Skip to main content

tv   Inspector General Testifies on COVID-19 Spending Fraud  CSPAN  February 1, 2023 10:54am-12:01pm EST

10:54 am
related measures. one of the bills would immediately end the covid-19 national emergency declared by president trump in march of 2020 much the white house has announced it plans to extend the emergency declaration until may 11 of this year. the other measure in the house requires federal employees to return to in-office work. also on the agenda this week, a resolution to remove democratic congresswoman ilhan omar from the house foreign affairs committee. watch live coverage when house members return at noon eastern today here on c-span. we take you live now to a house oversight committee hearing looking at covid-19 relief programs. we join this in progress. >> president trump tweeted and again reiterated that, quote, china's been working very hard to containt coronavirus. it will all work out. i want to thank president xi. then went on to say that the
10:55 am
coronavirus would be over by easter. based on what we know now, did that -- did those statements by the president of the united states induce the sense of urgency that the american people should have harbored with respect to this pandemic? >> i think that the actions that the congress took shows the sense of -rpblgency in passing the cares act in march of 2020 on a bipartisan basis. i think that sent the right signal in the sense of urgency that needed to be addressed to those issues. mr. lynch: you are diplomatic as always. mr. horowitz, you want to take a crack at that question? mr. horowitz: not particularly. mr. lynch: let me just say that -- let me just get down
10:56 am
into the details a little bit here. i'm not sure the division of labor within your agencies, are any of you familiar with the yellow corporation during your investigations? no? >> which corporation? mr. lynch: yellow corporation. it was a trucking company apparently with political connections to the trump administration. are you familiar with that? >> i think that's the one where there was the loan given to out of one of the programs. i think we -- mr. lynch: let me -- >> we looked at that issue. mr. lynch: thank you. let me rye to refresh your recollection. the select subcommittee report confirmed that a $700 million loan to this trucking company that was politically connected to the trump administration was
10:57 am
given the $700 million loan and trump administration administration, political appointees, overruled defense department officials in that case to actually certify the company as a, quote, critical to maintaining national security. therefore eligible for the loan. the company then went on to use the loan for long-term capital investments in violation of the cares act requirement. i was curious if -- know you are familiar with it. do you have anything else you could add to that fact pattern? >> i would be happy to provide our results for the record. i can't remember off hand. i don't want to misstate. mr. lynch: ok. we could take that at a later time. what are the lessons learned based on how the trump administration responded initially to the pandemic?
10:58 am
>> number one, i think there should have been more preparedness on the part of the agencies to prevent fraud. mr. dodaro: congress passed legislation in 2016, based on the advice of how to prevent fraud in the first place. part of this is there is a cultural problem. most cases the proud issues people think of the inspector generals and think of the secret service but you got to prevent it in the first place. but the agencies were slow to implement it. the o.m.b. was supposed to create a working group to develop this. we issued a report in 2019 the working group had never met. and needed to take more actions. number one. number two, i think the other lesson learned for the congress is to be careful about putting provisions in the legislation that make programs more susceptible to fraud. allowing, for example, the self-certifications, not using tax transcripts.
10:59 am
i think there is legislation there as well. thirdly, the agencies didn't -- did not address improper payment problems. they knew they had payment problems. and not addressing open g.a.o. and i.g. religiouses make them less prepared. regulations makes thepls less prepared. my legislation solutions to these address so lessons learned. mr. lynch: thank you , mr. chairman. my time has expired. i yield back. mr. comer: the chair recognizes dr. fox for five minutes -- foxx for five minutes. ms. foxx: thank you very much, mr. chairman. i thank you for holding the hearing. i want to -- i have no questions for mr. dodaro. i do want to thank him so much for the work he and his team do on behalf of the american people in helping us figure out ways to be more efficient and find the waste, fraud, and abuse. i appreciate your comments just now. since coming to congress i
11:00 am
fought for transparency and accountability in federal spending. with trillions of dollars of covid aid spent over a short period of time it's imperative we closely watch where and how that money was spent. i think you have given us more ideas. it's likely something we are going to have to track for a long time. but, mr. horowitz, i have questions for you. can you speak to the need for the pandemic response accountability committee, it's importance? mr. horowitz: thank you, congresswoman. i think it was critical for congress to set up the prac when the cares act was passed. at the time we were asked to oversee $2 trillion, it's now $5 trillion of pandemic oversight. what it did was, it brought the inspector general community together to coordinate oversight, we created a data analytics platform to do the work that resulted in our fraud alert last week, and you gave us
11:01 am
hiring authority to bring on great data scientists, great team that has enabled us to do this work. we got it up and running. . as a result, we've been able to coordinate more closely not only with the i.g. partners but with the g.a.o. and local auditors. we have two auditors from the state of tennessee who've come onboard recently. first ever that's been done in the i.g. community, because we want to coordinate with our counterparts and our oversight partners at the state and local level and so we brought together people in a way that we never had before in the i.g. community. ms. foxx: so in your work, how would you rate with the prac, how would you rate the various covid relief funding programs from most least as you say suptible to im -- susceptible to improper payments? mr. horowitz: what we've seen is
11:02 am
three of the biggest programs, the paycheck protection program, the economic energy disaster loan program and the unemployment insurance program. those three programs, which by the way accounts for just under $2 trillion of the spending, have shown to be highly susceptible to fraud for different reasons. ms. foxx: can you give us the characteristics that caused that? mr. horowitz: so for p.p.p. and eidl, those were done at the federal level. the problem is the desire to simply get the money out as quickly as possible without taking, not an -- not an unreasonable amount of time but an appropriate amount of time to make sure they were sending money to the right people. that was the problem among others with those two programs. on the unemployment insurance, the issue is different because that's administered by the 50 states. the problem there is the lack of
11:03 am
coordination among them and with the labor department and the labor i.g. has written extensively about that problem. ms. foxx: so we have some recommendations on to do in that area. -- on what to do in that area. mr. horowitz: absolutely. ms. foxx: so since i'm the chair of the education and workforce committee, i'm anxious to see those. so you charged 47 defendants in a $250 million fraud scheme involving a minnesota nonprofit. feeding our future. one of the largest covid aid related frauds uncovered. what, if any, indicators were there of this sort of fraud and could it have been stopped earlier? mr. horowitz: so it's always hard to say whether something could be stopped earlier. we obviously want to be careful in hindsight to say that. but had there been on these various programs prereview of an
11:04 am
applicant's -- first of all, whether it was a legal entity, did it really exist? was the email address coming from overseas? was it from an i.p. address coming from overseas? did -- as we just reported on -- did names, date of births, social security numbers match what's in the s.s.a. administration's records? that's a check. were they on a do not pay list? there were a number of steps that could have been at a minimum pause, hit the pause button, take a second look to make sure they're eligible. ms. foxx: mr. chairman, i know my time's up but i'd like to make one quick comment. i'm really concerned what mr. horowitz said about the 2016 bill being passed on how to prevent fraud and the agencies were slow to implement.
11:05 am
we have got to get to the root of these kinds of things and say to these agencies and fire people if they don't do things they're supposed to do. that is our biggest problem in the federal government. nobody can be held accountable. thank you. i yield back. >> thank you. the chair recognizes mr. krishnamoorthi. mr. krishnamoorthi: thank you, mr. chairman. mr. smith, i want to ask you about your ongoing investigations involving transnational criminals defrauding? the statement that the secret service put out in december, you talked about a group called apt-40. are you familiar with that group? mr. smith: yes, sir. mr. krishnamoorthi: and it says in your statement apt-40 is a quote-unquote chinese cyber group that is conducting -- are
11:06 am
you familiar with that? mr. smith: i am familiar with the article, yes, sir. mr. krishnamoorthi: and according to the same group, the apt-41, the chinese sponsored cyber gang stole tens of millions of dollars in u.s. covid relief benefits, including s.b.a. loans, unemployment insurance funds, in over a dozen states, is that right? mr. smith: that's what the article says, yes, sir. mr. krishnamoorthi: now tell me, sir, since that article came out, i got to believe that they've probably targeted a lot of states beyond a dozen. can you tell us how widespread the geographic coverage was in terms of the number of states they had tried to target? mr. smith: so, again, i'm familiar with the article. our national pandemic fraud coordinator, who testified last summer, who i appointed to that position, supervisor in one of our field offices, the spirit of
11:07 am
what he was conveying is that it is unimaginable that organized transnational criminal organized groups did not look to exploit pandemic-related fraud no different than, you know, an american would. it is -- there are some xhobalities -- commonalities between some of these thousands of bank accounts that we have seen used to move illicitly fraud resources that were also being used by some of those transnational criminal organized groups to include the one you mentioned. it's also worth mentioning, when we do have cases that involve transnational criminal organized groups or state sponsored entities -- mr. krishnamoorthi: let me stop you there. we now established apt-41 is a chinese state sponsored cyber gang. now we turn to russia. have we identified any transnational state sponsored
11:08 am
cyber gangs involved in fraud? mr. smith: a lot of fraud has to do with folks dealing in identity theft. so for decades we've known forms win people -- wherein -- mr. krishnamoorthi: are they state sponsored? mr. smith: sir, the secret service focused on financial crimes. whether or not they're state sponsored or not is not where we tend to focus on. we look at money. if it leads to a state sponsor, we don't stop the case but we then employ our partners at d.o.j. mr. krishnamoorthi: and have you come across that link yet? in other words, that required a referral to the d.o.j.? mr. smith: the referral to d.o.j. is actually part of the task force the d.o.j. started at the beginning of the pandemic. so there are cases where we have some linkages or commonalities between cases we're working for financial crime reasons and there may be a state sponsored actor. mr. krishnamoorthi: ok. we have established there are
11:09 am
chinese sponsored cyber gangs as well as russian state sponsored linked to the state, individuals who've committed pandemic relief crimes. mr. smith: sir, what i said is there are commonalities between some of the accounts and other indicators we've seen. that's what i said. mr. krishnamoorthi: ok. now with regard to apt-41, in particular, in your statement -- i'm sorry -- the u.s. secret service's statement -- it said it was, quote-unquote, state sponsored. now, did -- have you been able to identify any evidence that the chinese communist party ordered or asked this particular cyber gang to commit this fraud or do we have evidence that they just merely look the other way and permitted them, knowing them to have committed this fraud? mr. smith: sir, i have no evidence as to what the chinese
11:10 am
government ordered a transnational criminal organized entity to do. mr. krishnamoorthi: are there any other cyber gangs, state sponsored -- either chinese or russian or any other state sponsored criminal gangs that have committed pandemic fraud? mr. smith: sir, just last year, we disrupted a transnational criminal organized group known as black acts. they're nigerian based. they were operated in south africa. they have a long standing history of committing a lot of different types of fraud and they used a lot of the pre-existing money mules. there is an extensive money mule network that operates in the states. even though they overwhelmingly used an american profile to facilitate pandemic-related fraud. we did see that and we had an operation that disrupted that group just last year. mr. krishnamoorthi: thank you.
11:11 am
>> the chair recognizes mr. grothman for five minutes. mr. grothman: sure. a few more follow-up questions for mr. smith. could you give me a little more information as far as the stereotype, as far as fraud being committed by people abroad or fraud being committed by immigrants? mr. smith: fraud being committed by -- mr. grothman: immigrants. mr. smith: so i'm not going to get into stereotypes. we follow money. we follow evidence. and at the end of the day, as i mentioned to the previous committee member, the majority of the cases we've seen, even if there is a state -- a criminal looking to exploit pandemic related fraud abroad, they used an american mule. we had certain campaigns that our cyber fraud task forces
11:12 am
communicated to don't be a money mule whether witting or unwitting because what we saw was a lot of americans being utilized to move money abroad because the criminals did know that overwhelmingly what we were looking for were, you know, american bank accounts, american identities to issue money to -- so they used that and then leveraged an extensive met work of money mules that preside overwhelmingly in the united states to get that money. mr. grothman: is the mule in america, do they have contacts within the foreign nations? are they immigrants from the foreign nations? just grabbing a random person off the street? could you comment on these mules? mr. smith: so we have, you know, dozens of cases, hundreds of cases where we would have a person, one state comes to mind there was a mule who had literally funneled $12 million
11:13 am
to some criminals that resided abroad. and once we start following the money, once we start looking at some of the commonalities in bank accounts, we had an opportunity to go interview a person -- mr. grothman: could you tell me what those countries were abroad? and could you tell me the background of the mules here? did they have connections to the country abroad? mr. smith: so one of the cases, as i mentioned a second ago, was out of south africa focused on some nigerian individuals in a group called black acts. that case i mentioned with the $12 million was one of the cases wherein a money mule sent money to accounts that were operated by black acts. i want to impress upon the group here, money mules are not a new concept. there's an extensive network. mr. grothman: you're not answering my question. mr. smith: sir. mr. grothman: presumably, they got these mules somewhere. ok. you mentioned nigeria, south
11:14 am
africa. were the people that did the work in america connected in those countries in any way? were they immigrants from those countries? were they just random people they found on the internet? were they immigrants from those countries? mr. smith: not necessarily, sir. mr. grothman: not necessarily. does it happen and how often does it happen? mr. smith: overwhelmingly in our experience that does not happen. people just take -- criminals just take advantage of folks looking to make a quick buck. and the pandemic offered that opportunity with the amount of resources that were made available. mr. grothman: ok. now in general, mr. horowitz, i can think of flaws in these programs that the fraud would be almost predictable. but can you tell us in the future what things we can do in programs the fraud is not committed so easily? mr. horowitz: so i think one of the easiest things to do that wasn't done is to prepare, as the comptroller general said, by employing verification tools,
11:15 am
identity verification tools. the amount of identity theft was extraordinary here. and it needs to be addressed because we're not only talking about when that occurs, theft from a government program, theft from the taxpayers, but for anybody who's been on the receiving end of having their identity stolen, you understand how you're victimized in that way. and just in the fraud alert, we indicated, we now have 200,000 social security numbers that were used that we need to follow up on to see if those individuals' identities were stolen. mr. grothman: so in other words, the money is going to someone other -- it's going to an account or something other than the person who's committing the fraud? mr. horowitz: correct. so what's happening is, individuals are claiming that -- the person who's name is on the application, birth date on the application, the social security, when we checked and
11:16 am
went to the social security administration to ask them to verify it, a check they can do, we entered into that. they were doing large-scale verification for us. they came back and said those don't all match for those 212,000 numbers. which means somebody in some instances -- it could be a false positive -- somebody could have transposed their social security number down or date of birth down so there could be some of those. presumably for most of them, those are individuals who obtained on the dark web through other means social security numbers that were -- that were previously stolen from individuals. and had their identity stolen. mr. grothman: and they wind up going to a bank account that has this person's name on it but this person doesn't even know the bank account -- mr. comer: the gentleman's time has expired but we'll let you finish the question. mr. horowitz: certainly there is an ability to go to the bank. particularly with the p.p.p. program.
11:17 am
the agency said you don't need to do anything except accept the person's verification that it's them. all that happened in the p.p.p. at the outset, you went to the lender, you signed an application saying, no, i'm really this person, and they accepted it. no one can walk into a bank today to get a loan today and say, no, no, really, i'm this person. give me the money. but that's what was going on. mr. comer: the chair recognizes ms. norton. ms. norton: thank you, mr. chairman. mr. horowitz, this question is for you. democrats provided the department of labor inspector general $25 million in the american rescue plan to combat fraud and corruption in the process. also, in the american rescue plan, democrats made critical investments in fraud prevention and accountability, including providing more than $200 million
11:18 am
in funding for watchdogs to investigate fraud, waste, and abuse, as well as $2 billion to support states' modernization of unemployment insurance systems to reduce fraud vulnerabilities. the biden administration has begun using these funds to support state efforts to make unemployment insurance systems both more accessible to eligible recipients and less susceptible to fraud. the american rescue plan provided significant funding to the pandemic recovery accountability committee as well. yet, my republican colleagues voted against these commonsense measures to reduce fraud. when the american rescue plan became law, mr. horowitz, you released the following statement. and here i'm quoting you.
11:19 am
the enactment of the american rescue plan add to the important independent oversight responsibilities of the prac and its member inspector generals. we thank the prac and its oversight mission. end quote. mr. horowitz, how much funding did the prac receive in the american rescue plan to pr form the vital oversight functions? mr. horowitz: in the american rescue plan, the prac received $40 million of funding. ms. norton: now, mr. horowitz and mr. dodaro, what other resources and authorities do you need to continue your work? mr. horowitz: so as i mentioned
11:20 am
in my written statement, at the outset, i think very important to continue the debt analytics platform. that $40 million that was in the american rescue plan covered our ability to start the data analytics platform we had in 2021. it's funded through 2025. but we sunset on september 30, 2025. we turn the key off at that point unless it's extended. congress invested $40 million to fund that over 4 1/2 years. that's $15 million, $16 million we're spending right now. just the fraud alert alone this past week, we identified $4.5 billion of potential fraud. that's 360 times the amount of money that we spent this year or spending this year to run our debt analytics platform. in other words, it would take us 360 years of spending at that number to add up to $5.4
11:21 am
billion. so that i think is very critical. dianna: lb mr. dodaro: thank you. i want to throw myself behind this platform. right now it only comprises the pandemic spending and it will expire. this happened back after the recovery act, as i mentioned in my opening statement, and it was a very effective process then, but it expired in 2015. now, if it had been in place at the beginning when the cares act was passed in 2020, i think we could have saved a lot of money and prevented fraud or went after it earlier. but it wasn't established to the american rescue plan in 2021. by that point, hundreds of billions of dollars had hrd been spent. -- had already been spent. so i think this is a prudent investment on the part of the federal government to have this capability in the i.g. community on an ongoing basis that will more in an pay for itself many
11:22 am
times over. ms. norton: in addition to the funding, democrats included funding to the american rescue plan to provide grants to states to engage their local community organizations that represent those eligible for benefits. the goals is to help states learn how to more effectively reach these traditionally underrepresented and underresourced communities. so may i ask you, mr. horowitz and mr. dodaro, will these types of investments in the community engagement help you separate paperwork errors, other unintentional mistakes and actual fraud? mr. dodaro: i think it's important to recognize and we have ongoing work so we'll be looking at that issue to see how effective labor is working with the states and with those entities. so that's very important.
11:23 am
you know, today we focused a lot on the fraud part of the unemployment insurance program. but on the benefits side, there was lack of timely benefits that were given to people. we found, also, some disparities in terms of how different people, different races had been treated. so there's a lot to be done in the unemployment insurance area to make sure there are timely payments made to the proper people in a balanced, equitable fashion while stopping fraud on the other area. now, we've added the unemployment insurance program, along with the p.p.p. and the economic injury disaster loan payment to the list of high-risk areas across the federal government. the insurance -- unemployment insurance area is badly in need of transformation. not only dealing with these community organizations but the i.t. systems in the states are
11:24 am
terribly antiquated and not capable of executing this type of program in the future until they're modernized. mr. comer: the chair recognizes mr. palmer. mr. palmer: thank you, mr. chairman. i thank the witnesses. to date, do we know the full amount of improper payments, covid funds, mr. dough darrow? -- mr. dodaro? mr. dodaro: there are estimated. in 2020, the estimate for improper payments was $78 billion up from about $9 billion in 2020. and then there was another $18.9 billion of improper payments reported by the unemployment insurance program for 2022. and that was a 22% error rate. and the year before was 18.9%
11:25 am
error rate. prior to the pandemic, it was about 9%. and the p.p.p. and eidl areas combined is about $36 billion. mr. palmer: we're talking about $135 billion, at the top of my head, as you know i like to do. mr. dodaro: yes, i do. mr. palmer: it appears to me some federal agencies may not have been as forthcoming with information as both you and mr. horowitz would have needed. small business administration potentially violated federal law by not -- by failing to respond to the g.a.o.'s request. has that been the case that they have not responded to your question? mr. dodaro: it was early on the start of the programs. it's gotten much better. i had to actually go back in 2020 and 2021, i testified before the coronavirus select committee, and i had called the chair and ranking member of the small business committee, both
11:26 am
the authorizers and appropriators to get help. we couldn't get any information out of s.b.a. at all. and it wasn't until later there was a lawsuit where they had to disclose the amount of loans. now, it's gotten better. mr. palmer: one of the problems is that the unemployment insurance programs authorized under the cares act were excluded from the program's total reported improper payments because they were not in existence for more than 12 months. these programs represented about -- should congress consider legislation to reform the proper payments reporting periods in order to properly track the covid relief funds and in the future, if we have to have this again? mr. dodaro: absolutely. that's one of my legislative recommendations. mr. palmer: i would appreciate and i've enjoyed working with you and mr. horowitz over the years on things like this. if you would provide to me in writing your recommendations for
11:27 am
legislative fixes. i want to move to something else. it's been discussed about what actions republicans took. and i just want to ask you if we had required two-factor identification for online applications or provide state unemployment agencies -- transmission of copy of the -- state i.d.'s, if we utilized applications from foreign i.p. addresses, using virtual private network identification, require individuals -- i could go down this whole list of things, would that have helped reduce the amount of fraud? mr. dodaro: yes. mr. palmer: well, i just want to point out, mr. chairman, these are aemingses -- recommendations that were made by republicans in the house and the senate, including myself. i introduced a bill to do this that were largely ignored.
11:28 am
when we -- when we began to see the massive amount of fraud, as early as, i think april, may of 2020, mr. horowitz, i think, and working with the department of labor, the office of inspector general there, that billions of dollars had already gone out and we couldn't get these guardrails back in, would that have helped, mr. horowitz? mr. horowitz: absolutely. and the fraud did start right off the bat. the p.p.p. program sent out $400 billion in two weeks. mr. palmer: let me ask one other question. what we've seen in the last few months here is states using their covid relief funds for things like new jersey, $50 million in state and local fiscal recovery funds to bolster the state's bid to host the 2026 world cup, we saw the state of washington sent out $128 million in $1,000 payments to 20,000
11:29 am
illegal immigrants. we saw colorado springs use $6.6 million to put an irrigation system at two local golf courses. $5 million for the state of massachusetts to pay off debts incurred by the kennedy institute for the u.s. senate in boston. are any of those improper uses of funds? i know we wanted to give them flexibility. isn't that a little bit out of the box? mr. dodaro: well, there are broad use authorized to use that money. we are looking at it right now. so we'll try to identify those areas. they may be out of bounds legally. when there were questions about the use of the money, whether it's appropriate or not, when it was really, you know, legally authorized because we gave great -- we, the government, gave great flexibility to the state and local community to make decisions, the other issue you have to deal with, always, the money at the state and local
11:30 am
level is fundability of the money. mr. palmer: mr. chair, this is something we need to look into. it's not just the fraud but the improper use of some of the funds. and my time has expired. i always enjoy hearing from you guys. i yield back. mr. comer: absolutely. the chair recognizes ms. ocasio-cortez. ms. ocasio-cortez: thank you, mr. chairman. this hearing is called federal pandemic spending: a prescription for waste, fraud, and abuse. the paycheck protection program, all of it. in wind up to this hearing on january 13, i see that the chair sent several letters to three states. pennsylvania, california, and my home state of new york. with serious allegations of widespread fraud and abuse. but i'm curious a little bit about how we got to these three
11:31 am
states. mr. dodaro, if you were auditing or investigating what went wrong in states in the distribution of pandemic-related unemployment insurance, how would you go about choosing which states to examine? mr. dodaro: well, we would look at a number of factors. one would be the amount of money that would go there. we would look for geographic distribution of the programs. we would look for other characteristics the state programs -- a number of claims, for example, that have been there. and so we would -- we would take a nationwide sample. ms. ocasio-cortez: in your experience looking at something like a per capita approach or, you know, in your expertise, if you had to estimate some of the top candidate states, what do you think some of those states would be and why? and again, more on like a per capita level. mr. dodaro: i don't have the per capita numbers in my head so i
11:32 am
don't want to venture a guess at this point. i'd be happy to provide something for the record. ms. ocasio-cortez: what would the top states be? mr. dodaro: certainly california and new york are always the case to look at. you have michigan, you have florida. you have states in the south, in the west. so we would have a geographic distribution in order to make sure that we recover the money. what we try to do in these cases is cover -- like, right now we're looking at the state and local coronavirus relief fund. and we've selected 18 states. we're looking -- they account for about 60% of the total amount of money. ms. ocasio-cortez: thank you. i'd like to submit to the record the key insight state unemployment insurance programs. now, mr. horowitz and
11:33 am
mr. dodaro, can you think of any methodology that would have brought the committee to send those three letters specifically to just those three states? is there any methodology you can think of that would just result in pennsylvania and new york and california? being under investigation by this committee? mr. dodaro: i would defer to the committee. i don't know what their objectives were in that case. i don't think -- ms. ocasio-cortez: i understand. i want to get to this report. according to this report, for example, arizona paid $1.6 billion to individuals to stolen identities to get unemployment insurance benefits. louisiana disbursed more than $1 million to individuals after the date of their death and in kentucky, state employees applied for unemployment benefits while still employed by the state and were able to hack
11:34 am
the state's information management system and remove holds on their own accounts. and none of these states have been put under investigation by this committee. that is very interesting because as was stated at the beginning, the bipartisan nature of oversight is what gives it its power. and what we are seeing are investigations into -- and i believe that the methodology for these three states is highly questionable. i ask for this committee, if we're going to perform oversight, then let's perform oversight. congressional democrats are ready to perform that oversight and help our constituents get the benefits they need to pay their bills. i think there's no shortage of members of this committee who are willing to stand up to their own party when it's necessary. but i cannot for the life of me understand why the majority would send these three letters just to these three states that leaves us with another other
11:35 am
conclusion there needs to be some rank partisanship in this investigation. committee republicans, i ask if we're going to start off, let's do it right and with that i yield my time. mr. comer: before i yield back -- mr. palmer: i'd love to -- mr. comer: i would love to do a joint probe or whatever. i'd love to work with you on that or any of the 50 states because i believe it's a problem in all 50 states. especially kentucky. you're exactly right. the chair recognizes mr. higgins for five minutes. mr. higgins: thank you, mr. chairman. we knew there would be fraud because fraud is always connected to money. i supported the cares act. it was the initial response to the virus.
11:36 am
the cares act was our effort to respond and to help american families and american employees remain financially stable while we endured the impact of this unknown virus. so here we are to flatten the curve. it very well falls upon this committee under republican majority to begin conducting meaningful oversight into the massive fraud that was no doubt staged to take place when you started rolling out programs with trillions of dollars. $7 trillion, the total economic commitment from the united
11:37 am
states of america. american treasury, $7 trillion. that's 140 billion for sovereign states. an average of 62 counties per state. that's over $2 billion per county. i would argue that americans across the country in local and state government would say they would have done much better if every county could have received $2.2 billion in the form of a block grant. of course it was going to be massive fraud with programs like this. but what we expected was not the absence of fraud. what americans expected is the presence of accountability. and criminal prosecution. that accountability is what this republican controlled oversight committee is going to deliver. we know fraud is not born in the
11:38 am
mechanisms of man. fraud is born in the heart of man. it's to be anticipated. the gentleman referred to certain tradeoffs between urgency and processes that were put in place as this -- trillions of dollars were set to be disbursed. may i say, we anticipated this, but some of us, in order for the most conservative of us to support a $2 trillion response to this unknown virus, we insisted that this money be made available through local banks and credit unions and we pushed the s.b.a. product out through -- my recollection is about 4,500 lending institutions that had never handled a s.b.a. product before. we wanted and we insisted that regular americans would be able to communicate directly with the
11:39 am
bankers they knew to access this assistance. so we knew it was ripe for fraud but we expected criminal investigations to take place. we expected people to be put in jail. accountability for criminal acts begins with a suspicion and report of a local level. fraud, forgery, identity theft, etc. it should lead to investigation. it should lead to an arrest. should lead to prosecution, incarceration. i would say america would be just fine had we witnessed that kind of accountability. but it has to be pushed out of congressional investigations. that hasn't happened for the last three years. it will happen now. director smith, so specifically,
11:40 am
regarding investigations, it's understandable that the most massive cases will be prioritize millions and millions of dollars. but according to my research, a vast amount of fraud that we have witnessed is primarily from smaller cases. i've been advised that they've gone ignored. can you -- can you speak to that, sir? what are we doing at the federal level to assist local and state investigators to go after these smaller cases? mr. smith: sir, as i mentioned before, we follow money, we follow evidence. and one of the things i talked about in my opening is the secret service training state and local law enforcement professionals at our national computer forensic institute. it's the ultimate teach a man to fish, if you will.
11:41 am
we train thousands of state and local law enforcement professionals every year to be able to investigate cases locally. i was just down in the chairman's home state last week in kentucky talking to some of our cyber fraud task force partners and they were actually briefing me on cases they were working at a local level that were focused on elder abuse and some pandemic-related fraud. so we are a federal law enforcement entity, but we do have a responsibility to help train, equip, and resource our local partners who help us in every aspect of our mission to be able to build their capacity locally. mr. higgins: thank you for your response, director. mr. chairman, i yield. mr. comer: the chair now recognizes ms. porter for five minutes. ms. porter: good morning. i have questions about unemployment insurance. mr. dodaro, could you read this headline for the room?
11:42 am
could you put your microphone on, sir? mr. dodaro: sorry. california's e.d.d. unemployment system disaster, predictable fiasco. ms. porter: thank you. mr. horowitz -- we'll get everyone in on the fun. mr. horowitz, read this headline? mr. horowitz: there is no way. ms. porter: new e.d.d.'s software have defects. some critical. this is also an eye test in case you need a checkup. can you read that for me, mr. smith? mr. smith: it says the north carolina unemployment agency is a broken system. mrz porter: -- ms. porter: mr. horowitz, do these headlines seem familiar? do they seem representative of the problems regarding with --
11:43 am
unemployment system during the pandemic? mr. horowitz: they do. ms. porter: would you surprise these stories are from 2013, 2014, long before covid-19 was a problem? mr. horowitz: not at all. this has been an issue that g.a.o. has spoken about for decades, maybe. i'm not sure if it's that long. but certainly we have as i.g.'s as well. the unemployment insurance system needs to be fixed. ms. porter: i could not agree more. let's talk so we can fix it. state unemployment agencies have long had problems getting help to people who need it and preventing our tax dollars from ending up in the wrong hands. when the pandemic first began, we needed to deliver relief quickly. but due to chronic underinvestment in technology and systems at states that administer programs, we saw the same problems with waste, fraud and abuse we've seen for decades
11:44 am
under democratic and republican presidents, in blue states and red states. mr. dodaro, i want to talk about the g.a.o.'s high-risk list. what is that? mr. dodaro: high-risk list was originally created to identify for the congress and the administration areas across the federal government that we believe were highly susceptible to fraud, waste, and abuse and mismanagement, or in need of broad-based transformation as it evolved. ms. porter: did g.a.o. identify unemployment system as a high-risk system? mr. dodaro: yes. ms. porter: in june, 2022. mr. dodaro: june, 2022. ms. porter: in june, 202, the year before unemployment was added to the high-risk list, do you know the rate of overpayment for unemployment insurance? mr. dodaro: in 2021, it was 18.9%. ms. porter: great. and according to the department of labor, before that, before
11:45 am
you put it on the high-risk list, it was about 15%. in 2019, it was about 9.5%. in 2018, it was 12.1%. in fact, the overpayment rate has been over 10% for 14 of the last 18 years. according to the department of labor's o.i.g. when g.a.o. announced that the unemployment system had been designated as high risk, you said, quote, g.a.o. is concerned that many long standing problems may go unaddressed. do you remember saying that? mr. dodaro: i believe so, yes. ms. porter: is that a bit of an understatement at this point? mr. dodaro: for many of those years there was state money that was collected. there was not a big federal investment in this until the pandemic broke or perhaps earlier in some other emergency situation. but i -- i thought the time,
11:46 am
obviously, was right. ms. porter: what the o.a.g. has said the u.i. program has experienced some of the highest improper payment rates across the federal government. so my question is -- why don't we fix this? mr. dodaro: well, i think it requires some leadership on the part of the congress and the labor department. like a lot of these programs that where the federal government is relying on the state and local government, they give them a lot of discretion. and when times are good, unemployment's low, you know, they don't get a lot of attention until these problems comes up. ms. porter: here's how i think about this. when someone has a dollar and they lose a dime of it, they think, shucks. but when someone has $100 and they lose $10, they're like, little angry. and it just keeps going up. and now we're in the billions and trillions. so i would love to have your
11:47 am
continued pressure on the department of labor to use all of the funding that congress provided in the american rescue plan to actually modernize u.i. i'm trying to add up where that $2 billion from the american rescue plan has gone and it does not seem to have all been deployed and spent to improve these programs. mr. dodaro: yes. no, i agree. we're going to follow that $2 billion. also, i was in the senate testifying last march with michael horowitz and the i.g. from the labor department. he mentioned the money that was given states after the great recession to reform the programs and he mentioned some of that money went unused. ms. porter: it absolutely did. indulge me for just one minute. in california, after the american recovery act, they were given a $2 million grant to e.e.d. to prevent fraud. and guess what, it worked. at the end of the grant program, california quit using the fraud detection program. penny-wise and pound foolish.
11:48 am
because that exact fraud detection program would have prevented and saved tens of billions of dollars for federal taxpayers during this pandemic. so i appreciate the chairman's indulgence and i yield back. mr. comer: mr. palmer, do you want to be recognized? mr. palmer: thank you, mr. chairman. i want to affirm the gentleman from california, mr. dodaro and i have worked on this for quite a while. and over half of the problems with improper payments are antiquated data systems at the state and federal level. administrative error and failure to verify eligibility. i just want to affirm what you just said. i yield back. mr. comer: the chair now recognizes mr. sessions for five minutes. senator sessions: mr. chairman -- mr. sessions, thank you, mr. chairman. mr. dough dar o -- mr. dodaro, thank you for seeing you again. i want to ask you this question. we had a conversation about ideas that went back and forth with the administration. is there anybody at work?
11:49 am
are they there? are they -- you working with them? are they answering questions? give me an idea about people at work, at least for the last two years, what has that been like? mr. dodaro: no, we are engaged with folks. the labor i.g. has been engaged with the labor department to try and address long standing problems. as the congresswoman said, this is not new. we've been engaged with o.m.b. leadership and white house leadership to try -- along with the labor i.g. to try and push these issues forward and get them addressed. because the numbers are staggering. mr. sessions: if they're staggering, then what's the progress? they have come back to you. you've had meetings. what have they said? mr. dodaro: we made -- mr. horowitz: just to give you some of the basic issues. the labor i.g., because these programs are managed by 54
11:50 am
entities, the 50 states and other territories, the labor i.g. needed to send regularly subpoenas to the 50 states to get the data because that data isn't housed at the labor department. mr. sessions: so all 50 states denied information? mr. horowitz: no, they didn't. but to get it you needed to go to them and ask for it and they needed legal process to be able to send it. so we now have it at the prac. we're looking at it. just give you an example. it was found because of the locally based system, one social security number we've identified to date so far was used in 29 states. because they don't -- the systems don't talk to each other. they're not managed at the labor department, at the federal level. they're managed at the state level. and it's frankly not fair to blame the states for that.
11:51 am
they're not able to modernize their systems. some have more than others. if not all, most are struggling with this. mr. sessions: but not a new issue? mr. horowitz: not a new issue at all. and the labor department has been at the forefront. mr. dodaro: part of the problem, congressman sessions, there is not sustained attention to these issues over time and these issues require multiyear efforts. and you know, we've been working with the agencies. quite frankly, they're state administered programs -- medicaid is another one, for example, which has huge improper payments. it's administered at the state level, the federal agencies give a lot of discretion to the states. and quite frarngly -- frankly, there's not enough oversight on the part of states. this is a particular issue in the unemployment insurance program because in normal times it's state money that's leveled
11:52 am
on employers that pay. there's no federal funds involved until there's an issue where they need the money. and so there's not a good sense of direction as to how involved our country wants the federal government to be involved in state administered systems. so you run into a federalism issue a bit with these programs. and quite frankly, i think it would benefit from congressional oversight and direction as to what signals that you want to send. mr. sessions: we agree with that. mr. dodaro, there is such a thing we invented with you years ago, 1997, the high-risk series. mr. dodaro: it's still there. mr. sessions: still there. mr. dodaro: and s.b.a., two programs are on emergency loans on high-risk lists along with the unemployment insurance program. and there's 37 areas. we're getting wrd ready for our
11:53 am
normal update at the beginning of each congress. so we're ready to unveil the update on the lists soon. mr. sessions: great. is this information on your website for the agency or where do we find this information? mr. dodaro: it's on our we are site. we have a -- website. it's on our homepage there is a medallion that says high-risk list. mr. sessions: great. i want to thank all three of you. the gentleman, mr. smith, please know that the secret service is a valuable organization to us. but you should know that you got an employee problem that we've been trying to work on for years. and i encourage your management to look at that, about how they treat their employees and how quickly they respond back to the needs of those people. i appreciate each of your time. mr. chairman, i yield back. mr. comer: thank you. the chair now recognizes
11:54 am
mr. gomez for five minutes. mr. gomez: thank you, mr. chairman. this is the first hearing of a two-year session and i want to be very clear to the american people what i believe that the majority, the republicans in this committee and in congress will do over the next two years. they will attempt to rewrite history. they will attempt to absolve themselves of any of the decisions they made over the last two years in order to fit their own political narrative. everything from the pandemic response to january 6 to holding president trump accountable himself. we even have colleagues here that believe some of the january 6 insurrectionists were patriots and heroes. they're not. they're traitors. that's what those are. those insurrectionists were traitors. so i want to -- let's focus on unemployment insurance. the chairman and the majority of
11:55 am
the republicans voted three times in 2020 for u.i. benefit extension. three times. and that's a good thing because it put money in the pockets of americans who were struggling to make rent, to pay food, just to get by. but after a month of voting to extend those benefits, one month later, they voted to slash and to stop those unemployment benefits. what changed? did they not know about some of the concerns of the program at that time? no. what changed is we had president biden. my hunch if it was president trump, they probably would have voted to extend those benefits once again. but it wasn't. and why are they cherry-picking this program and not focusing on other programs? so now let's talk about the paycheck protection program. you know, as members, we voted to put the money in the pockets of constituents who need it the
11:56 am
most, to keep their small businesses afloat. we voted to put money in their pockets, not members of congress. we have colleagues from georgia who had $183,504 forgiven. other republican members had up to $4.3 million forgiven. why not focus on this program? that's because if they did, they would have to answer these questions regarding their own businesses, their own loans, their own -- and why were those forgiven and not others. so if we want to talk about handouts, we want to talk about fraud, let's talk -- let's talk about it. let's not cherry-pick programs. let's pick all the programs that were in place during the pandemic. let's talk about -- if we want to do oversight, let's do it. but this isn't about oversight. it's about passing the buck and making one too. so don't be fooled. the american people shouldn't be
11:57 am
fooled by them trying to rewrite history and the responsibility and the implementation of those programs. i believe they were a good thing. yes, no program is perfect. but it really did keep afloat the american economy, the american worker, and made sure that we didn't fall into a deep, deep recession. so with that, let's focus on inspector general on the prac estimates on its website that we spent -- it says the prac estimates on the website said we spent roughly $553 billion on pandemic. on your website a quarter of that could be improper and less than that is fraud. can you speak to the fact that a substantial majority of funds did what they were intended to do and keep americans out of
11:58 am
poverty and save lives? mr. horowitz: certainly, congressman. in all of the work we've done and the oversight work, no one has suggested or in any way sought to undermine the importance of these programs. we all can recall what was going on in march of 2020, april of 2020. and the need to assist and help people. the problem has been not that the programs were well-intentioned or valuable, the problem is we've seen substantial amounts of that money not going to the people it was interneded to help -- intended to help because of the fraud. we have also had hearings and panels and programs about the scope of the identity fraud such that for example we heard how in the unemployment insurance program individuals who were intended beneficiaries sometimes when they went to get benefits were denied because the state agency thought they were the fraudster.
11:59 am
not the person who came first who was the actual fraudster. and so they struggled just to get the benefits they were entitled to. that's why these programs need to be fixed and addressed because congress meant the money to go to the people who really needed it. and that's where we should be putting our efforts. mr. gomez: thank you. with that i yield back. mr. comer: the chair now recognizes mr. biggs for five minutes. mr. biggs: thank you, mr. chairman. thanks for all of you. southerliy. i'm doing -- sorry. i've been doing hearings. thank you, mr. dodaro, mr. horowitz. good to see you, mr. smith. i want to broad shoot this thing here. is there any money not expended in any of the covid relief packages that you are aware of? mr. dodaro: yes. there's about -- as of november, 2022, there's about $157 billion unobligated funds. mr. biggs: ok.
12:00 pm
uncovered, unobligated, unspent? mr. dodaro: right. mr. biggs: ok. what's the total amount that you estimate that was wasted in any of those programs, go ahead, mr. horowitz? >> we're going to leave it here to honor our more than 40-year commitment to live coverage of congress. you can go to this hearing on our or free mobile video app. take you live now here on c-span. [captions copyright national cable satellite corp. 2023] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit] the speaker: the house will be in order. the prayer will be offered by chaplain kibben. crib: would you pray with --


info Stream Only

Uploaded by TV Archive on