[Senate Hearing 119-350]
[From the U.S. Government Publishing Office]
S. Hrg. 119-350
FROM FRAUD TO RECOVERY: RESTORING
INTEGRITY IN SMALL BUSINESS PROGRAMS
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
OF THE
UNITED STATES SENATE
ONE HUNDRED NINETEENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 25, 2026
__________
Printed for the use of the Committee on Small Business and
Entrepreneurship
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISIHING OFFICE
63-360 WASHINGTON : 2026
=======================================================================
COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED NINETEENTH CONGRESS
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JONI ERNST, Iowa, Chair
EDWARD J. MARKEY, Massachusetts, Ranking Member
JAMES E. RISCH, Idaho MARIA CANTWELL, Washington
RAND PAUL, Kentucky JEANNE SHAHEEN, New Hampshire
TIM SCOTT, South Carolina CORY A. BOOKER, New Jersey
TODD YOUNG, Indiana CHRISTOPHER A. COONS, Delaware
JOSH HAWLEY, Missouri MAZIE K. HIRONO, Hawaii
TED BUDD, North Carolina JACKY ROSEN, Nevada
JOHN R. CURTIS, Utah JOHN W. HICKENLOOPER, Colorado
JAMES C. JUSTICE, West Virginia ADAM B. SCHIFF, California
JON HUSTED, Ohio
Meredith West, Republican Staff Director
Sean Moore, Democratic Staff Director
C O N T E N T S
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FEBRUARY 25, 2026
Opening Statements
Page
Joni Ernst, U.S. Senator from Iowa, Chair........................ 1
Edward J. Markey, U.S. Senator from Massachusetts, Ranking Member 3
Witnesses
The Honorable William W. Kirk, Inspector General, U.S. Small
Business Administration........................................ 5
Prepared Statement........................................... 7
Mr. Kenneth Dieffenbach, Executive Director, Pandemic Response
Accountability Committee (PRAC)................................ 19
Prepared Statement........................................... 21
Additional Letters/Statements for the Record
U.S. Senate Committee on Small Business and Entrepreneurship
Letter to the Administrator of the U.S. Small Business
Administration Dated January 8, 2026........................... 48
Questions for the Record
William W. Kirk Responses to Questions Submitted by Chair Ernst
and Senator Scott.............................................. 52
Kenneth Dieffenbach Responses to Questions Submitted by Chair
Ernst and Senator Scott........................................ 56
FROM FRAUD TO RECOVERY: RESTORING INTEGRITY IN SMALL BUSINESS PROGRAMS
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WEDNESDAY, FEBRUARY 25, 2026
United States Senate,
Committee on Small Business
and Entrepreneurship,
Washington, DC.
The committee met, pursuant to notice, at 2:32 p.m., in
Room 428A, Russell Senate Office Building, Hon. Joni Ernst,
chairwoman of the committee, presiding.
Present: Senators Ernst [presiding], Young, Hawley, Markey,
Shaheen, Hirono, and Rosen.
OPENING STATEMENT OF SENATOR ERNST
Chair. I call the Committee on Small Business and
Entrepreneurship to order.
Nearly 6 years ago, the Small Business Administration's
pandemic relief programs provided a much-needed lifeline for
small businesses in Iowa and across America. Millions of small
business owners and their employees were saved from closure and
mass layoffs thanks to Paycheck Protection Program and Economic
Injury Disaster Loan funds awarded by the SBA.
But as we've seen time and again, when government funds
seemed free for the taking, bad actors are ready to steal and
scam. Government programs should never be able to be exploited
at the American taxpayers' expense in the first place. However,
the lack of oversight mechanisms in SBA's COVID relief programs
coupled with the quick disbursement of funds to save shuttered
businesses allowed swindlers to rob taxpayers of $200 billion
in pandemic relief loans.
The Pandemic Response Accountability Committee, or PRAC,
sounded the alarm years ago on how allowing applicants to self-
certify their eligibility increases fraud. Self-certification
allows the government to rely on an applicant's promise that
they meet program requirements. The SBA Office of Inspector
General repeatedly echoed their concerns about this system.
Unfortunately, for taxpayers, the Biden administration
ignored repeated watchdog warnings, allowing blanket
forgiveness without additional verification on PPP loans under
$150,000, and potentially allowing a large swath of fraud to
escape meaningful scrutiny. Self-certification was known to be
a major problem as more pandemic relief programs were created.
Consider the Restaurant Revitalization Fund, or RRF, and
Shuttered Venue Operators Grant, the SVOG programs. These
opened a menu of fraud for the taking. In 2024, music artist
Chris Brown exploited these awards to the tune of $10 million.
Half of these funds were paid directly to the singer himself.
Additional funds were spent on an $80,000 birthday party. The
SBA never should have been running a drive-through for
fraudsters.
However, even though the RRF program had a 20-location
limit for franchisees restaurant chain, CoreLife eatery with 29
locations still got served $7.8 million from our taxpayers that
it never should have been allowed to receive. But talk about
fast fraud made to order, one Oregon dentist known for
illegally distributing pharmaceuticals, used his personal
address and fictitious restaurant names in Florida to generate
nearly $8 million in RRF payments.
To date, the PRAC has diligently helped law enforcement
partners expose more than $2.4 million--or excuse me, billion,
with a B, $2.4 billion in estimated fraud loss. IG Kirk's
recent appointment as PRAC chair highlights how critical it
remains to claw back these funds, especially across SBA
programs. Last July, the SBA OIG flagged an astonishing $544
million of potential improper payments in the SVOG program.
Yet, the Biden administration continued ignoring the program.
Ultimately, officials from the previous administration did not
refer a single case to the Treasury.
Fraudsters can't be left off the hook just because time has
passed. Congress must pass my SBA Fraud Enforcement Extension
Act to extend the statutes of limitations for SVOG and RRF
programs, and give investigators the time they need to continue
going after crooks. Without my legislation, as soon as April,
fraudsters who stole funds will escape justice.
You heard me right folks, in just a little over a month,
many of the swindlers who took advantage of some SBA COVID
relief programs can no longer be prosecuted. The good news is
my statute of limitations bill has already passed the House and
this committee; it is now pending before the full Senate. I
call on Democrats to stop blocking this legislation so there
can be real accountability.
I am grateful the current administration knows that the job
is not finished. The SBA is conducting manual reviews of more
than 10,000 RRF awards, totaling over $3 billion. Just over
1,000 of these awardees did not submit the required post-award
report documenting how the money was spent. SBA also sent
demand letters to an additional 8,000 awardees who were not a
part of the manual review and never submitted a post-award
report totaling over $1.2 billion in RRF disbursements.
Additionally, last year, the SBA issued hundreds of demand
letters to SVOG grant recipients. The total grant value of
recipients who have not responded totals over $150 million.
The SBA has been dealt an incredibly difficult hand
reviewing the entirety of both programs before the statutes of
limitations and referring all fraud to investigators. This
critical work must continue. A few weeks ago, Administrator
Loeffler suspended more than 110,000 California borrowers who
took home over $8.5 billion in potentially fraudulent COVID
relief funds. The recent fraud investigations in Minnesota have
uncovered at least $9 billion from State and Federal programs,
including $400 million in PPP loans, and Administrator Loeffler
acted quickly to remedy this issue.
Republican members of this committee sent a letter to
Administrator Loeffler earlier this year, applauding her work
to shut down these schemes. I ask unanimous consent to enter
into the record our January 8th letter requesting information
from the SBA on its efforts to uncover fraud in the SBA
programs.
Without objection so ordered.
I look forward to hearing from our Federal watchdog
partners today on how they are tackling fraud and recovering
taxpayers' hard earned dollars. Thank you for your service, and
I look forward to hearing your testimony.
I now recognize Ranking Member Markey for his opening
statement.
STATEMENT OF SENATOR MARKEY
Senator Markey. Yeah. Thank you, Madam Chair.
Last night, President Trump declared a war on fraud. While
fraud must be taken seriously, the Trump administration has
shown it is only interested in weaponizing fraud for political
gain, and last night was a clear example of that. Trump said
the Somali community in Minnesota is plundering America and has
pillaged $19 billion from the American taxpayer. You know,
Trump lied and cynically weaponized fraud to demonize
immigrants. Trump is falsely pointing the finger at immigrants
while facing no accountability for his own behavior that
enriches himself and his family.
Trump said last night, if we're able to find enough of that
fraud, we'll actually have a balanced budget overnight. That
level of fraud does not exist, and it should trouble every
American because what it really means is that Trump will use
isolated incidents of fraud to punish his perceived enemies,
and the attacks have already begun. Last month, the Trump
administration used fraud as a pretext for freezing funding for
childcare and low-income assistance programs, threatened to
withhold Federal Medicaid funds, and ordered a review of
Federal funding for Democratic-controlled states.
These are not actions of a President fighting fraud. This
is a President determined to make life miserable for anyone who
doesn't support him. All the while, DOGE has been accessing
American's sensitive data. We recently learned DOGE employees
illegally funneled voter data to an organization pushing
disproven conspiracy theories of widespread election fraud. We
still don't know if sensitive data at SBA was compromised by
DOGE because our committee has never been briefed on DOGE's
activities at the SBA, and that is unacceptable.
If the President cared about fraud, would he be doling out
billion-dollar contracts to his cronies. Would he solicit
donations for his gold-plated ballroom from companies that do
billions of dollars of business with the Federal Government?
Would he grant pardons to criminals convicted of money
laundering, bank fraud, and wire fraud who have connections to
him and to his administration? And we are just 1 year removed
from the night President Trump illegally fired 17 independent
watchdogs, including Mike Ware at the SBA. Are these the
actions of a President serious about fraud? Or are those the
actions of an administration where corruption is self-dealing
are the norm?
There's an old saying that hypocrisy is the tribute that
vice pays to virtue. And so, yeah, we now have Donald Trump
paying vice, paying tribute to the rooting out of fraud while
at the same time. That is a good way of describing the entirety
of his administration. And that's the hypocrisy I think that
really bothers people even as they see the President up there
trying to demonize a small number of people and promising that
eradicating that level of fraud will balance the budget when he
knows that is not true.
Today's hearing is about fraud at the SBA, and we know that
bad actors took advantage of some of these COVID programs. We
don't deny that, and we must hold them accountable. Absolutely.
But let's be very clear about when that fraud occurred. Take
the Economic Injury Disaster program or the EIDL program, for
example. Of the approximately 4 million loans issued during the
pandemic, more than 3.7 million of those loans, or more than 90
percent of the loans, were approved in 2020 by the Trump
administration itself, 90 percent of the loans that we're going
to be looking at.
So, when we hear about fraud today, let's keep in mind who
was on watch when it happened, and Democrats and Republicans
should stand up and acknowledge actual fraud wherever and
whenever it occurs, and not just when it is politically
convenient to do so.
So, if we're serious about protecting taxpayer dollars,
policing fraud should not become a farce where those in power
give themselves a pass and use investigations to exact revenge
on their political counterparts. The Trump administration
abuses of Minnesota and other Democratic-led states like my
home state of Massachusetts, which he mentioned last night,
demonstrate exactly why we need real independent oversight at
all levels of government.
So, I thank you Madam Chair. I thank you for holding this
hearing, and I look forward to hearing from our witnesses.
Chair. Thank you, Ranking Member Markey. I do want to
extend a warm welcome to our witnesses, and I'm thankful that
you took time out of your busy schedules to share your
expertise and insight with this committee.
And, first, Mr. William Kirk serves as the inspector
general for the Small Business Administration. Mr. Kirk was
sworn in as SBA inspector general in early January, and has
extensive experience in strengthening internal controls and
combating fraud, waste, and abuse in his three decades of
leadership across higher education, also private enterprise,
and the Federal Government. So, yeah, thank you for your
service. He earned his bachelor of business administration in
accountancy and juris doctorate degrees from the University of
Notre Dame.
Mr. Kirk, I would also like to congratulate you on your
recent appointment as chair of the Pandemic Response
Accountability Committee, effective March 1. I am confident
that you will continue to shine a spotlight on the pandemic-era
relief programs, and work across the investigative community to
recover funds and bring fraudsters to justice.
Next, Mr. Ken Dieffenbach. Mr. Dieffenbach serves as the
third executive director of the Pandemic Response
Accountability Committee, or PRAC, and brings over 28 years of
experience in the oversight community. As executive director,
Mr. Dieffenbach leads the PRAC's efforts to support and
coordinate oversight of the pandemic response, enhance
transparency, and use data to detect fraud, waste, and abuse.
Mr. Dieffenbach earned his bachelor's degree in business from
the Citadel and a graduate degree in criminal justice from the
University of Alabama at Birmingham. Thank you again.
Briefly, I'd like to take a moment to explain our lighting
system to our witnesses. There are three lights in front of
you. Green means go, yellow means you need to wrap it up pretty
quick, and red means to conclude your remarks.
I ask unanimous consent that the witness's full statements
be included in the record, and without objection, so ordered.
As your written testimony has been made part of the record, the
committee asks that you limit your oral remarks to 5 minutes.
And with that, Mr. Kirk, you are recognized for 5 minutes
for your testimony.
STATEMENT OF MR. WILLIAM ``BILL'' KIRK, INSPECTOR GENERAL, U.S.
SMALL BUSINESS ADMINISTRATION WASHINGTON, D.C.
Mr. Kirk. Thank you, Chair Ernst, Ranking Member Markey,
and distinguished members of the committee. Thank you for the
opportunity to appear before you today. It is a great honor to
represent the Office of Inspector General at the U.S. Small
Business Administration and the dedicated auditors, sworn law
enforcement investigators, analysts, and support professionals
who work every day to protect taxpayer dollars and promote
integrity across SBAs programs.
The SBA OIG operates independently under the Inspector
General Act of 1978. Our mandate is straightforward, but
consequential; we conduct objective oversight, grounded in
evidence to detect and deter fraud, waste, and abuse, and to
strengthen SBA program integrity through actionable
recommendations and transparent reporting.
While the acute economic phase of the COVID-19 pandemic has
passed, oversight has not oversight, the scale and speed of
SBAs pandemic response was unprecedented. To avert an economic
crisis caused by lockdowns, business closures, and other
impediments, SBA dispersed approximately $1.2 trillion in
pandemic economic assistance.
The response delivered critical relief to millions of
legitimate small businesses, but it also created opportunities
for fraudsters to exploit internal control vulnerabilities.
Fraudsters stole identity information, created synthetic
identities, duplicated information to exploit programs, all
this to exploit to--they exploited programs meant to help those
in need.
Today I'm going to focus on three areas central to the
committee's oversight responsibilities. First, the systemic
risks within the 8(a) Business Development Program and the
importance of eligibility oversight. Secondly, the
underperformance in post-award monitoring within the Restaurant
Revitalization Fund, also known as RRF, and the Shuttered Venue
Operators Grant, known as SVOG, or SVOG awards, and the
recovery of funds that were improperly or fraudulently
dispersed. Third, the necessity of extending the statute of
limitations to 10 years for RRF and SVOG fraud, which would
match the statute enacted for the Paycheck Protection Program,
PPP, and COVID-19 Economic Injury Disaster Loan, or idle fraud.
These issues are interconnected. They all reflect the same
underlying principle; when program eligibility is not
rigorously verified, when red flags are not fully resolved, or
when enforcement timelines are misaligned with investigative
realities, the American taxpayer bears the risk.
Our office has continued to identify indicators of
potential ineligibility, unresolved fraud flags, and delayed
recovery actions in certain pandemic programs. At the same
time, we have seen the benefits of strength and controls,
improved inter-agency data-sharing, and enhanced investigative
coordination through partnerships such as with the Pandemic
Response Accountability Committee, known as the PRAC. Oversight
is not about revisiting the urgency of 2020. Rather, it is
about ensuring that the structural lessons from that period
translate into stronger controls today and in the future.
Under my leadership, SBA OIG will continue to exercise
independent judgment, pursue complex fraud investigations,
wherever the evidence leads us, we'll issue recommendations to
strengthen internal controls, and we pledge to keep this
committee fully informed of risks, corrective actions, and
measurable outcomes. The work before us requires persistence,
sufficient time to investigate potential fraud, and a sustained
commitment to integrity.
I appreciate the committee's engagement on these matters,
and I look forward to discussing them in greater detail. Thank
you very much.
[The prepared statement of Mr. Kirk follows.]
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Chair. Thank you very much. Mr. Dieffenbach, you're
recognized for 5 minutes for your testimony.
STATEMENT OF MR. KENNETH DIEFFENBACH, EXECUTIVE DIRECTOR,
PANDEMIC RESPONSE ACCOUNTABILITY COMMITTEE (PRAC) WASHINGTON,
D.C.
Mr. Dieffenbach. Thank you. Chair Ernst, Ranking Member
Markey, members of the committee, it is an honor to be here
today to discuss the Pandemic Response Accountability
Committee, or PRAC, and our work to investigate fraud and
improve fraud prevention across Federal programs, including
funds intended to help small businesses.
PRAC's success would not be possible without strong
partnerships like the one we have with the Small Business
Administration, OIG. Thanks to Congress, the One Big Beautiful
Bill Act extended the PRAC and its data analytics capability
until 2034, provided $88 million in funding and expanded our
jurisdiction to programs funded in the law. Operating an annual
budget of approximately 18.5 and a half million dollars, to
date, the PRAC has helped recover well over $500 million for
the taxpayer.
As executive director of the PRAC, an entity Congress
created to oversee over $5 trillion in relief funding, I work
with a phenomenal team that is leveraging artificial
intelligence to collect, organize, and analyze data to rapidly
provide insights into fraud risks. This proactive approach is
clearly needed so that fraud is prevented before funds are
dispersed. This past summer, the PRAC issued two fraud alerts
that identified over $79 billion in potential fraud that could
have been prevented with pre-award vetting and cross-agency
coordination.
To address these issues, the PRAC is developing an
artificial intelligence enabled fraud prevention engine,
trained on 5 million pandemic applications and other data, the
tool can quickly identify anomalies, trends, patterns, and
hidden connections in applications before payment. Our access
to law enforcement sensitive and other unique data, over 119
million applications for pandemic aid and over 127,000 known or
suspected pandemic fraud cases can reveal powerful new insights
and serve as an early warning system of organized, often
transnational, criminal conspiracies and other emerging
threats.
Had our fraud prevention engine been in existence in March
of 2020, pre-award vetting would've flagged at least tens of
billions of dollars in fraudulent claims for further scrutiny,
allowing agencies again to prevent fraud. One of the many
lessons of the pandemic is that fraudsters rarely target just
one government program, they exploit vulnerabilities wherever
they exist. This is why the PRAC uniquely focuses on cross
program and cross agency risks. For example, in one project we
found over 40,000 instances where the same person appears to
have reported a low income to obtain housing benefits and also
a high income to obtain small business administration benefits.
These anomalies indicate potential fraud in more than $860
million in PPP loans, and they were likely caused by identity
theft or other types of fraud schemes in one or both of the
programs. Now, most importantly, it also means that legitimate
beneficiaries likely lost out on benefits that they needed and
deserved to have.
The PRAC also works across--works with OIGs to develop
analytics tools that provide new insights and prove
effectiveness of oversight. For example, we recently developed
a risk dashboard for the Pension Benefit Guarantee Corporation
OIG, that to date has contributed to them recovering over $260
million. And we just launched a similar dashboard for the
Federal Communications Commission OIG, which aggregates data
related to $11 billion in disbursements to 14,000 entities that
will allow them to provide more effective oversight.
The PRAC also provides investigative support to more than
50 law enforcement partners related to 1200 investigations with
24,000 subjects and well over the $2.4 billion, Chair, that you
referenced in your opening statement. In one of the tens of
thousands of pandemic fraud cases, we identified one PPP scheme
involving more than 450 applications from over 100 individuals
across 24 states. This is but one example where the proactive
use of data and technology could have prevented or aided in the
early detection of a scheme, mitigated the need for a resource
intensive investigation and prosecution, and helped ensure
taxpayer dollars went to the intended recipients and not the
fraudsters. Every dollar that goes to a fraudster does not go
to the recipients that Congress intended the programs to help
including small businesses, the unemployed, and veterans.
With the support of Congress, we'll continue our work on
behalf of the taxpayers to investigate fraud and demonstrate
the value and effectiveness of fraud prevention. Thank you
again for the opportunity to be here today and for your
continued support of the PRAC, the IG community, and
independent oversight. This concludes my prepared remarks. I
look forward to answering your questions.
[The prepared statement of Mr. Dieffenbach follows.]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chair. Thank you very much to our witnesses. And now, we
will move into the question, answer session and I will
recognize myself for 5 minutes.
So, Mr. Kirk, we'll start with you. Reports from your
office state SBA identified $544 million in potential improper
payments in the SVOG or SVOG program and $522 million in the
RRF program. Yet not one recipient had been referred to
Treasury for recovery. Not one. This is actually pretty
appalling. Your testimony also identifies more than $9.5
billion of RRF awards in need of review.
Given the scope of potential fraud across the two programs,
will you be able to investigate all credible leads before the
statutes of limitations expire in April for the SVOG program
and May for the RRF program?
Mr. Kirk. Thank you, Senator, for the question. There is no
possible way that our office would be able to investigate all
of the outstanding referrals and cases that we have received in
the SVOG and the RRF program. I will acknowledge that the work
of the SBA OIG to this point in the RRF and SVOIG
investigations has been underwhelming, quite honestly. There's
lots more work we can do.
I can only say that that was probably as a result of
resource allocation on other programs. The investigators and
auditors have done tremendous work, but the scope of the work
is such that we would need much more time, which is why I'm
strongly supportive of the idea of extending the statute of
limitations to allow for more time to investigate and resolve
and return money to the Federal Fed.
Chair. No, I really appreciate that. And does that mean
that the ongoing investigations as well would time out?
Mr. Kirk. I believe so. I believe that the handful of
investigations, quite honestly, it's an embarrassing number of
investigations that we currently have underway, those would
probably time out as well if we could not bring them to
prosecution.
Chair. Yeah. So, even though you've invested time and
resources through the department they could not continue if the
statute of limitations runs out for the programs.
Mr. Kirk. Indeed, it's my understanding that that work
would be for nought.
Chair. Okay. Which is exactly why we do need to extend the
statute of limitations. So, thank you. Mr. Dieffenbach, the
PRAC has produced over $57 billion in monetary findings and
over 1200 indictments resulting in over 450 convictions. Is it
safe to say you are aware of the time and energy it takes to
investigate pandemic fraud?
Mr. Dieffenbach. Yes. Very safe to say. I spent the bulk of
my 29-year career doing fraud and public corruption
investigations in the OIG world, and it takes time to identify
the bad actors, track them down, and to do the necessary work
to, to serve the purpose of justice. Yes.
Chair. So, if Congress extends the statutes of limitations
by an additional 5 years, how much additional SVOG and RRF
fraud do you realistically believe could still be uncovered and
prosecuted?
Mr. Dieffenbach. So, Chair, I can't provide you a numerical
estimate for that, again, because there's so many factors
involved, but I can assure you that with additional time, we'll
identify more bad actors and more losses and, and lead to more
convictions and more arrests. Yes.
Chair. Okay. Thank you. And maybe for both of you in, in
the remaining time that I have, the Biden administration chose
automatic forgiveness for paycheck protection program loans
under $150,000, effectively waiving through potential fraud.
What front-end control should have been mandatory before
forgiveness was granted? And, and if we could start with you
General Kirk.
Mr. Kirk. Sure. Thank you, Senator. First off, the, the
front-end control that would've certainly avoided many problems
would be the avoidance of the use of self-certification of
eligibility. That's a real problem. There are ways to
crosscheck that self-certification, but certainly self-
certification is problematic. I would defer to my colleague if
there are others that he's aware of.
Chair. Great. Thank you. Yes.
Mr. Dieffenbach. Sure. So, the PRAC has done a tremendous
body of work in lessons learned, and we've produced a program--
a blueprint for program integrity, it includes program
certification. The biggest point I'd make to you is that
agencies own this risk and they have to do risk assessments,
and they have to identify how are we verifying eligibility,
what are the terms and conditions of the award, what is the law
as laid out by Congress, and how are we ensuring that we're
mitigating a broad range of risk?
And every program has different risk, overlapping risk, but
first and foremost, agencies have to pay attention and devote
resources to those activities.
Chair. Okay. Thank you. Now I recognize Ranking Member
Markey.
Senator Markey. Thank you, Madam Chair, very much. The
questions that I'm going to begin with refer to the Paycheck--
the Paycheck Protection Program, or PPP, and the Economic
Injury Disaster Loan Program or EIDL, which helped save
millions of businesses during the pandemic. The SBA and
Congress should be learning from our experiences to improve
programs, keep fraudsters out, and target help to deserving
small businesses.
However, Republicans seem more intent on blaming the Biden
administration than anything else. 2023 SBA report found that
86 percent of the fraudulent loans came under Trump during the
first 9 months of the first pandemic relief programs. So, Mr.
Kirk, your office's own 2023 report on pandemic fraud states
that many of the SBA's improvements to stem fraud, ``Were made
after much of the damage had already been done,'' and that
fraudsters, egregiously exploited SBAs weakened controls during
the first year of the program, meaning during the Trump
administration. So, Mr. Kirk, when were most PPP and EIDL loans
made?
Mr. Kirk. Thank you, ranking member, for the question. I
appreciate it. As you described, the vast majority of the loans
were made in the year 2020 and 2021. So, they were in that
timeframe, that's when the pandemic occurred. So, the relief
that the country needed was at that time in those--that's when
the loans----
Senator Markey. So, 93 percent----
Mr. Kirk. Yes.
Senator Markey [continuing]. Of the EIDL grants were made
in 2020 when President Trump was in office. Mr. Kirk, do you
agree with your predecessor's finding that the vast majority of
fraudulent PPP and EIDL loans were made during the first Trump
administration? It seems that you do. Mr. Kirk and Mr.
Dieffenbach--excuse me?
Mr. Kirk. No, I was going to say that that was the time
place--time when the pandemic occurred, it was in 2020, and the
economic relief that the country needed was at that time. So,
that's when the loans were disbursed.
Senator Markey. And I think I heard you say, Mr.
Dieffenbach, that if pre-award vetting had been in place in
2020, we would've saved tens of billions of dollars. Is that
what you said? Correct.
Mr. Dieffenbach. Correct, Ranking Member Markey. Had we had
the data systems, the authorities' jurisdiction in place, we
certainly could have identified significant amounts of
potential fraud for which the proper due diligence could have
been accomplished before the money went out the door.
Senator Markey. Right. So, back in 2020, if we had put
those programs in place, we wouldn't be chasing fraud. We
would've prevented the fraud in the first place?
Mr. Dieffenbach. Correct.
Senator Markey. Right. Thank you. So, do you agree with
that, Mr. Kirk?
Mr. Kirk. Thank you, Senator. Yeah, I agree that had
different measures been taken, I think you learn an awful lot
in hindsight. But because the pandemic was raging at that time
and there was a strong desire, a bipartisan desire to try to
save the economy, that's when those loans were made.
Senator Markey. And what programs should the Trump
administration have put in place? Because as you're saying, you
live life forwards, but you understand it backwards. So, what
programs should have been in place in order to prevent against
faulty implementation of those laws?
Mr. Kirk. I'm sorry. I'm not--what, the program, the
pandemic, the people----
Senator Markey. You agree with Mr. Dieffenbach that we
should have had those checks in right from the get go. You do
agree with that?
Mr. Dieffenbach. The protocols in place to prevent.
Mr. Kirk. It would--again, hindsight is wonderful. I think
there were significant controls put in place, but the frauds
were very capable, and they were able to get by some of them.
As I said, I think there was bipartisan interest in rescuing
the economy from the ravages of the pandemic. And so, the loans
and grants that were made were intended to save the economy.
Obviously, in hindsight, we can----
Senator Markey. I'm just trying to get the timeline down--
--
Mr. Kirk. Sure.
Senator Markey [continuing]. In terms of when that fraud,
you know, began.
Mr. Kirk. The fraud has continued in the past 5 years as
well----
Senator Markey. I appreciate that. But as we just heard
earlier, if the safeguards were in place initially, we would've
saved tens of billions of dollars. And that's just the
testimony that we received. And just a few weeks ago, the New
York Times reported about a huckster who had been convicted of
peddling bogus energy drinks in 2019, but was then pardoned
with the help of one of President Trump's former lawyers as he
concluded his first term in 2021. And just last year, that same
huckster was convicted again of another fraud scheme that cost
victims millions of dollars. So, what did the President do? He
granted another pardon to that same huckster.
So, Mr. Dieffenbach, as someone who has devoted nearly
three decades of your life to fighting fraud, how does it feel
to see convicted fraudsters let off the hook not once, but
twice, because they happen to have a line into the President?
Mr. Dieffenbach. So, Ranking Member Markey, I'm not
familiar with that matter at all. But I can look into it if the
law is followed throughout then it's followed throughout. I
don't--I don't know the facts.
Senator Markey. Okay. Thank you. Thank you, Madam Chair.
Chair. This might be an instance where both Ranking Member
Markey and I agree that if we had had the proper protocols in
place for that very bipartisan bill the Paycheck Protection
Program and EIDL, that we probably would've saved a lot of--a
lot of taxpayer money, and we wouldn't be in this situation
today. But I would remind everybody, probably everybody on this
committee voted in favor of those programs because we did want
to save our small businesses back home.
But, you know, if we had instituted DOGE, Department of
Government Efficiency at that time, we probably would've had
the proper protocols in place. So, next, we have Senator
Hawley. You are recognized for 5 minutes.
Senator Hawley. Thank you, Madam Chair. Thanks to the
witnesses for being here.
Mr. Kirk, if I could just start with you, help me
understand the scope of what you're looking at with the
Restaurant Revitalization Fund and the Shuttered Venue
Operators Act. These are the programs you've identified that
are currently under shorter statutory limitations that you
think that we need to adjust. And partly that's because as you
outline in your written testimony, there is a good deal of
potential fraud here that it sounds like to me your office and
others are currently running down. Is that fair to say?
Mr. Kirk. That is correct, Senator. Thank you for the
question. Yes, we're running it down. I will acknowledge that
I've only been in place 7 weeks or so. I have learned that
really there's been an inadequate attention paid to
investigating RRF and SVOG fraud. We can do much better. I
commit to you we will do much better. We have only a handful of
investigations underway. To me it's an absolute priority, but
it will be critically important for us to have an extension of
the statute of limitations to be able to continue those
investigations.
Senator Hawley. And you say only a handful of
investigations have been performed or are currently underway,
but it sounds like on the basis of your written remarks, that
the potential fraud in the Restaurant Revitalization Program's
quite large. Is that fair to say?
Mr. Kirk. Yes, Senator. There's potential fraud in the
billions of dollars.
Senator Hawley. Billions with a B?
Mr. Kirk. Yeah.
Senator Hawley. That's incredible. I'm reading from your
written testimony, you say, OIG in one review identified 33,168
restaurant revitalization recipients, who had also received PPP
loans that have been marked as potentially fraudulent or
ineligible. These recipients received nearly not quite $11
billion in RRF funds. And you go on to outline that a bare
minimum of these, a tiny percentage have had any kind of
substantive review. It sounds like there's a lot to be done
here.
Mr. Kirk. We have our work cut out for us, and we will make
good use of the additional time in the statute of limitations.
Indeed, there is a tremendous amount of fraud that has been
uncovered, identified potential fraud. Not all of it has been
proven. Obviously, we have work to do to ensure that fraudsters
are brought to justice, but it is billions of dollars, Senator.
Senator Hawley. You say that your recommendation called for
review of more than 61,000 RRF awards totaling almost $10
billion.
Mr. Kirk. That's correct.
Senator Hawley. That's quite substantial. Why is it that
there's been so little investigation done before now? Do you
have a sense of that?
Mr. Kirk. Thank you, Senator. The magnitude of work
available to us to do is significant. I have come to know that
the investigators and auditors that are in the SBA OIG right
now are really dedicated professionals. I believe that they
were performing their duties in other areas. The pandemic and
EIDL fraud is significant. We have so much work to do. Having
said that, we can't ignore one area of fraud just because we've
got fraud in others. We are going to attack this fraud. We're
going to do it diligently. I'm really honored to be named to
the Pandemic Recovery Accountability Committee because I
selfishly will look forward to using the PRAC to be able to
identify more of the fraud.
For example, it would be impossible for our staff to review
manually 61,000 loans. But with the data analytical capability
of the PRAC, we'll be able to do a much better job of that and
return far more money to the--to the taxpayer. We need that
time, though. We need the extension of the statute of
limitations to undertake that work.
Senator Hawley. And remind us when it runs out one more
time, Mr. Kirk. When does the statute----
Mr. Kirk. Current, some of them as early as March or April.
Senator Hawley. Very, very soon.
Mr. Kirk. It's very soon.
Senator Hawley. We need to act immediately.
Mr. Kirk. Yes, sir.
Senator Hawley. I'm glad that you're making this a top
priority. Obviously, we've seen in recent weeks, I think just
the scope of the pandemic era of fraud that has continued into
the present. I had testimony at another committee, one expert
suggested that we could be looking at as much as a trillion
dollars in fraud every year. Not all of that pandemic fraud, of
course, but that's an astounding, astounding number. I think
the American people are astounded and also sickened by the fact
that their tax dollars are being used to fund fraudsters buy
private planes, luxury yachts.
In one case there were 12,000 pounds of $100 bills smuggled
out of suitcases in the city of Minneapolis. I mean, this is
outrageous stuff. Any dollar of fraud is outrageous. But the
scale that you're talking about here is truly alarming. What's
the first order business for you? We get this statute extended,
which is what we've got to do, what's the next order of
business for you in terms of tackling this?
Mr. Kirk. Oh, thank you, Senator. As I mentioned to our
staff, our focus is fraud, fraud, fraud. I mean, there's three
things we're concentrating on. We need to dedicate our
investigative capabilities to identify the fraud, to return the
dollars to the--to the taxpayer. The first priority really is
to leverage data analytics, because when you're talking about
billions, even trillions of dollars and hundreds of thousands
of loans, it's simply not possible to do manual reviews in
these cases. We have to use data analytics. We have--the
fraudsters are taking advantage of the technology. We need to
be able to do so as well.
Senator Hawley. Very good. Well, I hope that we can get the
statute of limitations extended so you'll be able to do your
work. Thank you for the terrific work you're doing, both of
you.
Mr. Kirk. Thank you.
Senator Hawley. Thank you, Madam Chair.
Chair. Thank you, Senator Hawley. Next, Senator Shaheen. 5
minutes.
Senator Shaheen. Thank you, Madam Chair, and thank you both
for being here and for the work that you're doing. I appreciate
what the chairwoman said about the importance of the programs
and what you said Mr. Kirk, about the fact that when those
programs were designed, and as somebody on this committee who
helped design the PPP program, there was real urgency about
getting that done, about trying to save the small businesses
that were going under and the economy, and a recognition that
fraud needed to be addressed. But it was secondary to ensuring
that businesses were able to continue to operate.
So, Mr. Dieffenbach, can you talk about how long it is
taking to develop those pre fraud measures that you mentioned?
Mr. Dieffenbach. I'm sorry, the pre fraud measures?
Senator Shaheen. Yeah. What you're talking about.
Mr. Dieffenbach. The pre award vetting?
Senator Shaheen. Yeah.
Mr. Dieffenbach. Yes, ma'am. So, thank you for the--for the
question, Senator. We have developed, again, a artificial
intelligence enabled system that can very rapidly identify----
Senator Shaheen. And how long?
Mr. Dieffenbach [continuing]. Patterns, trends, anomalies.
We can--we can review once the system is set up----
Senator Shaheen. How long did it take you to develop?
Mr. Dieffenbach. To develop it? We've developed it over the
last 6 to 7 months.
Senator Shaheen. Okay. So, having that kind of a system in
place before the program was done was probably unlikely given
the urgency about getting----
Mr. Dieffenbach. From March of 2020, correct.
Senator Shaheen. Correct. Okay. I just wanted to be clear
as we're looking at timeframe here. And one of the things that
you said was that we can't ignore--maybe it was you, Mr. Kirk--
we can't ignore one area of fraud because of fraud in other
areas. And Senator Ernst mentioned the DOGE work.
Last year we saw reports that DOGE had accessed SBA systems
that had sensitive information about people and businesses. We
requested a review of what they accessed and whether there was
any misuse of personal information. Mr. Kirk, have you looked
into what DOGE accessed and whether there was any tampering
with the information at SBA?
Mr. Kirk. Thank you, Senator for the question. I've just
been in place about 7 weeks. And in that time, I have not
conducted any review of DOGE. If I may say though, I was--at
the time I was a career employee in the Federal government over
at the Department of Education. And when I worked with DOGE
employees, we understood them to be government employees.
Certainly, they were from the Department of Government
Efficiency, I guess the name was, but they were government
employees that were vetted and reviewed by the HR processes and
procedures.
Senator Shaheen. But in fact, they weren't.
Mr. Kirk. I can't speak to that. I don't know. But the
folks that I worked with were as I understood them to be,
members of the Federal service.
Senator Shaheen. Is this something you're concerned about
looking at SBA?
Mr. Kirk. Not currently. No, ma'am.
Senator Shaheen. I would hope that you would do that. And
in fact, when this was happening, we requested on the committee
a briefing that I think both Senators Ernst and Markey said
they would try and make sure we received. And yet, we haven't
gotten a briefing yet, so.
Mr. Kirk. Thank you, Senator. I would be happy to work with
your staff to see if there is additional work that we can
assist you in trying to understand that.
Senator Shaheen. That'd be great. I appreciate that. One of
my next question is also about SBA and how it operates, because
one of SBAs programs is the State Trade Expansion Program. It
helps small businesses that are exporting, it helps them to
grow their business. I think that's something that this
administration is also very interested in. And Congress
provided $20 million for STEP in fiscal year 2025 funding last
March.
But despite SBA putting out a notice of funding
opportunities last May, they have yet to announce any awards
from STEP. So, I would hope Mr. Kirk is your looking into the
integrity of SBA and how it operates, that you would also look
into why SBA is not getting out the funding that Congress has
provided to ensure that those programs that are so critical to
our small businesses are actually being funded. Will you commit
to looking into what's going on and why the STEP program is not
funded?
Mr. Kirk. Thank you, Senator. It appears to me that you
might be making a referral to an impoundment issue. And if so,
that's a matter that falls under the Impoundment Control Act.
That's a matter for the GAO to do that.
Senator Shaheen. Well, I don't know that.
Mr. Kirk. Perhaps not, but I'd be happy to try to research
that more and understand if that's what you're referring to.
Senator Shaheen. Because there are also several other
programs, the Women's Business Centers and SCORE, where
Congress has funded them, but the money hasn't actually gone
out from SBA. So, I assume in your position, you can check on
that and see if SBA is actually funding the programs that
Congress determined it should fund.
Mr. Kirk. I'll certainly be happy to work with my staff to
try to get answers to those questions for you.
Senator Shaheen. Thank you. Madam Chair, I hope that we can
follow up and make sure that we have those answers.
Chair. Yes, absolutely. Happy to work with you on that.
Senator Shaheen. Thank you.
Chair. Yes. And Senator Hirono, you're recognized for 5
minutes.
Senator Hirono. Thank you, Madam Chair. Mr. Kirk, in your
testimony, you discussed the need to investigate fraud in the
8(a) Program, and I agree in fact, we should go after fraud by
anyone and in all programs. So, there you go. We agree on that.
And we should investigate fraud again in all programs,
including the 8(a), but to allege widespread fraud in this
program, which involves--how many people are--how many
companies, entities are in the 8(a) Program?
Mr. Kirk. Gosh, I apologize, Senator. I don't have that.
Senator Hirono. Thousands, thousands.
Mr. Kirk. It is thousands. Indeed, I can assure you.
Senator Hirono. And these are small businesses, and we have
decided in this committee that we should be supportive of small
businesses----
Mr. Kirk. Absolutely.
Senator Hirono [continuing]. And to work with them. But to
come into the questions relating to this 8(a) Program as with
the idea that there's massive fraud that is--that is
inappropriate. So, I just want to get your commitment that in
your review of the 8(a) Program that you maintain your
independence from those within the administration, including
the SBA leadership that considers the 8(a) Program to be a
fraud magnet. But you would be independent in your assessment
of whether or not there is fraud in the 8(a) Program.
Mr. Kirk. Thank you, Senator, for the question. I can
absolutely assure you. I swore an oath to uphold the law, to
act impartially, to act without regard to political
partisanship independently and objectively. That's an oath I
take very seriously.
Senator Hirono. I'm glad that you're reiterating once
again, that the IG is really critical that you be independent.
And I have the questions that I asked you during your
confirmation hearing.
Mr. Kirk. Yes, ma'am.
Senator Hirono. Now, one question I did ask you was whether
the rule of law applied to the President of the United States,
and you didn't answer that directly. I'm going to give you
another chance to answer that question.
Mr. Kirk. Sure, Senator. I'm happy to acknowledge that the
rule of law applies to all citizens, all people in the United
States, including the President of the United States.
Senator Hirono. Do you know that the President said that
the rule of law doesn't--he doesn't think the rule of law
applies to him?
Mr. Kirk. I'm not aware of that statement.
Senator Hirono. What if I were to tell you that that is his
view of the rule of law as applying to him? He doesn't think
the rule of law applies to him. He thinks that the Supreme
Court has given him pretty much immunity from--although that
that decision was based on any criminal doings, I think he
certainly applies it to the civil situation.
So, I have some concerns about your independence. I'm glad
that you continue to affirm that you're going to be
independent. Now, on the question of Planned Parenthood receipt
of PPP funds, once again I believe that you're bringing up
whether or not, or the SBA is bringing up whether or not the
Planned Parenthood should have gotten this money. And your
predecessor IG has said that it was done appropriately.
Do you have any reason to suspect or disagree with your
predecessor's assessment of whether Planned Parenthood had
committed fraud?
Mr. Kirk. Thank you, Senator. My understanding is that the
SBA is conducting a review of the eligibility of many
institutions and entities, including that one.
Senator Hirono. No, but your predecessor had already said
that Planned Parenthood had complied with the requirements.
Mr. Kirk. Thank you, Senator. I'm actually quite pleased
that the agency is continuing to conduct reviews in all areas
because the job of tackling fraud is shared between the agency
and the IG.
Senator Hirono. Well, the thing is----
Mr. Kirk. This administration has made--the agency has made
really very significant efforts, since the beginning of last
year to----
Senator Hirono. Hold on. I'm reclaiming my time. So, that's
great that, you know, the agency is being very objective and
all of that. But this regime is not objective when it comes to
the funding of Planned Parenthood. And in fact, it continues to
beat the drum that somehow Planned Parenthood committed fraud,
or that it was inappropriate. Now, your predecessor IG has
already reviewed--I mean, you must have enough other things to
look at regarding fraud, but you're going to once again, pursue
fraud with regard to PPP.
So, my question to you is, do you not accept your
predecessor IGs report, the assessment----
Mr. Kirk. Thank you, Senator.
Senator Hirono [continuing]. That Planned Parenthood had
not committed fraud?
Mr. Kirk. I understand the question.
Senator Hirono. Yes or no?
Mr. Kirk. The SBA is conducting a new review, reviewing the
eligibility of the affiliates, as I understand it. I am not
involved in that review. Our office is not involved in that
review. If they make referrals to the Inspector General's
office, it is our responsibility under the law, and we abide by
the law in all cases to investigate those matters.
Senator Hirono. Well, I have to tell you that this is very
politically motivated, as you can imagine. And you must be
aware that this regime--I call it a regime because of its
authoritarianism--that this is a regime that has been calling
to question funding for Planned Parenthood in many different
ways, and certainly in this instance, you must be aware of
that. So, I'm just saying this is yet another instance of
politically motivated investigations. Thank you, Madam Chair.
Chair. Thank you, Senator Hirono. And I, for one, have
called for additional information regarding those programs and
the allocations that went out to Planned Parenthood, because I
did not believe that they fit with the original congressional
intent of the package that we passed out of this Small Business
Committee. So, I would applaud the Inspector General's efforts
on reviewing that matter. Senator Young.
Senator Young. Well, thank you, Madam Chair. And I want to
thank our witnesses for being here today. Mr. Dieffenbach, I'd
like to start by discussing the AI enabled fraud prevention
engine that was developed by the Pandemic Response
Accountability Committee that you highlighted in your written
testimony. You noted that the tool can review approximately
20,000 applications per second before the funds are dispersed,
and this would dramatically increase the government's ability
to detect anomalies and potential fraud in real time.
Given those capabilities, what specific action should
Congress consider to ensure agencies are fully leveraging AI
driven fraud prevention tools at the front-end, rather than
relying on a costly pay-and-chase model after funds go out the
door?
Mr. Dieffenbach. Thank you, Senator Young. Indeed, we have
built a very powerful tool. To what Congress can do to help
enhance fraud prevention, I think first and foremost, it's
ensuring the right incentives are in place, and that agency
officials are taking their primary responsibility of preventing
detecting fraud as they should. Inspector General Kirk and the
rest of the inspectors general are here as kind of a secondary
backup and an oversight mechanism. But the first and primary
role of agency officials is to properly design programs, assess
risk, and allocate proper resources to it.
So, in my estimation, the more Congress pays attention to
their ownership of that risk, the more they will pay attention
to it, and the more they will seek assistance from the PRAC and
from inspectors general and follow recommendations so they can
have impactful prevention activities.
Senator Young. Okay. Well, Congress will be--at least this
member of Congress will be attentive to those issues. I know
fraud throughout government programs is especially concerning
to my constituents. Are there any statutory data sharing or
other barriers that to your mind today prevent wider adoption
of the AI tools you referenced across Federal programs?
Mr. Dieffenbach. Sure. The biggest one that comes to mind
is our jurisdiction of the PRAC is currently limited to
pandemic programs and to programs funded in the One Big
Beautiful Bill Act, which is an expansion we received last
summer we're grateful for. But the greater jurisdiction that we
have at the PRAC, the greater we can identify trends,
anomalies, patterns, and hidden connections across all
government programs.
As I said in my opening statement, most fraudsters don't
just defraud one government program. They go to the ones that
are the weakest. We have an ongoing case now that involves
frauds in 24 different states. The Department of Labor IG has
identified one social security number that was used in 40
different states to obtain unemployment insurance benefits. So,
expanding our jurisdiction, giving us the ability to
responsibly look at a wider set of data, will give better
visibility into these emerging trends and these organized
groups to be more----
Senator Young. So, you would need statutory direction, is
that accurate? Or would some other sort of direction suffice in
order to broaden the scope of your current authorities or
responsibilities to encompass non pandemic response programs
that may be rife with or certainly you know, characterized by
fraud?
Mr. Dieffenbach. So, as I outlined in my written statement,
our jurisdiction is currently limited, so we would need
statutory authorization to look at a broader array of programs,
which would allow us to collect more data to be more effective.
Senator Young. Short of that, would it be allowable for
members of your staff, perhaps you individually, to visit with
me, any members of the Small Business Committee that would like
to join and talk more generally about how lessons you've
learned might be applied to other areas or tools you've
developed?
Mr. Dieffenbach. Yes, Senator. I would welcome that
opportunity. I spent almost my entire 28-year Federal career as
a Federal law enforcement investigating corruption and fraud. I
can talk fraud risks with you all day long, which is the first
step in the process. But happy to talk anytime.
Senator Young. Here, today, I resolve to work with you and
members of your team and have my office do so, and we will ask
if other colleagues on the committee would like to also be
supportive of cracking down on indefensible fraud.
Mr. Dieffenbach. Anytime, sir.
Senator Young. All right. And I see for the record, Senator
Rosen, her face lit up. So, perhaps we can work together on
this. Mr. Kirk.
Mr. Kirk. Yes, sir.
Senator Young. You've highlighted in your written testimony
the recent steps the Small Business Administration has taken to
strengthen program integrity. I regret that we're sort of
running towards the end of our time, but I'll just ask you one
threshold sort of question here. How's the SBA integrating AI
machine learning or advanced data analytics into its fraud
detection and application review processes today?
Mr. Kirk. Thank you, Senator. I know it is a priority of
theirs. I have had several meetings already with the chief
technology officer there, and I look forward to continuing
those. It's really imperative. What we have to do is, as we
integrate AI and data analytics, we have to make sure it's done
safely, in a way that protects data, in a way that doesn't
create new problems, as such as we're created with pandemic
program, when steps were put into place that had a tail to
them. So, I am, I know they are committed.
I am very committed to using technology because as Senator
Ernst referred to, as Senator Markey referred to, we're talking
about hundreds of thousands of loans, and there's no way to
manually review these, that we have to use the data analytic
tools that are available.
Senator Young. Well, thank you for your focus on this
important matter. Chair.
Chair. Great. Thank you, Senator Young. Next, we'll go to
Senator Rosen. Thank you.
Senator Rosen. Thank you, Madam Chair, Ranking Member
Markey, appreciate this. Data and analytics, you're talking my
language here. So, I want to thank Senator Young bringing this
up. I was going to ask this very same question. I agree that
early fraud protection through better technology, AI,
dashboards, and the like, it is really preferable to--we don't
want to pay them ahead of time and chase them down later. We
want to prevent them.
And so, I do agree with your quote that the proactive use
of data and technology could have prevented or aided in early
detection schemes. So, I want to work with you to continue to
use technology in smart ways to prevent fraud and join us on
that. What we need to do to learn with you on ways that we can
enhance your work. So, thank you for that.
And I want to say since I entered Congress, I've worked
really hard to fight wasteful spending, look after Nevadans'
hard-earned tax dollars, ensuring that waste is responsibly
minimized. Responsibly minimized, right? As fraud is prevented,
should always be a top priority. Tax dollars are precious. And
so, I do believe this effort, and again, I agree with my
colleagues that we must take the preventative approach. It's
always better prevention--what do they say? An ounce of
prevention versus a pound of cure, right?
And so, our goal should be to improve access to the support
and SBA programs that are intended to provide. There's a lot of
programs out there, not to create more barriers but to really
enable people to navigate the complex environment that exists
for I will say the people who aren't perpetrating fraud. The
rest--the majority of folks really want to do the right thing,
and they look forward and really dream about owning a small
business. And so, we should be focused on implementing
evidence-based reforms, identifying opportunities to improve
compliance, and ensuring that critical resources do remain
available for, look--99.2 percent of business owner of
businesses in Nevada are small business. These are people's
dreams, large and small. And we want them to use these
resources.
So, one opportunity to improve compliance exists in better
leveraging small business resource partners. You have an
extensive network of resource partners, like Small Business
Development Centers, Veterans Business Outreach Center--I was
glad to bring the first VBOCs, two of them to Nevada--Women's
Business Centers, they're all utilized extensively I know in
Nevada by our small businesses. And I believe that the reach of
these resources can be expanded to better help people who
really want to do the right thing and own their own business
and stay compliant with program requirements.
So, Mr. Kirk, how can the small business resource partners,
like the ones I've named and others aid in the goal of
educating business on compliance requirements? And what efforts
are you taking to have the reach of our resource partners
really get out there to the multitudes? Like I said, almost
300,000 small businesses in Nevada, so they know they're there.
They want to do the right thing, and they just need to be able
to get the resources to do it.
Mr. Kirk. Thank you, Senator for the question. I really
appreciate it because it allows me to talk about the other arm
of what we do in the Inspector General's office. We are
statutorily required to investigate and prevent and detect
waste, fraud, and abuse. But our other critically important
function is audit. And when we audit these programs, we can
identify ways where their reach can be expanded. These are
program responsibilities you're talking about, right? So, that
those questions are--some of them are best directed to the
administrator, but we are critically involved in auditing the
programs to ensure that their reach is what Congress intended.
There are so many programs available. I'm only now becoming
familiar with many of them. But our audit work is geared in
many cases to identify how those programs might be improved,
how the reach of the programs can be expanded.
Senator Rosen. Improved, for sure, because you can see the
roadblocks for people who are trying to get things done and
what are their obstacles to being compliant.
Mr. Kirk. Indeed.
Senator Rosen. Sometimes they're just not educated on what
they need.
Mr. Kirk. Indeed. And, you know, the problem, you know, the
pandemic relief was pushed out so quickly.
Senator Rosen. Yes.
Mr. Kirk. It would be nice if we could push out SBA
assistance program assistance as quickly, but we would do so at
the risk of greater fraud. So, I really am grateful for your
question because it allows me to talk to our audit folks about
really having them bear down on the issue of how can we ensure
that the program funding, the program availability, the
knowledge of how to use the programs is made available to the
36 million small businesses.
Senator Rosen. Right. Because some people are trying to
perpetrate fraud and others may just not understand----
Mr. Kirk. Absolutely.
Senator Rosen [continuing]. How to be stay in compliance if
they don't have--it's not a very large business.
Mr. Kirk. Indeed.
Senator Rosen. It could be just a mom and pop, a smaller
business that just doesn't have the resources. So, thank you
for that. And Madam Chair, I yield back.
Chair. Yes, thank you, Senator Rosen. And an excellent
point, because we do have a lot of small businesses that just
lack the ability to sort through some of the legalities.
Senator Rosen. They are trying to do the right thing but
they just don't have the resources. Maybe they're not sure how
to fill out paperwork.
Chair. Right. Exactly, exactly. Thank you for that line of
questioning. And now I'll recognize Ranking Member Markey.
Senator Markey. Thank you, Madam Chair. Mr. Dieffenbach,
you have been fighting government fraud for 28 years. You know
that fraud is not a problem that is unique to only red and only
blue states. Yet we've seen the SBA administrator take
selective actions against borrowers in Minnesota and
California. In fact, Administrator Loeffler went so far as to
pause annual grant funding to the state of Minnesota after
launching a probe into COVID-19 programs. I think the
administrator is actually using isolated incidents of fraud
from 6 years ago to deny law abiding small businesses in
Minnesota access to SBA programs today.
So, Mr. Dieffenbach, as head of the Pandemic Recovery
Accountability Committee, you have a comprehensive
understanding of the fraud landscape. Has the data given you
any indication that there was a correlation between whether
someone lives in a state that voted against Donald Trump or for
Donald Trump in terms of the likelihood that they committed
fraud?
Mr. Dieffenbach. Ranking Member Markey, fraud exists in any
program that gives away money. I have no data, no information
about the geographic disbursement or the voting piece that you
just discussed.
Senator Markey. Yeah. So, it's not red states and blue
states, it's all states?
Mr. Dieffenbach. I don't know. It is--it is distributed
across all states. Yes.
Senator Markey. Thank you. So, do you think that targeting
specific states for political reasons as the SBA has done is an
effective way to pursue recovery for the American taxpayers or
does the PRAC rely on more nuanced analytics yourself to
identify concentrations of fraud?
Mr. Dieffenbach. I don't have a comment on that except to
say that I have 3 billion data points, and every day I've got a
team that is looking for the patterns, trends, and anomalies of
the fraud where it may occur so we can pursue it and refer it
to the right inspectors general.
Senator Markey. Yeah. And I like that about you. You know,
you're like, Sergeant Joe Friday in Dragnet, it's nothing but
the facts, you know, and just follow the facts. It's not let's
just target the blue states, because obviously, you'll be
letting off most likely half of the culprits at that point,
because that's just the way fraud works.
So, Madam Chair, as you know, this committee passed the SBA
Fraud Enforcement Extension Vote Act by a voice vote this past
July, and I am committed to passing this legislation as part of
a comprehensive set of reforms and look forward to working with
the chair to advance it along with other bipartisan priorities.
And that said, our efforts to fight against fraud should not be
limited to going after small restaurants and theaters,
especially when President Trump is letting off fraudsters left
and right.
If we're going to combat fraud, let's look and see what
DOGE is doing with the social security numbers they illegally
harvested and take steps to make sure they're not doing the
same thing with small business data. So, I just want to be
consistent. Let's call out the fraud across the board,
including when it's committed by the President's allies, as
well as the President's opponents. So, let's not allow the
search for fraud to be used as a weapon to hurt people in blue
states. So, I'm committed to fighting fraud but we just have to
be consistent so that we call it out like you Mr. Dieffenbach
regardless of where we find it in the country.
So, with that, Madam Chair, I yield back.
Chair. Thank you. Thank you, Ranking Member Markey, and I
love that Sergeant Joe Friday, just the facts. And yes, I do
believe that if there is fraud out there, we need to call it
out. I don't care whether it is a blue state or a red state.
Unfortunately, we have seen a lot of fraud in Minnesota. So,
that's the state that does garner the most attention. So, I'll
just ask a brief question.
So, the SBA had announced that there was nearly 7,000
Minnesota borrowers linked to an estimated $400 million in
COVID relief loans. They are being suspended after massive
fraud rings were exposed throughout Minnesota. So, right now,
what we do know is that Governor Walz is now proposing new
forgivable loans, claiming businesses are being harmed by law
enforcement.
So, Mr. Kirk, maybe what warning, as we're wrapping this
up--what warning would you give to officials advocating for
broad new grant forgivable loan programs?
Mr. Kirk. Gosh, thank you, Senator, for the question. I
would suggest they consult with my colleague here and with me
and with others, inspectors general to try to put in place
methods in advance that would prevent fraud from occurring.
There's many steps that can be taken. They don't require all
that much effort. As I said, hindsight's 20/20. I hope that
folks that would do that would look to experts who can provide
information in that regard.
For example, self-certification, a real problem in these
matters. There's opportunities that exist to check the self-
certification that's being made. There's data tools out there
that are available, and the data tools are better now than they
were 6 years ago when the pandemic began, so.
Chair. Well, thank you. This has been a very good hearing,
and I appreciate it. And, ranking member, I absolutely agree,
let's go after the fraudsters. It doesn't matter, R, D, blue,
red, does not matter. Fraud is fraud.
So, again, I want to thank our witnesses for being here
with us today. I ask unanimous consent that the record of
today's hearing remain open for 2 weeks for members to submit
questions, revise and extend their remarks, and submit
additional information into the record.
And without objection, so ordered.
And with that, the Committee on Small Business and
Entrepreneurship stands adjourned. Thank you, Gentlemen.
[Whereupon, at 3:41 p.m., the hearing was adjourned.]
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