WASHINGTON, DC – Today, U.S. Senator Rob Portman (R-OH), Ranking Member of the Senate Homeland Security and Governmental Affairs Committee, questioned witnesses on approximately how much fraud has occurred as a result of pandemic spending, how much can be recovered, and what more can be done to recover improper payments. During a hearing on oversight and accountability for COVID-19 relief, Portman discussed possible corrective actions to avoid such fraud in the future.
A transcript of the questioning can be found below and a video can be found here.
Portman: “Thank you, Chairman. And again, thanks for the work you all have been doing in a very difficult situation. I want to start with Inspector General Turner and focus on the unemployment insurance fraud that you talked about. You said that we know that at least $163 billion in pandemic UI benefits were paid improperly, and a significant portion of that is attributable to fraud. You said that fraud cases have exploded by about a thousand percent. Could you describe your efforts to date to try to recover some of those improper payments? Approximately how much have we been able to recover so far, and what’s our plan to try to recover more of that $163 billion plus in the future?”
Larry D. Turner, Inspector General at the U.S. Department of Labor: “Just let me say that I can start off by answering your second question first. We have $830 million in terms of the monetary gains that we’ve found so far that we’ve been able to recover. It is a challenge because I think we believe that it has to be a proactive effort initially to stop and prevent fraud before it actually happens. The concern in terms of how we get it back, we again, we go back to when we started the program, we first started 20 years ago. We’ve identified several problems within the program, a lot of it is lack of staffing and lack of modernization. So that has allowed some of the fraud to occur. And although we talk about 18.71 percent as being the fraud rate, therefore all the 872 billion, that is what we believe, and that’s just the IG figure of the 163 billion you’re talking about, and we believe that it’s going to be somewhat difficult to get that back.
“Number one is because a lot of the funds have been expended before we actually are able to get it back because so many of the fraudsters have already spent it on high dollar value items, whether it be homes, whether it be vehicles or whatever. So some of that is hard to get back. A lot of it is also tied up in the courts in terms of restitution. Some of the ones that we have identified, it’s going to take years to actually see what the total amount of recovery will be.”
Portman: “Well, thank you for doing everything you can to get that tax payer money back, $830 million is a lot of money. On the other hand, it pales in comparison to the 163 billion doesn’t it? So whatever we can do to get that money back.”
Mr. Turner: “Yes, it does. And we take every loss, every dime of government money. We take that serious in trying to recoup all that we can.”
Portman: “Yeah, let us know how we can be more helpful, and you know part of the problem, you said, is that it’s converted into assets. Those assets can be seized as well. And you know, it seems to me that particularly with regard to some of the foreign nationals, that we should have a government wide approach to this getting more help from, in that case, the Department of Justice.
“So Chairman Horowitz, PRAC has identified a lot of gaps in existing data sources. You talked about this a little bit. So the lack of transparency means less accountability. What are the key gaps in the existing data sources that you see? And in your 2020, October 2020 report, you identified 13 corrective actions, all executive branch looks to me, to mitigate these gaps. Tell us how many of those 13 recommendations have been implemented.”
Michael E. Horowitz, Chair of the Pandemic Response Accountability Committee and Inspector General at the U.S. Department of Justice: “So on this issue Senator Portman, the gaps are many, as you indicated. We’ve outlined them in our two reports. Let me highlight two of them. There’s a significant issue with coding and putting sufficient information in about, naming what the money went for. Our second report has, lays out thousands of grants that have either program names associated with it or things like codes or initials. Nobody looking at that, not us as oversight professionals, the public looking to see where money went, would have any idea where that money went from looking at that reporting data. That’s not what I think Congress intended when they set up the Data Act and other mechanisms for reporting through USAspending.gov to report out for the public to learn how their money was being spent. So that’s one significant issue. Even when there are reports of where the money is spent, we’re finding thousands of instances where I’ve referred to it as gibberish in there, you can’t make heads or tails of what the money is for.
“Another major problem we found is going beyond the first level of spending to figure out where the money actually went to and how it’s actually being used. You can see oftentimes how agencies distributed the money in the first instance, but in many of these programs, as you know through these grant programs, the money goes even further downstream and there’s no information about that flow.
“Finally, the information reporting back from recipients, what did they do with the money? How did they spend it? One of the big questions we hear all the time is so the PPP program, $800 billion in the Payment Protection Program. How did that impact employment? We don’t know. The agency doesn’t know because the information isn’t being collected.”
Portman: “Well, huge gaps and understanding we need to get money out the door quickly, there’s no reason not to have that kind of coding and to understand where the money is going and then to follow the money to see whether it’s working.
“In terms of the amount stolen, $87 billion to $400 billion. That’s a pretty big range. We just learned from the IG at the Department of labor it’s 163 billion there alone, at least, so it’s more than 87 billion. Can you give us your best guess as the PRAC Chair and as someone who’s been looking at this for a long time and has some perspective on it, how much was stolen?”
Mr. Horowitz: “You know Senator I wish I could answer that right now. A couple of reasons that’s a challenge. First of all, we don’t have all the data just yet. Secondly, we have lots of cases ongoing and, of course, there’s a difference between an improper payment, of which there are, there’s billions and hundreds of billions of dollars of fraud and we’ve got to sort that out through the investigative process so I can’t give precision at all. I’m not even trying to give a wild guess yet at what the fraud number will be. It will be very large. The improper payment number, as the Comptroller General indicated, is disturbingly large. We know about just, for example, $3 billion went out the door right away to deceased payees through the IRS and the initial loan check distributions, 50,000 plus PPP loans went to individual entities on the do not pay list.”
Portman: “Well Chairman Horowitz give me your best educated guess. Is it less than $400 billion or more than $400 billion? That’s the top of the range.”
Mr. Horowitz: “Senator, I’m going to be careful in giving a guess. It’s certainly in the three digit billion number, how big it is I’m just not prepared to guess”
Portman: “You’re prepared to say it’s over 100 billion, but not prepared to say whether it’s 400 billion or 300 billion.”
Mr. Horowitz: “Well, I think in light of obviously just the UI numbers that IG Turner just mentioned, if you’re talking about $87 billion plus of potential fraud in that program…”
Mr. Horowitz: “163, I’m sorry, billion plus in that program, you are obviously already north of that number. And I know from SBA IG, the Payment Protection Program, the EIDL Program is the other place where we’re finding very substantial fraud.”
Portman: “Well, to help you, we want to get the Administrative False Claims Act done and we’re hoping to get that done in the Senate soon and again, with regard to these 13 corrective actions that you proposed, I’d like to know if you get back to us how many of those have been implemented, how many have not, and these are all administrative executive branch functions. So we can help perhaps to put some focus on that. Thank you, Mr. Chairman.”