At Hearing, Federal Watchdogs Explain Early Deficiencies in Pandemic Relief Programs and Stress Importance of Continuing Investment in Whole-of-Government Approach

Washington, D.C. (June 14, 2022) – Today, the Select Subcommittee on the Coronavirus Crisis, chaired by Rep. James E. Clyburn, held a hearing with federal watchdogs involved in preventing, detecting, and prosecuting fraud in pandemic relief programs. The hearing highlighted how the Trump Administration left pandemic relief programs highly vulnerable to fraud early in their implementation. The hearing also addressed the Biden Administration's efforts to surge resources—using funding provided by congressional Democrats—to successfully prosecute wrongdoers and recover funds. Witnesses testified that more must be done to ensure future crisis relief programs are fortified against fraud.

"The coronavirus crisis caused significant economic suffering as millions of Americans lost their jobs and businesses struggled to keep their doors open. Congress took decisive action to ease this pain, appropriating unprecedented relief for small businesses and workers who lost their jobs, first through the CARES Act and later, under President Biden, through the American Rescue Plan," Chairman Clyburn said in his opening statement. "Unfortunately, criminals and criminal organizations took advantage of Americans' suffering during this crisis and committed substantial fraud against these critical pandemic relief programs, stealing billions of dollars in aid."

Today's witnesses were: Kevin Chambers, Director for COVID-19 Fraud Enforcement, Department of Justice (DOJ); Michael Horowitz, Chair, Pandemic Response Accountability Committee (PRAC); Hannibal "Mike" Ware, Inspector General, Small Business Administration (SBA); and Roy D. Dotson, Jr., Acting Special Agent in Charge, National Pandemic Fraud Recovery Coordinator, United States Secret Service (USSS).

Based on today's hearing, the Select Subcommittee concluded that:

The Trump Administration Failed to Prevent and Detect Fraud in Pandemic Relief Programs, Leading to Unprecedented Fraudulent Payments.

• Inspector General Ware described his attempts to draw attention to the significant risks of fraud he observed early in the implementation of pandemic relief programs. He testified that he was "at the table screaming for the need for control after identifying that we have major issues." He explained that his office recognized the need for greater fraud prevention controls before funds were even distributed, saying: "We had three reports out before the first loan went through the door asking for these controls to be raised."

• Echoing a finding from the Select Subcommittee's staff report regarding the Trump Administration's implementation of the EIDL program, Inspector General Ware said that "the most concerning [deficiency] was self-certification." He explained that "you just had to say that you had a business, that you had X amount of employees, and you could get money." He noted that his office "sounded the alarm very early on that, that this can't be the way."

• Inspector General Horowitz also cited self-certification as a major deficiency in the early implementation of the EIDL program, saying, "having simply a situation where you're requiring self-certification and nothing more is an invitation to fraudsters to come in and try to obtain benefits that they shouldn't otherwise get."

Under the Biden Administration, Federal Authorities Strengthened Fraud Controls and Surged Investigations in Pandemic Relief Programs While Effectively Collaborating Across Agencies.

• Inspector General Horowitz testified that federal watchdogs "are all committed to making sure that we use every single tool available to not only hold individuals and entities accountable for fraud and wrongdoing, but to ensure we are recovering every single penny for the taxpayers. That's our responsibility and our goal."

• Inspector General Ware explained that "we have a much stronger control environment" today than a year ago. He recited a number of changes that have been implemented in pandemic relief programs during the Biden Administration, including "checking the Do Not Pay list, not allowing folks to change bank routing information after loan approval, starting with the Rule of Two again, raising all these types of controls."

• Special Agent Dotson emphasized the importance of collaboration, saying "The efforts put forth with the Secret Service and SBA OIG and our partners here has been extraordinary." He explained that collaborative efforts between federal agencies allowed the government to "recover over $1 billion to date, and that's just by sheer hard work of thousands of investigators and detectives."

• Mr. Chambers explained that the Department of Justice "will be, in the not-too-distant future, standing up strike teams in specifically selected locations that will be made up of dedicated prosecutors, dedicated investigative agents, and dedicated analysts who will do nothing but prosecute" certain types of "large-scale fraud."

To Safeguard Funds for Eligible Americans, Congress and Executive Agencies Must Work Together to Continue to Undo the Damage of the Past Administration and Fortify Relief Programs for the Future.

• Inspector General Ware explained that continued action and investment in anti-fraud programs will be necessary, saying, "the actions of these fraudsters will not simply vanish" and that "we are nowhere near a full understanding of the fraud landscape."

• Special Agent Dotson also emphasized the need for ongoing action, saying, "I expect our investigative efforts to recover stolen assets and hold criminals accountable will continue for years."

• Mr. Chambers said that legislation to extend the statute of limitations for pandemic relief fraud is "essential." He added, "With the amount of relief that was provided, the amount of potential fraud, there is an incredible volume of cases in the hopper and an incredible volume of cases yet to come." He urged Congress to "help to get the statute of limitations extended."

• Inspector General Horowitz explained that investments in fraud prevention, including inspector generals, provide a substantial return on investment for taxpayers, saying: "Any measure of return on investment will show that taxpayers benefit by multiples—14, 15, even more than that percent at times."

Additional Federal Investment in Preventing Identity Theft Would Help Americans Access Relief Programs and Safeguard Taxpayer Dollars from Fraud.

• Inspector General Horowitz testified that "prevention and detection of identity theft should be among the highest priorities of federal agencies." He said: "[W]hat people don't tend to focus on in identity theft, is not only how it rips off the program and depletes the program from helping the people it was intended for." He described reports of "instances where the people who were intended beneficiaries, when they tried to show up for the benefit, couldn't get it."

• Responding to a question from Rep. Bill Foster about the importance of safer digital identification, Special Agent Dotson agreed that additional measures to secure Americans' identities would be helpful: "anytime you put in an extra level of identification, it's going to benefit the program, it's going to eliminate some fraud."

"It is our responsibility to ensure that relief funds during a crisis are available to all eligible Americans and are not stolen by those who seek to profit in times of pain and suffering," Chairman Clyburn said in his closing remarks. "I applaud the Biden Administration for taking steps to protect vital programs going forward and to bring perpetrators to justice."

Click here to view the Chairman's opening statement in full.

Click here to read today's report on the EIDL program.

Click here to read yesterday's staff memo noting key figures in pandemic fraud.

Click here to watch the full hearing and view the witnesses' written testimonies.