were,
my guess is many weren't, because we have seen this problem,
and it makes no sense why you would want the Social Security
Administration to have a Death Master File index, and yet let
other parts of the Federal Government pay out billions of
dollars in benefits to individuals who are deceased.
Chairman SMITH. Thank you, Representative. We will now
recognize the gentleman from Illinois, Mr. Schneider.
Mr. SCHNEIDER. Thank you, Mr. Chairman, and let me start
with the obvious.
Everyone on this committee is outraged at the rampant fraud
experienced during the pandemic. American taxpayers, including,
as was touched on, those who relied on the programs stood up by
this Congress--and, by the way, stood up unanimously by
Republicans and Democrats together--were victimized by
deceitful individuals and organized criminal groups. No one is
defending it. We all agree that we should be doing everything
possible to recover the money stolen and prosecute those who
stole the money to the full extent of the law.
We also need to make sure that, going forward, we are
better at defending against fraud, from program design to
system development supporting the programs, and deterring those
inclined to consider stealing from taxpayers with greater
prosecution and enhanced recovery.
And let's review the facts. Three years ago, our nation
faced an unprecedented health and economic crisis. In February
of that year, we sat in this very room with Secretary Azar. I
would venture to say that no one sitting here had any idea of
the devastating impact the pandemic would have.
We had a much better view a month later, when we came back
to D.C. and passed the CARES Act, bipartisan, unanimous. And
then 20 million people lost their jobs. Unemployment reached
nearly 15 percent, and that is the highest rate since the Great
Depression. And there was no end in sight.
Now let's consider what would have happened if Congress had
not acted. Maybe another Great Depression, the loss not just of
individual businesses, but of entire industries, and millions
of people out of work with no prospect of finding a new job,
rising poverty across the country, and negative economic and
social impact lasting for generations.
So, some like charts. I love analogies. We had a five-alarm
fire raging out of control. We were trying to put that fire out
with water passed in buckets as fast as possible, and the
buckets had holes. Speed mattered, as we have discussed, which
meant that there was a trade-off between trying to fix the
holes and precisely passing the buckets so no water spilled and
getting the water as quickly and effectively as possible to the
fire lines. And unfortunately, that would mean not getting 100
percent of the water to the flames.
Does anyone here want to claim we failed in our primary
goal of putting out the fire?
Are you asserting that the millions of Americans out of
work at the time and otherwise unable to feed their families or
keep roofs over their heads didn't receive desperately needed
assistance?
Is anyone arguing that we should not have stood up these
programs?
Last month, this economy created more than 500,000 jobs, 12
million jobs just in the past 2 years, and employment, as also
has been noted today, is at its lowest rate in 54 years.
So my questions to our panel, as we have discussed today
the breadth and sophistication of the many unemployment
insurance schemes and the ongoing efforts to pursue criminals
and reclaim the monies, and with an eye towards making sure
that we are better prepared if we face a similar crisis, what
should have or could have Congress and the Trump Administration
done in 2020 to better protect against fraudulent claims, and
what should we be doing now?
And I will start with you, Mr. Dodaro.
Mr. DODARO. First, the legislation that Congress passed in
2016 was to get agencies prepared to prevent fraud. That needs
to be effectively implemented. It is still not effectively
implemented at the Labor Department or at the Small Business
Administration and others. So, we are slightly better prepared
than we were before, but we are not fully prepared for the next
emergency so that, to use your analogy, that, you know, we
saved--you know, the fire doesn't do as much damage as it does
before, we put it out. And that--all right?
And so, secondly, there needs to be more oversight by the
Congress to make sure agencies put these anti-fraud prevention
measures in place, and deal with improper payments. Since 2003,
when agencies have been required to report improper payments,
there has been $2.4 trillion in improper payments. This is a
problem that is pervasive across the government. Last year, 86
programs, 16 different agencies. More attention needs to be put
on these two matters.
Mr. SCHNEIDER. Great, thank you.
Mr. Turner.
Mr. TURNER. For us I would say data access. If Labor OIG
had data access from the start, instead of having to wait five
or six months to get it, we would have been able to move out
and identify some of these issues a lot earlier. So, for us,
that would be the key.
And although the Department has gotten better with that,
they are assisting us, but it is a temporary solution that we
have in a--in place right now. And so, we hope that we can get
something more permanent, and we would hate to resort back to
IG subpoenas.
Mr. SCHNEIDER. Okay. Mr. Horowitz.
Mr. HOROWITZ. IT modernization, what Mr. Dodaro said on
that.
Transparency, greater transparency into data. Justice
Brandeis famously said, ``Sunlight is the best of
disinfectants.' Get that information out. We need it. The IG
needs it.
And third, data analytics, the ability to cross-match data.
One person shouldn't be able to take their Social Security
number to 40-plus states to get benefits.
Mr. SCHNEIDER. Thank you. And if I can quote my friend, Mr.
Kelly, we shouldn't be pointing fingers. Let's find a way to
work together and solve this problem, make sure we don't face a
crisis like this again.
I yield back.
Chairman SMITH. Thank you, Representative.
We want to highlight again the purpose of this hearing is
to investigate the size and scope of fraud in the Federal
unemployment program, which more than doubled in the last few
years during the pandemic. The purpose is to investigate fraud.
I would like to introduce--recognize the gentleman from
Ohio, Mr. Carey.
Mr. CAREY. Thank you, Mr. Chairman, and I want to thank the
witnesses for your time and your patience with all the
questions that you are getting asked.
We highlighted, I think throughout today, the importance
that state auditors have in--across the country. To that end,
Keith Faber, who is our state auditor, actually issued a
report. And in it--in the--which I will be eventually putting
it to the record--Ohio estimated--is estimated to have paid
over a billion in fraudulent unemployment benefits from March
2020 to 2022. And I think my colleague from Ohio highlighted
the fact that both our governor, our lieutenant governor, and
the governor's wife each received the fraudulent claims.
The other thing that the auditor's report identified, which
I found interesting, was it identified over $475 million was
actually paid to criminals.
So, Mr. Chairman, without objection, I would like to submit
this for the record.
Chairman SMITH. Without objection.
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Mr. CAREY. So, I am going to go into--I am going to kind of
go through my question, lay it out.
Last February the Administration took unilateral action to
sweep suspected fraud under the rug, releasing guidance to
allow states to waive large numbers of suspicious claims and
forgo recovery and restitution for the taxpayers. Then, in
March, DoL reported that the states identified $35.1 billion in
overpayments made in the UI programs during the first seven
quarters of the pandemic.
So after first allowing the states to waive the
overpayments, and only subsequently identifying the extent of
the overpayments, DoL relented last July and sent $250 million
to the states for reporting and detection and recovery of the
overpayments. While DoL is not here to address these contrary
actions, perhaps DoL OIG can shed some light on this.
So, with that, Mr. Turner, I do believe you were in the
military for a number of years.
Mr. TURNER. Yes, I was.
Mr. CAREY. I want to thank you for your service. So, Mr.
Turner, even if DoL told states they could not waive fraudulent
payments, how are we to know what--some claims involved in
those waivers were not fraud, if the states don't have to look
into them at all?
Mr. TURNER. Well, you have kind of taken the OIG position,
because you--we actually believe that you do have to do that.
And part of our work this year and this spring is going to take
a look at that.
Mr. CAREY. Wonderful. And to that, are you investigating
the impact of this guidance on your ability to recover
fraudulent payments?
Mr. TURNER. Yes, we are.
Mr. CAREY. Okay. Mr. Chairman, I yield back.
Chairman SMITH. Thank you, gentleman. And last, but
certainly not least, the gentleman from California, Mr.
Panetta.
Mr. PANETTA. Thank you, Mr. Chairman.
Gentlemen, I will try to be quick.
Obviously, starting with the CARES Act, Congress acted with
speed and bipartisanship to help people who lost their
livelihoods, who lost money, who lost their jobs. We provided
billions for unemployment insurance that worked, that helped
people, that actually prevented hardship for millions,
including in my district, the 19th congressional in California.
Now, unfortunately, as we have heard over and over, and as
we know well, there was fraud. And as a former prosecutor, I am
well aware of people who try to pull one over on the Federal
Government and on the government. And yes, we should hold them
accountable to the fullest extent of the law, as we have been
hearing throughout today's hearing.
But now, as a Federal representative, I get to look
forward. And basically, we get to create laws, or provide
funding to help eliminate--to help prevent fraud. That is why,
through the American Rescue Plan, we in Congress provided that
type of significant funding for oversight and improvements for
our unemployment insurance systems.
Now, Mr. Horowitz, earlier I think you mentioned, you know,
that is exactly what we are doing and have been doing right
now. And so, my question to you is did that funding help crack
down on fraud during the pandemic, and will it help states in
the future protect from fraud?
Mr. HOROWITZ. So, the funding did help states make a start
in this effort. I think there is more that needs to be done, as
GAO has reported on and DoL OIG has reported on.
But the extent to which you modernize and improve the
systems, you not only reduce the rate of fraud, but you improve
the benefit, you improve the delivery of benefits to people who
are entitled to get the benefits.
Mr. PANETTA. Right. Do you have many examples of states
that are modernizing, with this funding, their unemployment
systems?
And are there any lessons learned, looking at any
particular states?
Mr. HOROWITZ. There are multiple states, actually, that are
moving forward. So, I am not going to single any out, but they
are working through their national association to do that.
And I would say the key movement forward is modernizing
their systems and taking steps to do identity verification. So,
there is a variety of tools being tested in--among the states.
But that, to me, from what I have seen so far--not just, by the
way, with unemployment insurance, with SBA as well, and other
Federal programs--the need to put in place identity
verification.
Mr. PANETTA. Understood. And then just let me throw this
out there. Would it help if there was a national standard for
unemployment systems when it comes to maybe--and I think you
guys have mentioned this--technology, data gathering, or--in
order to help states set up systems for employing unemployment
insurance?
Mr. HOROWITZ. You know, I think that is an excellent
question, Congressman, and a key question for Congress. And--
because we have largely built an unemployment insurance system
that is managed effectively at the state level, with 54
entities, the 50 states, D.C. and territories.
And the question is, how much do you want to centralize it?
How much do you want to give authority to the Labor Department
to manage those systems? And I know GAO has written on that and
spoken about that, as well. It is a policy question, really,
for the Congress to consider.
Mr. PANETTA. Mr. Dodaro.
Mr. DODARO. I think it would be a good idea to have some
minimum national standards. You don't want to hamstring the
states from being innovative and trying different approaches,
because that could be beneficial.
But you have to have some minimum standards that are in
place, particularly for IT systems, particularly if you want
those systems to be able to talk one another, and to have--be
able to cross-match. As we have been--pointed out this morning,
if somebody files a claim, you know, in one state, they can
file in all the other states, and nobody would know the
difference, because there is no way to cross-compare.
There ought to be cross-comparisons against incarcerated
people, as well. There is a system that is kept for that, as
well.
Unless there are standards, you are not ever going to have
the optimum IT system network, nationally, to deal with a
global problem like we had before.
Mr. PANETTA. Great. Mr. Turner, anything on a national
standard?
Mr. TURNER. The only thing that I could say to add is that
I think there needs to be some kind of central database that
the OIG has direct access to, as well as the Department and the
States.
Mr. PANETTA. Great, great. Thank you, gentlemen.
Mr. Chairman, I yield back. Thank you.
Chairman SMITH. Thank you, Representative.
I would like to thank our witnesses for being here the
whole time, and for the great discussion.
Please be advised that members have two weeks to submit
written questions to be answered later in writing. Those
questions and your answers will be made part of the formal
hearing record.
With that, the committee stands adjourned.
[Whereupon, at 2:08 p.m., the committee was adjourned.]
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