[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
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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
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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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