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	<title> - ROOTING OUT FRAUD IN SMALL-BUSINESS RELIEF PROGRAMS</title>
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	[House Hearing, 117 Congress]
	[From the U.S. Government Publishing Office]


	ROOTING OUT FRAUD IN
	SMALL-BUSINESS RELIEF PROGRAMS

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

	HEARING

	BEFORE THE

	SELECT SUBCOMMITTEE ON THE CORONAVIRUS CRISIS

	OF THE

	COMMITTEE ON OVERSIGHT AND REFORM

	HOUSE OF REPRESENTATIVES

	ONE HUNDRED SEVENTEENTH CONGRESS

	FIRST SESSION

	__________

	MARCH 25, 2021

	__________

	Serial No. 117-12

	__________

	Printed for the use of the Committee on Oversight and Reform

	[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


	Available on: www.govinfo.gov,
	oversight.house.gov or
	docs.house.gov

	__________


	U.S. GOVERNMENT PUBLISHING OFFICE
	43-986 PDF WASHINGTON : 2021

	--------------------------------------------------------------------------------------



	COMMITTEE ON OVERSIGHT AND REFORM

	CAROLYN B. MALONEY, New York, Chairwoman

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

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

	Contact Number: 202-225-5051

	Mark Marin, Minority Staff Director

	Select Subcommittee On The Coronavirus Crisis

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


	C O N T E N T S

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

	Witnesses

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

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

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

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

	Index of Documents

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


	ROOTING OUT FRAUD IN
	SMALL-BUSINESS RELIEF PROGRAMS

	----------


	Thursday, March 25, 2021

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

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

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

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

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

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

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

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

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