Transcripts For CSPAN Senate Hearing On COVID-19 Scams 20240712

Good afternoon. I welcome you all here today to a hearing entitled protecting americans from covid19 scams. The nation continues to fight the unprecedented Public Health crisis brought on by the covid19 pandemic. It is our absolute . It is clear that resources are necessary for extinction missile crisis. However, during this time of National Emergency and needed recovery, there are scam artists who seek to take advantage of consumers, especially the most vulnerable communities, like that of our nation seniors. Sentinelthe Consumer Network reports that consumers across the u. S. Reported over 136,000 Different Cases of covid related scams, totaling approximately 90 million in total losses from january 1 to july 20, 2020. More specifically, at home in kansas over this same period of time, consumers report over 500 related cases, totaling 800,000 in financial losses. Everyone should also bear in mind that these are only the reported cases. It is fair to assume there are a number of scams that have not been reported today. The variety of these complex and innovative scams remains difficult for any consumer to wrap their head around, much less defend themselves against, whether it be health products, illegal robo calls pitching low health insurance, imposters claiming to be from federal agencies collecting mandatory payments, raising awareness to these practices is critical to educating consumers in protecting themselves. As such, this subcommittee has a efforts ton in their not only identify and address these harms, but also what exactly they are doing to prevent these harms from occurring in the first place. If there is a role for congress to play, we will need them today and in the future. I look forward to hearing from the federal trade commission on how there authorities are ,ddressing covid related scams and how enactment of the extension act, which i introduced with senator blumenthal, is essential for court naming these efforts. I would be interested to hear about protecting our seniors. It makes our competitions on how to prevent future scams during emergencies, and to distribute such information to seniors and their caregivers. Finally, the subcommittee looks forward to hearing more about Current Issues to identify, prosecute criminal organizations engaged in these illegal activities. If there are ways congress can assist to strengthen the current framework, joined with local agencies in the private sector to address the crimes, the subcommittee would welcome the suggestions. The Witness Panel provides a variety of different perspectives on the same important issue. Joining the subcommittee is the attorney general of the state of kansas. Mr. Andrew smith, director of the ftcs bureau of Consumer Protection. The founder and ceo of knowb4 inc. While the food and Drug Administration was not able to join us today, the agency has been active in protecting consumers around this pandemic and provided written testimony and agreed to respond to questions for the record from the Committee Members as well. Finally, u. S. Telecom provided a letter for the record describing the collaborative efforts of companies in the trace back group to actively trace and identify sources of robo calls that only increased in frequency during the pandemic. I ask that this letter be submitted for the record. Without objection it is. With that, i turned to senator blumenthal for his Opening Statement. Sen. Blumenthal thank you for having this hearing. In the wake of almost every disaster in this country, no matter how dire, there are always bottom feeders and con artists who exploit peoples fears and hopes. We all know, probably everybody watching and listening today knows there is no cure for covid19 and there is no vaccine or other medical prevention. That has not stopped the con artists and scams from exploiting peoples fears and hopes. In fact, they have defied both science and common decency in taking advantage of people financially. So, the scams range from the invasion of privacy and products that are useless, price gouging, mortgage and Student Loan Relief scams, false cures and fake tests, cons. But more than just financial loss, people face Real Health Care danger. False cures can kill. False cure not only take peoples money, they can kill, and deception can be deadly. So, there are a variety of products, and in fact, the ftc has issued 255 warning letters. Those 255 companies were defrauding and endangering consumers before they were caught. Those 255 companies are among hundreds of others that are still doing business. Those 255 companies have paid no cost, none, for breaking the law and harming people, despite the ftcs warning letters, and they are still doing business. They may have changed their marketing pitches to be slightly less deceptive and misleading, but they are still out there. And if warning letters will not protect consumers, we need stronger action. On march 9th, i wrote to the ftc e agessive action to stop the marketing and sale of fake coronavirus cures, warning letters to marketers, they simply fail to give consumers fair notice. They fail to inform. They fail to correct wrong information and they sent no real signal to the market. There needs to be real deterrence, not just just warning letters for or a slap on the wrist. Last monday i wrote the ftc and fda on the dozens of unsafe supplements being sold on amazon and other Online Marketplaces that claimed to kill viruses. Amazon still has supplements, tonics, probiotics, in the search for the covid here. We need to stop the snake oil salesman. I mentioned a number of them in my march 9th letter. In particular, tv evangelist jim baker, who recently promoted a celluloid silver on his show, claiming that it would eliminate viruses such as coronavirus. Another one, cellular silver itself claims to, quote, achieve 99. 99 complete kill against 660 microorganisms. Again, this is deception. We find these kinds of utterly false ads for aromatherapy, vivify, herbal amy. There is a list, and it is growing. Many of us i think hope that this crisis would pass swiftly and that we could return to a normal life, both the Health Care Crisis and the economic crisis. We are six months into this pandemic. There is no end in sight to this her and does national suffering. We have seen hardship and heartbreak. It has been aggravated, not reduced, by many of these false and misleading promises for products that threaten health care, endanger lives, take money from people unfairly and illegally, but also pose grave dangerous to Public Health, and if we can do something about them, mr. Chairman, we will accomplish a lot of good for the american people. Thank you. Senator blumenthal, thank you. We now will hear testimony from our witnesses and we will begin with the honorable derek schmidt, attorney general, state of kansas. Thank you, mr. Chairman. Chairman moran, thank you for the invitation and thank you for accommodating our remote testimony today. I will admit it is the first time ive presented congressional testimony without leaving the office of the attorney general, so i hope it lives up to your needs. Mr. Chairman, both you and the Ranking Member have laid out very well the framework in which we operate as a state level enforcement agency. You have my written testimony. I certainly wont read it. I thought i would use my minutes here for oral presentation to just emphasize a few of the highlights that we have already presented to you in writing. Let me first discuss one case, for the purpose of illustrating, not because that case is necessarily all that extraordinary, but it illustrates some of the types of Enforcement Actions at the state level that we are engaged in. I had already filed a lawsuit prior to the covid pandemic against a defendant. A fellow i actually have both civil and criminal litigation against impending against him, so i have to say the criminal charges are only accusations and that it is presumed innocent unless proven guilty. But on the civil side, we accused him of violating our states consumer laws by selling autopsy services, Tissue Recovery Services and other related types of Services Without having the qualifications to do so. We had him enjoined from operating with the state of kansas from Court Ordered during our litigation and then along came covid and we received information after the pandemic erupted in the public consciousness that our enjoined defendant had set up some new companies and was peddling essentially the same services, although in a new package outside of kansas, beyond where he was enjoined, and specifically he marketing his unqualified services to families and individuals who had loved ones that were deceased as a result of covid to do autopsy and tissue recoveries, which in my view, he is entirely unqualified. Because we have a case already pending, the investigation for the Additional Information did not take long. We were able to go back in front of our judge and receive an expanded temporary restraining order that prevents him from representing himself on any of this, including on the covid related services, and also bars him from leaving the state of kansas without case by case permission from our court. I use this case just to illustrate, you know, we often talk at the broad policy level about sort of the collective impact of cases and behaviors by groups of defendants, groups of companies, whatever it may be, and those are certainly important, but at the end of the day, Enforcement Actions, at least at the state level, typically boiled down to one defendant or an associated group of defendants, one group of victims, and one group of misconduct. So those are the types of cases we wind up dealing with with some regularity. Moving beyond that individual case, let me just mention some of the types of complaints, of scams and related misconduct we have been receiving since the pandemic erupted on this stage in march. We have investigations pending with respect to each of these categories. I wont be able to discuss the particular investigations, but i can certainly talk about the general approach and subject matter. , mr. E say, as both you chairman, and the Ranking Member already pointed out, the crooks and scam artists use the same tools they always use, trying to get into peoples pocketbooks. They just changed the messaging to reflect the current concerns about covid and to prey upon what people are currently worried about. We saw, for example, the first wave that we saw come in that continues were text message scams related to Contact Tracing, something that back in march most americans had never heard of. And the Text Messages would come in and claim along the lines that this is an official communication letting you know that you have been in contact with a person who has tested positive for covid19. Please click on this link in order to get more Public Health information to help you know what you need to do next. Of course, it was a phishing email. It provided an invitation to provide personal information that had nothing to do with any legitimate Public Health purpose. We put out an early consumer alert in our state on that to raise awareness and try to help people avoid the problem, because it is obviously much easier to prevent people from becoming a victim than it is to chase down their money when the scammers operate outside of our jurisdiction, often from offshore. Another type of scam that we have seen a lot of complaints on, as already mentioned by senator blumenthal, are covid prevention and treatment scams. It is everything you have read about, but they come in and all the usual way, sometimes by robocall, and sometimes by personal call, sometimes by text message, sometimes by email. We have seen ppe scams, plans to claims to be able to sell ppe to folks and then either there or it existed, but was subpar or it existed and it was good, but it was stolen and it was not theirs to sell. We have seen all of the above. We have seen scams related to stimulus checks, communications saying, folks, we are from the Small Business administration, we are from the irs, we are from fill in the blank Government Agency and we are here to assist you in making sure you get the payment to which you are entitled. And we have seen fraudulent unemployment claims, usually the objective there is to get personal information and a payment based on some type of identity theft. Finally, mr. Chairman, from our standpoint, the ability to cooperate with federal agencies is really critical. The vast majority of law country,nt in this especially on scams and frauds, is conducted in the state and local level. But we are geographically and jurisdictionally limited. And it makes no sense for us to be doing our thing in the territory that is kansas and for the federal agencies to be doing their thing in the territory that is kansas and us not to be coordinating. E always coordinate closely we have a very good working relationship with principal agencies you would expect for this type of work, whether it is hhs, oig, or the fbi, secret service, among others and we have readable those efforts during covid. Two things i might suggest for consideration on a policy standpoint related to that. I will close with this, mr. Chairman. One is i do think there is room and i suggested this to you before covid, and i think covid has proven the point i think there is room for a more structured relationship between statelevel enforcers and our regional federal Law Enforcement partners. The i mean by that is federal agencies receive a lot of information. We receive a lot of complaints from citizens. Sometimes they come from federal agencies. The feds are limited, in terms of size they choose to look at. The reality is they have to make choices and they look at the larger cases. That is perfectly understandable. Sometimes, and we have done this on occasion, it is helpful when our federal partners have received a complaint, and they work it up in part because they are trying to figure out what they got, and they have a violation of the law but it is not raise to the level of prosecution. It is very helpful, if they we have done that particularly with hhs, oig, and it makes us happy, because it gives us more happy,and it makes them because it is cases that they already invest time and effort in. And the second and final thing i would suggest for consideration, mr. Chairman, there is one thing pending in the senate that would be very helpful, i think, in advancing our capacity on some of this. It is senate bill 79. I know you are a cosponsor. Other members on the committee have talked about it. It is a measure that has been pending for years now. I would hope it would be part of the next stimulus bill, if there is one. It would remove what i think is an arbitrary area in federal law that prohibits states from using the medicaid control units to detect or prosecute patient medicaid patient abuse, as opposed to systemic fraud. But patient abuse, unless that abuse occurs at an institutional setting. What that means is, somebody who is ripping off and defrauding in a medicaid beneficiary in a Health Care Setting, trying i to sell them bogus cures or whatever it may be for covid, i currently am not allowed to use the assets, which are federallyfedera funded, and therefore subject to limitation, to investigate and prosecute that. I have to find out how to do that with other resources. It would be very helpful if that limitation were lifted swiftly, because it would allow us to deploy already existing and inplace prosecution resources investigation and prosecution resources to address noninstitutional covid scams. Thank you, mr. Chairman, for the opportunity to present the information. General, thank you for your help in protecting consumers. Thank you for your specific suggestions about actions. Now we turn to our next witness, mr. Andrew smith. He is the director of the bureau of the Consumer Protection at the federal trade commission. Mr. Smith thank you. I am andrew smith, director of the federal trade commissions bureau of Consumer Protection. My written statement represents the views. Not necessarily the views of the commission or individual commissioners. I am pleased to appear before you today to discuss protecting americans from covid19 scams. Despite the disruption, the bureau has managed to be productive, particularly with respect to scams taking advantage of covid19 fear and confusion. Many are outlined in my written testimony, but what is truly remarkable is how the entire bureau has visited to the occasion and made a major contribution against covid scams. Each of our eight divisions and eight regional offices is pulling its weight, while also keeping up with project loads and cases. Our marketing Practice Division is taking on robo calls. Businessous opportunities. Our Privacy Division is focused on Contact Tracing and issues around since learning. Our Enforcement Division is taking on fulfillment scams that promise ppe to consumers, but that never delivered. Collecting and analyzing complaint data for public consumption and improve Law Enforcement targeting. It remote courtroom appearance these, testimony and production. Until graphic shareable videos and other material in five different languages. It has also been conducting extensive outreach directly and through our partners in the media advocacy organizations and trade groups. Our regional offices are doing all of the above, actively engaged in investigation, litigation, and tros. Outreach, outreach, and more outreach, with state and regional partners. In fact, in the car on the way up here, i got email about a joint a that our Chicago Office had done with the Missouri Attorney general, a warning letter to two separate companies, warning them against making fake claims for covid relief in connection with hearing aids. Just within the last hour that we did that. None of this none of the work we , are doing, however, would be possible without the coordination with federal, state, and local partners, as well as the private sector. Working with fda, we sent letters to sellers. We have been working to halt illegal robo colors. Working with sba we have taken , action against companies smallng ppp financing to businesses without sba approval. Some actions have been in conjunction with doj or other criminal authorities executing , who execute search warrant at the same time we go to court for an emergency tro. State regulators are joining us or taking action against recipients of our ftc morning warning letters. Canada, sweden, and elsewhere have worked with us on investigations and enforcement. Some of the private partnerships have been just as remarkable. I mentioned u. S. Telecom robo call trace back initiative, which has been invaluable in leading us to the source of illegal robo calls. Andpartnerships with aarp bbb has enabled us to reach literally millions of consumers with our message. In fact, one aarp presentation early in the pandemic was viewed by more than 850,000 people. We are always open to new ideas about how to better educate and protect consumers from these pernicious covidrelated scams, and i look forward to our conversation on this topic. Thank you for the opportunity to testify. I look forward to your questions. Sen. Moran thank you, mr. Smith. Thank you. Now, the founder and chief executive officer. Members of the committee, thank you for the opportunity as we work towards developing solutions combating covid related scams. My name is stu sjourwerman. I am the ceo of knowb4. We are headquartered in florida , with offices in europe, south america, australia, and southeast asia. Our services are used by more than 80,000 organizations with 24 million employees around the globe. And for the last 30 years, i have served as an entrepreneur and security expert in the i. T. Industry. I founded an antimalware called sunbelt software, which got multiple awards and was acquired in 2010. As i was running the company, i realized the Human Element of security was being seriously neglected. So i decided to help organizations to manage the ongoing problem of cybercrimes. That is why i want to provide Security Awareness training. More than 30,000 organizations in a variety of industries, including highly regulated fields, such as health care, finance, insurance. They have mobilized their users as their last line of defense using knowb4. The primary objective is for employees, and of course, they are also our consumers, to make smarter security decisions by training them to become a human firewall and defense against social engineering. The shutdowns and the economic turmoil of the coronavirus pandemic has expended the cyberattack surface, making it even easier for hackers and scammers to do their nefarious acts. If we do not focus on the Human Element, consumers and employees, we ignore a crucial part of cybersecurity. Since the beginning of this year, covid19 has quickly we reshaped the cyber threat landscape. Over 192 coronavirusrelated phishing attacks have occurred per week, over the last month. No one is immune to being scammed. They target different sets of consumers. Scams go to Great Lengths to make their attacks as convincing as possible. And many of these scams have very few visible sites. That could tip off the recipients. Frequent social engineering testing. Here is one example. New data from security vendor tripwire highlights how a shift to Remote Working has changed the face of cybersecurity for both current and future work climate. Currently, the report 94 of organizations are more concerned about cybersecurity than before covid19. And they should be. The fact is that people are clicking on simulated covid19 phishing attacks at high rates. Coronavirusthemed emails are rampant. The emphasis in cybersecurity has traditionally been on hardware and software. However, we cannot solely rely on that. This strategy cannot catch everything. Nor does it address the need for a human firewall. Off, any support from congress that would direct Government Agencies to implement ongoing security registering, more than just training and include testing would be greatly beneficial, as we Work Together to bridge the gap in cybersecurity and protect american networks. Thank you for the opportunity to share perspective on cybersecurity and our industrys unique ability to protect citizens from rising covid19 engineering scams. Thank you for the time and effort you are putting into this important matter of social security. We will all work to serve the best interest of the public. Thank you. Sen. Moran thank you very much. Ms. Laura maccleery, policy director for the center for science in Public Interest, welcome. Maccleery thank you, chairman, for the honor of testifying today on this critical topic. I am the policy director for the center for science in the Public Interest a 50yearold , organization. Americans are facing an unprecedented challenge in keeping themselves and their families safe during a pandemic. Public Health Officials emphasize that we need to socially distance and wash our hands. We are looking for more to protect themselves. Those without scruples are actively exploiting consumer fear and anxiety. In truth our under regulated supplements dietary is risky. For the past three years we have , been collecting evidence of scans concerning supplements and sending it to the federal trade commission. This includes many misleading claims we found on products marketed to those suffering from opioid and tobacco addiction, as well supplements making false claims on female fertility. It is far too tempting to think that a powder or a supplement a globalus with pandemic. When the coronavirus appeared, we knew the hucksters would not be far behind. Wrote the sba and ftc about televangelist jim baker, whom we heard senator blumenthal describe. Advancing the claim that products containing Colloidal Silver could cure coronavirus. They had previously claimed it cured all venereal diseases, such as hiv. There is no evidence that silver supplements heal or treat any symptoms. Colloidal server, in large amounts, can be dangerous to kidneys and major organs. It can cause permanent discoloration of a persons skin or major organs. We also sent a request asking for enforcement on supplements being marketed as antiviral claims. Any supplement claiming to be a cure is immediately sent to the fda, because only drugs can cure or treat disease. Our market scan found 46 Dietary Supplements making illegal claims. We vote than for immediate removal. 26 of these supplements are still making antiviral claims on their own websites or on online stores. We continued to be on the look for scams related to the claims. In the pandemic, such untruth posed a clear and urgent danger. Consumers may fail to practice social distancing, endangering themselves and everyone around them. Asks, use m endangering themselves and everyone around them. They may harm themselves by taking dangerous doses or failing to seek appropriate treatment. But it is worse than that. The recent episode of podcast he advises consumers to , take the immunity supplements he sells and to deliberately contract covid19, because his supplements will allegedly reduce their symptoms. Dietary supplements are, in fact, poorly regulated. Congress established a barebones system of oversight , designed to be weak. Given the tremendous expansion of products and use by consumers, that system is failing. The fda and ftc need more funding and personnel for reinforcement. The fda in particular needs far better tools to make the marketplace transparent for regulators and consumers. In addition, congress should authorize states attorney laws andto improve improve accountability and reach. Fda should be given heightened regulatory powers against companies known to market to consumers, because they are marketed to vulnerable groups. We would appreciate the opportunity to work on oversight to ensure that consumers are protected from fraud. It should not take a pandemic to solutions, to require supplements, like any Product Consumer product, are truthfully enabled and marketed. Thank you and i am happy to answer any questions. Sen. Moran thank you very much for your presence and testimony. Let me begin with a question initially for mr. Smith. On april 14, senator blumenthal and i sent a letter asking if the ftc had the authority under its relatively flexible section v authority to enforce against unfair, deceptive act to deal with the issue of price gouging. On may 19, the chairman responded, saying there are legal challenges to address price gouging allegations, and they rely heavily on the doj and state attorney generals to enforce such activities. Historically, the ftc has not used its section v authority related to those acts unfair or deceptive acts or practices related related to price gouging. Would you have recommendations for this subcommittee as to what that should look like . Mr. Smith you are right. Right. You are right. Historically, the commission there have been supply shocks following natural disasters and the like. And the commission has been asked, you know, could the Unfairness Authority for the increased prices that follow the supply shocks . The commission has historically reluctant to use its authority Unfairness Authority in that way. At least 35 other states have the authority as well. They have seen fit to enact price gouging statutes, including kansas. Writtenschmidt in his remarks talked about that. And connecticut and a lot of other states. So, we think that a special law would be helpful here. With respect to that law, what we have and we have worked with some of your offices on this. What we would recommend is that the crisis to which the statute be clearly defined and be truly national in scope. Not one of these local or regional supply shocks that my call upon the National Federal trade commission to address so there would be a narrowly defined or clearly defined National Crisis that the statute applies to. It would be nice if it defines the type of materials or services that would be covered. For example, ppe in the current crisis. There should be a clearly defined trigger, such as an increase in price over a precrisis index. So a 25 increase in price, for example, is what some state laws account for. There should be some acknowledgment that increased cost might be legitimate. So, for example, if there is a disruption if a merchant needs to find alternative supplies, we and it resulted in increased costs, we do not want to discourage that. We want to encourage new entrants into the marketplace. We do not want to discourage people from providing Critical Services their costs i think those three or four items that i outlined would be helpful. Sen. Moran let me turn to the attorney general. Attorney general schmidt, we do have a law in place. Tell me, would you describe your efforts in enforcing law . Ag schmidt we do, after the 9 11 attacks, the state of kansas enacted our profiteering from disaster statute. The way it is structured, it is in effect only in the time and place of a declared state of emergency by the governor or the president. Those are the two triggers. The standard is any unjustified increase of pricing, as compared with a particular price or product. Unjustified that there is a increase is unjustified that there is a presumption that something was unjustified, although if it is a passthrough cost, it negates the presumption and operates as a defense. It applies to what the statute calls necessary goods or services, essentially things that consumers are likely to need more of as a result of the particular emergency. That is the structure of our statute. To your question about our efforts to enforce it, it has been in effect in kansas in a more widespread way than ever before. We have approached this. We have received, last i looked, 400 complaints from kansans about that statute. We have investigated them all. Or we are investigating them all. Generally speaking we have , approached this through education or engagement with the supplier and retailer. A lot of times, we discover they did not know that it existed, because it is so rarely in effect. Other times, it is so plain on its face that they are just passing through costs, so we can go up the supply chain. We have tried to approach it. We have not actually had to file an enforcement action. We have had a number of suppliers change their behavior. , once we have engaged with them, however. Sen. Moran thank you. I now turn to a former state attorney general, the Ranking Member, senator blumenthal. Blumenthal i want to welcome you particularly attorney general smith, thank , you for the good work you are doing out there. I think you provide evidence as to one of the recommendation made aboutmaccleery the need for authority on the part of states attorney general to enforce federal laws. Let me ask, if i may, mr. Smith, what do you think about getting giving state attorneys general Broader Authority . Mr. Smith generally i am speaking for myself, not for the commission or any state commissioner. A lot of the Consumer Protection laws that we currently enforce have authority to enforce them as well. I think that is terrific and it is a big help for us. If the state attorneys general are willing to share some of the load, with respect to enforcement, we are delighted for that. I would say that when there is a provision permitting state attorneys general enforcement the federal trade commission or Relevant Authority might be has the opportunity to receive notice of the case before being filed, but with those safeguards, traditionally, we at the federal trade commission have been in favor of thee a. G. Enforcement of federal statutes that we enforce. Sen. Blumenthal ms. Maccleery, i want to thank you for the work that your organization does. The center for science in the Public Interest really does magnificent research and policy formulation. Not only is there a financial cost, but they have adverse side effects. The sense of false security may cause the kinds of dangers that they pose, when people talk about them and exaggerate them to their friends or neighbors. I think there is a special responsibility on the part of everyone involved in promoting these products, and i know in your testimony that you make a reference to amazon, ebay, and etsy. They must do a far better job of removing misleading claims and products. Shouldnt they be held accountable . Ms. Maccleery yes. I think there has been a perception that the thirdparty platforms are just a marketplace without a stake in the game. Increasingly, we see that is not the right understanding of the model. They profit from having all the sellers on their platform. They learned tremendous amounts about the marketplace and behavior of buyers and sellers. They sell them directly. They should be asked to patrol the viability of claims that they are managing. The antiviral complaints that we have filed have been very disappointing to see, the lack of response on the part of amazon to those. They are doing some coordination understanding from news reports, with the department of homeland security, around covid products specifically marketed to treat or prevent covid, which is commendable. What we would like to do is see more of that shared enforcement model. Amazon has been found liable in court for selling foods that should have been recalled, after they were identified by the cdc as having a foodborne pathogen. In addition, we were working with the family that lost their son for unwashed poppyseed tea, which is an opiate, that was sold through amazon in bulk amounts to be used for this purpose. It was clear from the comments that these were used for drug purposes. Those are the kinds of things that we see. We think there could be a much more compelling partnership between that platforms and the government to deal with fraud and abuse. Sen. Blumenthal they could be more aggressive. And dont they have an obligation to be much more aggressive . If you search for covid cure on amazon, you still find sponsored banners for probiotics and supplements. Arent they complicit, along with other marketplaces . Have you been satisfied with their response . . O your complaints ms. Maccleery they have a tricky job controlling the algorithm, which might in part be learning from Consumer Practices in realtime on the site. I dont know enough about how amazons Search Engine works, because it is not very clear looking over the site protocols. So that would be an area for investigation by congress or the agencies in consultation with the company. I do think, where we have flagged items, like the antiviral claims, which are, per se, illegal claims, according to the food and Drug Administration, they have a clear obligation to act. Supplementse also that are contaminated with prescription drugs have been sold through amazon. Those need to be expeditiously removed as soon as it is known that they are tainted. Sen. Blumenthal my first round, i hope there will be a second has expired. Time i yield. Sen. Moran we are following our practice of not informing Committee Members whether there will be a second round or not. Until we determine how many people are here. We now turn to the full committee chairman. Senator wicker, thank you for being here. Sen. Wicker thank you, senator moran. I appreciate the work that you and senator blumenthal are doing on this issue. I have a prepared statement that i will ask to be included in the record, following the Opening Statement of senator blumenthal. Sen. Moran without objection. Sen. Worker thank you very much. Wicker thank you very much. I enjoyed the testimony. Mr. Smith, we are looking right now in the house and senate at covid19 response bill, phase four. This is not a Good Opportunity for, i think, us to see if you need anything in the bill. Ms. Maccleery said the ftc does not have enough funding or enforcement tools to go after the scammers. But you have not asked for any additional equivalents. Fulltime equivalents. One thing i would like for you to discuss is, you have enough resources to fulfill the task we that we are talking about today. And then with regard to following up on senator blumenthals question about state attorneys general, maybe that is a way for us to spread some of the responsibility. Let the 15 attorneys general be involved in this. When you have been able to farm out work to attorneys general, does that involve a state enforcement mechanism only, or are there damages requested . Do you ever outsource that to in enforcing anything that the ftc does . If you could comment, i would appreciate that. Mr. Smith ok. Thank you. So i will go with resources first. At this point, we have not identified any costs that we cannot cover. But we do appreciate very much the additional funding the House Appropriation Committee has recommended in fy 2020. 1. We also appreciate the extra resources we got in fy 2020. Whatever resources we get, we will put to good use. I will say we have two very specific needs. The first is legislation to address our authority under section 13 b of the ftc act. This is the provision we use to return money to consumers. For decades, boards around the country have said we have authority to obtain equitable monetary relief under section 13 b. Very recently, the court in the seventh circuit has questioned that. So this is the first court to do that. The great weight of the authority is felt on the ftc side. This is an issue that has been teed up in front of the Supreme Court for next term. We expect the court to resolve that issue by the middle of 2021. But an adverse ruling from the Supreme Court would mean that the ftc would lose the ability to get monetary relief under the under the ftc act, as we have been doing for decades. Because the stakes are so high, we are asking congress to act now, so the ftc can continue returning money to consumers. The second issue we could use some help is the reauthorization of the safe web act. The safe web act was last reauthorized in 2012. Right . 2012. It will sunset on september 30 of this year. It extends the ftc udap authority, the unfair and deceptive practices authority, on content that has an effect on u. S. Consumers. This allows us to address crossborder fraud, which is a real problem. Since 2015, we have had 310,000 complaints from u. S. Consumers against foreign businesses. The other thing it allows us to do is more easily exchange confidential investigative information with our foreign counterparts. We relied on safe web to respond to information sharing requests 162 from 40 enforcement agencies in 17 foreign countries. It has been critically important. A lot of the covid19 fraud we see is also coming from overseas or canada. Two things we could really use help with, 13 b and safe web. With respect to state a. G. s, we routinely have task force we participate in task forces, regular meetings with our state agent counterparts. They will frequently be coplaintiffs in our cases where cases,cularly charity where they have a better authority than we do to return money to consumers. We sometimes refer cases to them. They sometimes refer cases to us. We have, you know, one of our biggest recent cases was our 170 million settlement with google and youtube. That was a case that we did with the new York Attorney general. Sen. Wicker do they farm it out to the trial bar . Mr. Smith we have not farmed anything out to the trial bar. Our state partners, as far as i know, we have been dealing with , you know, assistant attorneys general. We have not been dealing with private lawyers who are hired by the attorney general. In my experience, that has been what we have seen. But i have not also been participating in a lot of these task forces. That is generally done by the folks in our regional offices. So i cannot say for sure about outsourcing to a trial bar, but i have never heard about it. In our cases. Sen. Wicker mr. Chairman, we are way over time. I would note you and senator thune, senator blackman, and i have a data privacy bill that would deal with this issue of covid19. Perhaps on the record, our witnesses might tell us if they have had a chance to look at that, and if they want to go ahead, and on the record, enthusiastically endorse this great piece of legislation. Thank you, mr. Chairman. Mr. Chairman, would you like the witnesses to respond to that question now . Sen. Moran i will be glad to. I do not want to intrude on your time. But if they can respond within your constraints. Let us do it very quickly. A. G. Schmidt . Based on the sponsors, i have no doubt it is excellent legislation, but i have not had a chance to review it. That means you are offending half the members of the United States senate. [laughter] mr. Smith . Mr. Smith i cannot speak for the commission. We institutionally believe Contract Tracing legislation would be a big help. Consumers need to trust Contact Tracing apps if they are going to work and after Developers Need to know the rules of the road. The commission has testified in favor of broad privacy legislation. That feeling, Contact Tracing legislation would be great, too. Mr. Sjourwerman . A . Mr. Sjourwerman is this within your domain . Mr. Sjourwerman i have not been able to look at this particular legislation. I cannot afford an opinion. Of course these things are important. They cover part of the problem. If you take this slightly more, you would likely see National Security standards, not the work of current different state security standards. Which can prevent a multitude of these types of scams in a variety of ways, but maybe we can come back to that particular issue a little later. Sen. Moran yes sir, thank you. Ms. Maccleery . Ms. Maccleery we would be pleased to review the bill, but i have not had a chance to focus on data privacy. I regret to say. I do have more information on funding and resources, if that is of interest to the chair. Sen. Moran i will try to make certain each of you have an opportunity to respond at the end of the hearing to catch up with anything you would like to add. Let me turn now to senator klobuchar, who has been patiently waiting. Thank you very much, mr. Chairman. Thank you senator blumenthal as well for holding this really important hearing today. I think we all know we are in a Public Health crisis, but also an economic crisis. Sadly, when that happens, there are people who prey on peoples vulnerability. While scammers have used, as you pointed out at the beginning of your remarks, both moran and blumenthal, they have used the coronavirus to exploit americans fears, the impact of the scam on seniors has been particularly disturbing. Reports have found eight out of 10 people in this country who have lost their lives to coronavirus are seniors. The seniors who also lose an estimated 3 billion annually to financial scams in a normal time have been targeted for additional scams. Just last week, in my state, we had a scammer that pretended to be the child of an elderly minnesotan and convinced that person to send 25,000 to an address in connecticut. Not to pick on your state, senator blumenthal, but yes, connecticut. That is why senator moran and i introduced the protecting seniors from emergency scams act in may to help prevent scammers from taking advantage of seniors during the pandemic. We have also called on the ftc to protect seniors from some of the Contact Tracing scams that you have all discussed and to educate seniors on how to protect themselves. So i think i would start with ms. Maccleery. Could you talk about how it is critical for seniors and their caregivers to have access to resources from Law Enforcement, adult protective agencies, to help combat these coronavirus scams, and also with the rise of Online Shopping fraud, in which Consumer Products are ordered online, what is the ftc doing to protect seniors from these types of scams . Ms. Maccleery thank you so much, senator. I so appreciate the care that you and the chairman are showing for this very vulnerable population. We know that seniors, for example, in our work, are very heavy users of Dietary Supplements. 82 of people ages 85 to 64 and 55 to 64 and 88 of those 65 or older take vitamins and supplements. We have been very concerned the supplements actually deliver on the benefits that are promised on the label. We have sued cvs several years ago for producing a supplement that was a cvs label that promised to have Macular Degeneration ingredients in it that were effective and in fact lacked those ingredients, even though it was sold next to a product that had the appropriate ingredients. Seniors are particularly vulnerable to supplement scams in the way that we have highlighted. They also tend to be vulnerable to the kinds of marketing scams in the supplement marketplace, buybackyou know, guarantees and the moneyback promises and fishing scams related to those product marketing. That is of real concern to us. Their health makes them more vulnerable to supplements or the use of supplements for valid medical treatment. It may delay a visit to a doctor that is actually needed. Sen. Klobuchar thank you. Mr. Smith, i will direct this towards you. Is the ftc planning to take additional measures to better protect seniors . If they are the victim of a Contact Tracing scam . And i know the ftc is coordinating with the doj and hhs to warn consumers. Can you highlight the measures the ftc is taking as part of this coordination . Mr. Smith sure. Older americans have been priority of ours for a long time. , ournow, interestingly Research Shows that Older Americans are not necessarily victimized at a higher rate than younger people. In fact, they are victimized at a somewhat lower rate. But they suffer more losses when they do suffer a monetary loss. Some of that has to do with scams, like the grandparents scam that senator klobuchar referenced which is really , pernicious and can lead to big losses. Our efforts, in addition to Law Enforcement efforts, our efforts are focused on educating consumers, particularly to these scams. One of our most effective tools has been a campaign called pass it on. And what pass it on does, it is a series of articles, presentations, bookmarks, and videos, and what it does, it is targeted at Older Americans and it says, look, you need to give this information to your friend, your neighbor, your family member. You need to educate them about about this scam. And it allows older people to capitalize on their Life Experience and their wisdom in educating others. And of course in educating others, they are also educating themselves. So we have distributed millions of pieces of this information, and we have found it is effective, but you are absolutely right. There are always new scams, particularly involving Contact Tracing, which where they are the scammers are going to find Fertile Ground with consumers. Colder consumers. Sen. Klobuchar thank you. One last question. Mr. Schmidt, you mentioned legislation enacted in kansas to protect data. Do you think providing strong protections for consumers personal data is helpful in making these Contact Tracing apps more effective . What more do you think we should be doing federally on the personal data . A number of us have been trying to work on privacy issues, when as well when it comes to personal data. This goes way beyond the pandemic. I think it has only put a magnifying glass on this issue. And the tech company like. What do you think would be helpful . Thesmith right, so commission has testified in favor of Data Security legislation that would Civil Penalty Authority and expanded jurisdiction by the ftc over common carriers and nonprofits. A majority of commissioners testified for something similar with respect to privacy legislation. Speaking for myself, privacy legislation would be really helpful now to both tell App Developers and others who might be working on Contact Tracing issues, let them know what the rules of the road are, what they is protected, what they can collect, what the contours of the identified and aggregated data are, as an example. And it also would build confidence by consumers. Consumers need to be confident in these apps if they are going to use them, if they are going to be effective. Sen. Klobuchar mr. Schmidt, could you also answer that . Thanks. A. G. Schmidt we follow with interest many of your discussions and debates in washington on broader privacy issues. From a state standpoint, we always have generalized concerns about preemption, the tension between state authority on the one hand and on the other hand the benefits of a national standard. Setting that bigger issue aside that i assume would also be a challenge for you at this point if you were trying to do something quickly on this federally, kansas did our legislature was in special session in june, and we had at that point enact, at the suggestion of our office, what we call the Contact Tracing privacy act at the state level. It is characterized as stopgap legislation. It sunsets next may. It is designed to fill the need while we have a more thoughtful review of what the law can look like with respect to Contact Tracing. It has multiple parts, some of which are not relevant to your question. But essentially it requires that Contact Tracing was largely unregulated, even though it has deep roots and is a critically important Public Health tool. At least in kansas, there were not many rules of the road. It operated the way Public Health officials chose to operate it. Obviously the scale of the Covid Response has brought a lot more people into that business. And, therefore, invited discussion about what the rules ought to be. Our new rule does things such as requiring specifying participation in Contact Tracing, whether it is electronic or whether it is the oldfashioned way, with pencil and pen knocking on the door. It is voluntary. We think that is important. It reduces some of the pushback citizens have when the government tells them they must provide information under some sort of penalty. Our statute, again, a stopgap , actually flat prohibits the use of cell phone Location Information for most of the app s, for Contact Tracing, our Public Health department at the state level said they were not interested at this point. We thought it advisable to put the whole thing on hold until there is more thoughtful review in the spirit of trying to reassure folks it is ok to participate without having to wonder what happens to your information. We also, in that statute, ensure that there cant be your Credit Mission creep. We ensure the Data Collected for covid, when it is no longer needed for that Contact Tracing purpose, must be safely and securely destroyed. There is obviously going to be tremendous value in this data, for reasons we may not have thought about. It may be beneficial. Again, folks may be really discouraged from dissipating if they think it is an open door. That has been our approach. Sen. Klobuchar thank you. Thank you, senator moran. Sen. Moran you are welcome, senator klobuchar. Now, senator fischer. You, mr. Her thank chairman. I appreciate you holding this hearing today. Americans have to be suspicious of all kinds of fraud. Mailboxes to their front doors. On top of this, the coronavirus pandemic has been the convergence of all of these potential scams. It is increasingly difficult to determine what is real and what is not. We saw this recently in my state when consumers were confused after they received their valid stimulus money from the c. A. R. E. S. Act in the form of prepaid debit cards from the u. S. Treasury. Many of them thought it was a scam, so they threw them away. Thankfully, the treasury has been responsive on solving this issue. We have also seen skepticism from consumers contacted from Government Agencies for Contact Tracing efforts. Mr. Smith, in light of these going forward, what can we do to improve trusted channels between the federal government . Mr. Smith well, what we are doing at the ftc is educating consumers about Contact Tracing and the like, so that they can be we want consumers to engage with contact tracers. So we dont want them simply to be afraid and to shut down when they get that email. Our message is dont be afraid to engage with contact tracers. But the first thing is, dont click on any link in the text message, just like general schmidt said. Second, the contact tracer, a legitimate contact tracer, will never ask you for money, for your bank account, or for your immigration status. In addition, on our website, ftc. Gov coronavirus scams, we have Contact Information for all the different state boards of health and other information about Contact Tracing to educate consumers about legitimate Contact Tracing. But you are absolutely right that we need to build trust. Consumers need to be able to trust these apps, if they are going to work in the way they are intended to work. Sen. Fisher what are you looking at for best practices there . Are you trying to reach out to State Government more to be able to Work Together, so that we can build that Consumer Confidence . Mr. Smith well, we have issued a great deal of business guidance, including business guidance for contact tracers and for App Developers. We have been counseling App Developers to employ privacy and security by design at the beginning of the App Development process, not simply build it in at the end. That they include Privacy Protection design features for their apps, such as decentralization of data, so the data lives on individual devices rather than one centralized database. That they use anonymous data or , even better, aggregated data, so think heat maps for coronavirus, for these Contact Tracing apps. They use the data only for the stated purposes, just like general schmidt said. If you are collecting it for Public Health, you use it for that. You use it for nothing else. You delete the data when you no longer need it. Those best practices would be relevant to a private entity developing a Contact Tracing app or to a state board of health that is developing a Contact Tracing app. Fischer thank you. General schmidt, i noticed you commented on the enforcement action that your office has taken related to covid19 scams. As you have carried out those investigations, do you feel there has been adequate and proactive coordination from the ftc as well as the Justice Department with state a. G. s on these covidrelated issues and other issues as well . A. G. Schmidt yes i do, senator. We have a very good preexisting relationship with our counterparts at the relevant federal agencies, both in the regional offices, to the extent they are in kansas city, at least, or nationally, to the extent they may not have a regional presence in kansas city. I think those preexisting relationships have been really helpful in allowing us to simplify how we normally Work Together in this context. I feel very good about that. I i suggested in my opening, think there might be room to maybe, in a more institutional way i dont mean legislation in a more institutional way, to ensure relationships that cause cases to flow federal to state or state to federal for example, between the stages, that that may happen, even when there is changes of personnel, because much of it becomes based on personal relationships, and you have to reinvent the wheel. Fischer thank you, mr. Chairman. Sen. Moran thank you, senator fischer. We are pleased to have the Ranking Member of the full committee here. Senator cantwell. Canwell thank you, mr. Chairman. Thank you to my colleague, senator blumenthal, for being the vice chair of the committee and for all your hard work on these issues. I think what i will try to do is just talk about some very broad issues, if i could. I think my colleagues have covered a lot of territory. Let me thank you for mentioning, senator klobuchar, the Data Security issue. It really feels Data Security is and should be included. Thank you for endorsing that concept of Data Security, along with privacy legislation overall. On this issue of the usual approach, which is a firsttime warning, do the witnesses agree the ftc needs a firsttime Civil Penalty Authority, when it comes to some of these covid you know, deceptive information and statements, given the severity of the problem . I dont know, ms. Maccleery, i dont know what you have to say, or whether mr. Smith wants to comment on that. Ms. Maccleery i think the warning tool has limitations. There are unscrupulous actors in the marketplace that may disregard warning letters. It is enormously inefficient for the ftc to have to track and go after bad actors multiple times. We have seen a pattern, even in supplements tinted with drugs, amphetamines, they will issue a warning letter. The company will come back with it, a slightly tweaked product. You have a small number of bad actors, and the letter of authority is to get their attention. Sen. Cantwell well, we definitely agree. We were involved in drafting a new law as a related to the same on the opiod crisis. We did not put enough oomph behind the penalties. We should look at this, while pandemic when people are reaching for solutions seems a reasonable approach. Did you want to add anything to that . I would say, i think your question like the opiate law where under section five we bring enforcement action and are titled to equitable monetary relief, but no penalties. If we get it amid a straight of an administrative order the , second go around we can get Civil Penalties. That is what your question was focused on, not so much the warning letters. I think the warning letters in the middle of a pandemic on things think might be our lifesaving or could cause fatalities, it seems that the warning letter may not be Strong Enough even the complexity of given the complexity of the environment we are in. We can go to court. With respect to every company we sent a warning letter to, we can go to court or to a judge and get an injunction. We have chosen the warning letter because what we have found particularly twostate cures, what we have found is the warning letters are astonishingly effective. We can get claims taken down, and where we cannot, we follow up with Law Enforcement in a federal court or in front of our Administrative Law judges. What about flexibility . What youre advocating is another path like the opiate law where we get Civil Penalties at our first bite of the apple. That is a better question for the commission, i would get out over my skis. What about our definition of price gouging. The Unfairness Authority that is what we in washington, unfair and deceptive practices are similar to where you are, but it is quite broad. Do we need to do more on defining the price gouging standard . Yes. It would be helpful to have a price gouging statute. If congress wanted us to address price gouging, it would be hopeful to have a specific authority laid out, specific guidelines for how high is too high. States have the same ftc act authority that we do, the unfair and deceptive act practices. They had nonetheless seen fit to an act of price gouging statute. If you want us to address price gouging, the statute would be a big help. We have been involved in establishing a standard for you on manipulation. We thought that was helpful. We think clarity is our friend. We think like with the if they can get around it, they will. The stronger deterrent and the penalties the better in my opinion. One last question. I was going to ask about lets see. What else do we need to do on some of these some of the larger organizations that have taken advantage of state on their paychecks and the programs for unemployment . Are you talking about Large Businesses that have obtained Paycheck Protection Program loans . I am talking about the abuse of people signing up in the state of washington we have had implanted checks given to rings. General schmidt from kansas may have thoughts on that. From the ftcs perspective, we send it to the irs or take it to their inspector general. That is real criminal theft. It is not so much an ftc problem, but general schmidt may have additional thoughts. I am wondering what we do to share that data. Identity theft and these issues, i do not know how many states have addressed this. If general schmidt wants to offer something. The only thing i might add that we did not dwell on earlier, with respect to unemployment, it may not be what you are asking about. We have a lot of complaints from a folks alleging to broaden and benefit payments, identity theft, creating false identities to create payment. Under kansas law, i do not have you original criminal jurisdiction for that crime. We have been referring those to the error state department of labor which handles unemployment programs, and they work with the federal counterparts when it is appropriate to do so. A little outside our authority. Thank you. Senator cantwell, thank you very much. Thank you, mr. Chairman. Thank you, Ranking Member, for having this hearing. I will start with senator cantwell left off, the fraud on unemployment compensation. I am from west virginia. We just had an instance where our unemployment basically said that somebody from the same ip address applied 50,000 different ways to get a benefit with him and him different names, or tweaking different names and im wondering, attorney general schmidt, you mentioned that this is an issue that has come up in kansas, but im wondering is it the magnitude in which we are seeing . And also, when Additional Resources but you need to come that something of this nature when a program is created this rapidly, but also, to the great benefit of people. Senator, from the Vantage Point of the kansas turning attorney generals office, we have not seen that scope but i could say we might not. We are not necessarily the face of the public response. You know, the only thing i might add is something we have talked and thought about it here because weve seen the reports in other states, problems have been widespread and i dont think i am seeing the data. There are other programs weather where there is a federalstate partnership as there is now with the unappointed payment from the federal government to assist in extending benefits. Medicaid Program Comes to mind, and in some of those programs, congress has seen fit to create certain requirements for fraud policing by the state in order to participate in the program. For example, medicaid Fraud Control units i mentioned earlier. I am not prepared to advocate that in the unemployment context, but it seems a logical area to look, what it those whether those programs that has shared funding would make sense in the unappointed context for fraud enforcement. I think a lot of our systems are overwhelmed and to try to determined where the front lines lies and howfraud to detect it i think is an issue. Im going to stick with you mr. Attorney general because i want to ask something that comes up in this committee all the time, that has to be related to scams and either our elderly and others and i appreciate senator klobuchar bringing up the scamming of the elderly, that is an issue im very concerned about in all aspects. We do have a lack of broadband in rural areas, and what you find is the best way to really transmit to people who may not have broadband connectivity, the possibility of false advertising or false claims or, you know, cures that are going to cure it all or prevent you from ever getting covid. How do you address that . We are the lead Consumer Protection agency for the state of the state level in kansas, and because of that, in ordinary, times we have a very robust Consumer Education and prevention program. We do it online, as you suggest. We also do a lot of in person visitations around the state, whether it is Nursing Homes, senior center, people and a large portion of their time talking with kansas and if you avoid losing money in the first place, better for, you better for, us we can focus our enforcement on the back end. So, thats how we normally do it, and your question implies we are less mobile. We are communicating remotely. That disables one of our principal tools for reaching kansans, which is go with a are in person and talk with them. We struggle with that. We are doing more online. We recognize the limits as you suggest. There are areas that will not be effective because our consumers are not able to access that programming. Nonetheless, we think there is a significant number of kansans who we do not normally reach online. We could reach online, technologically they are able, so we are doing that because it is better than not doing anything. I have struggled very much with how we reach those pockets of individuals in the state that we cannot reach digitally because they do not have suitable internet access. We cannot reach them physically right now because of covid related restrictions. I do not have a good answer. That is a real problem because those are a vulnerable population. It brings up a difficult question. I have one more question to mr. Smith. We have seen a big increase in scams obviously, and they are heading toward the vulnerable population. What limitations does the ftc have, and i have created an act with senator gardner which would increase penalties for false advertising. I am wondering if that would be a helpful tool, if you are aware of that, and what additional tools you might need in the ftc to break up these large advertising scams that we see. I am familiar with the act, and i think we may have provided Technical Assistance and her to your offices, and we are happy to continue working with your office on that law. With respect to specific tools that we could use, i mentioned earlier reauthorizing the safe web act. I think senators moran and blumenthal have introduced a cosponsored bill that would reauthorize the safe web act. That is quickly important for Law Enforcement. Some of these covid scams come from outside the country. The second thing is to clarify our authority under section 13b of the ftc act. For decades we had authority to obtain equitable monetary relief under section 13b. And recently there has been one Important Court of appeals that has called into question that authority. That issue is now in front of the Supreme Court, and will probably be resolved sometime next year about this time. In the meantime, it would be great if congress could act to clarify our authority that we can get and redress. A vote has been called. I have been very lenient in time. I will try to be less so. Senator udall, it is your turn. Thank you chairman moran and Ranking Member blumenthal for calling this hearing on the important issue of protecting our constituents from covid19 scams. There is Unprecedented Demand for products to protect against the transmission of coronavirus and the scramble to keep our families workers and customers safe has led to a surge in scams and fraud against consumers. The ftc has received over 136,000 reports of scams related to covid19, including 477 from new mexico, and people have reported losing nearly 90 million on these and other covid related frauds. But is not just individual consumers that are at risk here. There are increasing reports of companies misrepresenting themselves in contract with local, state, and federal agencies to procure ppe. A 3 Million Health Service Contract was given to a former white house official to provide one million respirator masks for use in the indian Health Service that is serving the Navajo Nation. It did not meet, the masks did not meet the fda standards for use in Health Care Settings by health care providers. I want to address the issue of substandard masks. Thousands procured were determined to be substandard and not for medical use for an ihs hospital serving the Navajo Nation in arizona. I brought this up directly with the ihs director and told him this was absolutely unacceptable. Thankfully the masks were never used, but hhs and fda ought to be savvy to consumers when it comes to Workplace Safety in the medical field. I will have a written question for our in writing, when it comes from the fda but much more clearly, what can this Administration Due to better protect workers both in the private sector and government, and do you support osha emergency standards . Absolutely. We are absolutely on the record of supporting oshas development of an emergency standard for workers at risk of contacting and developing covid. We are particularly worried about meatpacking workers were we have seen a large number of deaths even among inspectors but also workers and maybe something about the working conditions in close proximity that leave these to be hotspots. Workers really need these protections in order to maintain our food supply and keep going to work. We need a healthy workforce. We are backing the measures that have come out of congress and several packages for an Emergency Temporary Standard for workers. In addition, we think there should be a concerted effort to develop mask standards for workers in the Health Care Setting. We know there is some of that going on under way. Some sort of concerted attention by the fda to set standards. Masks in the Health Care Setting have been to protect the patient from infection by the health care worker, not necessarily to protect the worker. There needs to be a new and urgent effort to ensure workers in the settings where they are dealing with patients are also protected. Are platforms doing enough to put a stop to questionable goods and fraudulent goods before they are sold . There has been a concerted effort by amazon and other platforms to work with federal authorities and get rid of covid cures and treatments. Behind that, there is a lot more work to do. In general we need a plan for when platforms are selling supplements to public, and the false claims they are making, and actively patrolling them, not just during a pandemic. Not all platforms are making enough of an effort. We have looked across a number of platforms, and not all of them are free of products that are explicitly promising to treat or prevent coronavirus, which is a problem. Thank you. Mr. Chairman, knowing a vote is on and we are pressed her time, i will submit the rest of my questions. I believe there is a role for the attorneys general to play here, and i hope our witnesses will answer that question on the record. I would yield back at this time. Thank you so much. Senator baldwin. Can you hear me . Yes maam. Can you see me . We can. Thank you. Thank you, mr. Chairman. This march i introduced a bipartisan bill to incentivize states to provide compensation to elderly victims of financial fraud, abuse, and exploitation. I called it ediths bill after learning the story of her and her family, who wrote me a letter asking that i work on legislation to help seniors get money back when it is stolen from them, especially when it is earned over a lifetime of hard work. General schmidt, do you believe elder financial fraud and abuse is underreported, and are you aware of any National Programs or efforts that would incentivize states to provide compensation or restitution to these victims if they are unable to recover restitution from the offenders themselves . Senator, i absolutely believe elder fraud and Financial Abuse are underreported. All of the data i have ever reviewed has been substantial and suggests what order of magnitude. In terms of your question about compensation, i am not aware of it, any program that provides compensation to elder victims of crime. There is the Crime Victims Compensation Program generally that i am not sure all states participate in. Generally speaking, that compensation is restricted to certain categories of costs associated with Violent Crime as opposed to financial losses. We make a priority in kansas in our Enforcement Actions to put restitution first, and the states recovery, that usually is more important at the collection stage than the liability stage. In principle, it would make a good conversation to talk about whether there is some Compensation Program to assist somebody who have lost their life savings as a result of scams. Thank you for that. Edith and her family were scammed out of more than 80,000 by the longtime financial advisor. They fear they will never get that money back that was stolen from them. Ediths family was able to uncover the fraud because edith asked for help, and her soninlaw recognized there was a problem when he was attempting to reconcile and balance her checkbook. General schmidt, in april you wrote a letter to Senate Leadership in which you and other attorneys general noted that emergencies and disasters situations invite abuse and exploitation of vulnerable and isolated populations. I want to know if you are concerned with seniors who are isolated from family members, loved ones, caregivers during the pandemic, and the support networks that they usually rely on are being targeted by scammers. How does this separation from typical caregivers make seniors more vulnerable and susceptible to such scams . Senator, this is one of the things that keeps me up at night right now. We have focused tremendously in the Kansas Attorney generals office. A couple of years ago when i was president of our National Association of state of it attorneys general, we focused on elder abuse issues from the state standpoint. It is a longstanding priority for us. I am very worried seniors who may be physically isolated ordinarily and have their contact come to them or in terms of health care or other home support, or who go to contact but in a very discreet manner, they go to a doctors office, their coffee clutch for lunch, but they are now separated from those de facto Early Warning systems that can spot something out of the ordinary and perhaps sound the alarm with this. I do not want to sound like a broken record, i mentioned it in my Opening Statement. I believe one step congress can take swiftly without controversy would be to include in some vehicle this year, perhaps the next covid bill, whatever is appropriate, the text of senate bill 2379, which is the latest incarnation of a bill we have been working on for several years. When we began the advocacy, asking for this change in statute so that we can use our existing already funded, already trained, already Skilled Resources in our control units outside the exit doors of the Nursing Homes and longterm care facilities, and reach exactly the type of isolated in visuals individuals in the Medicaid Program you are talking about. Thank you. I think my time has run out, so i yield back. Thank you, mr. Chairman. Scammers are using this pandemic as an opportunity to defraud our seniors. Arizona has reported many fraudulent to the ftc. Those are just scams reported to the fcp. We know that damage is far greater. They also endanger the health of the public can believe certain products can cure covid, but there is no scientific basis to support these claims. Scammers have also distributed counterfeit personal protective equipment, all continue to work with partners on the federal, state and local levels to ensure we have adequate resources to prevent scams where they happen, ensure that we are returning funds, and punishing the scammers stealing from our families. I want to thank the mentioning of our bill to stop false advertising during this pandemic. Our bill increases penalties on scammers, and we hope to find bipartisan support for this legislation. My first question is for attorney general schmidt. Due to the coronavirus pandemic, scammers are using fear and confusion to steal money and personal information. I teamed up with our attorney general to warn arizonans about common coronavirus scams. This includes trying to self fake coronavirus axes are selllf fake vaccines or fake vaccines or unproven treatment. Scammers are calling seniors and threatening to cut off payments for Food Assistance if they do not share personal information. This criminal behavior hurts the victim, but it hurts legitimate charitable initiatives trying to help vulnerable communities respond to the virus. My question is, how can policymakers help our constituents distinguish between scams and legitimate offers of assistance, and offer Additional Resources that states need in order to effectively fight these pandemic related scams . Senator, it is a difficult question because mixed visiting is the bane of effective banexed messaging is the main of effective messaging. We normally are all on the page of, do not answer the phone, do not respond to the inquiry, hang up on the bad guys if you do not know them. Now we are saying that is all true but we would like you to respond to contact tracers when they engage with you. That creates a difficult message to convey to vulnerable populations. I can tell you what my messages when i talked with kansans. I say it boils down to two simple points. How do you separate the legit from the ill legit . Illegit . If you did not initiate the contact of communication, just assume it is not legit. That gets me in trouble with legitimate businesses and Public Sector folks, but from a Consumer Protection standpoint, it is a simple straightforward message. You think you need a widget, sitting at your breakfast table, initiate the contact with a cellar of widgets and now you at least know you are in contact with a legitimate operator. The oldfashioned advice is still good. Do business, whether it is online, remotely, or in person or person, do business with those who already no interest so shop local and reputable retailers in retail space. Again, it is not perfect but those two principles are usually what i tell folks. Thank you, attorney general. I appreciate that. My next question is for mr. Smith. Part of a fight against coronavirus, Many Organizations have experienced shortages of ppe, disinfectant and cleaning supplies, and other items that would help them reopen safely. As the virus continues to surge in places like arizona, our local businesses, schools, Nursing Homes, and Health Care Facilities are continuing to struggle to buy supplies from their usual and trusted vendors. What advice do you have for businesses and organizations that want to buy ppe or other coronavirus related supplies, in order to avoid fraudulent or counterfeit materials. Well, our efforts with respect to ppe have largely been focused on shopping home scams or fulfillment scams. Companies offering to sell ppe, and you order the ppe, next day delivery, and it is not delivered next day in fact, it is delivered never so, the folks we are protecting are generally consumers and not businesses and we brought at least one enforcement action in that area. We have several more in the pipeline. I would say that what we were enforcing there is our mail and telephone order rule, which requires that if you are not going to deliver on time, provide a notice or the opportunity for a full refund. With respect to this larger institutional purchases of ppe that youre talking about, we also have been working for the department of justice which has been extraordinarily active under the defense production act. A lot of our ppe fulfillment issues have followed on their price gouging under the da. So, there are unscrupulous sellers or theyre selling counterfeit products, price gouging, taking advantage of institutions needs for these products, in this time of emergency and so a lot of that, i think is being addressed by the criminal authorities in the department of justice. Thank you. Mister chairman, my time is expired but i want to thank you for holding this important hearing. Senator sinema, thank you. Senator blackburn. Thank you so much, mister chairman, and i want to go to the issue of privacy. General schmidt, you mentioned this in your statement, and lets look at the issue of protecting that private information, and if that falls into the hands of scammers, what are you doing to make certain that people are not being scammed based on their information for Contact Tracing. Because what weve learned, when you look at the virtual space, whoever has that data claims possession of it, feels that they own the virtual use, they have access to this, and then begin to use that to follow you and to share your information with outsiders. So, general schmidt, lets talk to you, or start with you and then if each of you will add, i want to hear about what is being done to protect privacy, and to protect the following information via Contact Tracing. Senator. I appreciate the question. I dont mean to sound glib to anyone who is listening, but often in this space, i think of the old expression that the road to hell is paved with good intentions and i worry, in the Contact Tracing space, because we have grown so rapidly into that Data Collection that perhaps we have not put in place the ordinary safeguards we would otherwise put in place if any entity, government or business that is collecting large amounts of personal data and we have done it for a good purpose, to try to properly contain the spread of the virus. I have been sort of the contrary voice on that i have done it deliberately because i think we need to have a more balanced conversation. As i suggested earlier, and i will not repeat myself, we did, in, kansas and legislature included a stopgap privacy measure. It is designed to put in place guardrails, rules of the road, duties for privacy, distribution on limitation and the light, for all of the data that is collected, but the digital stuff were talking about in terms of development, but also data is collected the oldfashioned way so, once it is collected in the database it does have value to some folks so, we have tried to put in those limitations to make sure data is protected and they can feel free to participate openly in legitimate tracing efforts. Let me ask you this. First of all, what i have heard you say is we need to have a federal preemption, and one federal standard for the retention, collection of and retention of this data. Is that correct . Yes, with an important caveat, and that is, this and this is my state rule coming out. I do understand the importance of a federal standard. That makes sense. I understand that but i would suggest that we dont want complete federal preemption of state enforcement. Correct. But we also dont want to compel state, for example, state ags to go to federal court, follow federal rules to enforce a federal law because with all respect, as ive said to my colleagues many times, i wanted to do that i would try to be a u. S. Attorney. I am a state actor. So what makes sense to me is set a federal standard with respect to data privacy but to allow states to independently enforce that standard under state law in state court, with state procedures and state rules, as long as we are holding those same standards. Let me ask you this, before we move on, and my time is about to run out. Should then we see that, should it be that consumers, the Online Consumer has the ability to choose to opt in to share their information or choose to opt out if they do not want that and entity that is collecting and holding that information to share that with third parties. Is that something that should be granted to them, or a protection afforded to them . It does seem so to me. Obviously as you know better than i, that is part of a robust policy debate both here and with our friends in europe. But i am on the general side of the debate that suggests my personal data is my personal data and i have to be able to control with whom it is shared and then reshared. All right. Ill tell you what, mister chairman, i will yield back the remainder of my time. Thank you for yielding back. Ive got to go vote. I have one question i want to ask and then i will turn the hearing over to senator blumenthal for a question or two you may have. He is going to then close the hearing. We are to be exiting this room by 5 45, so, our panel of witnesses should breathe a sigh of relief that it cant last much longer. I want to ask mr. Chairman, with noteworthy cybersecurity news related to twitter last week, it serves as a pretty significant example of social engineering. These attacks continue to evolve while posing harm to americans. Your testimony indicated that these types of threats are responsible for quote, upwards of 93 of data breaches. Do you have any recommendation for the subcommittee on how congress can draw increase consumer attention to these risks, or even prevent them from occurring in the first place . Yes. Ideally, there should be federal National Cybersecurity standards. There are several standards. For instance, the National Institute of standards for technology. They have several standards in place. The problem is that if you want to really combat social engineering attacks, youre going to have to go far and why wide. You go to have to get the private sector to some degree involved and motivated to live up to Data Security standards. If you had asked me what is the best framework to use in this particular case, i point to the department of defense cybersecurity maturity models certification. They have a very good model where you have five levels of ramp up in the sense of making sure that you comply more over time and can build up your resilience against scams like this, and basically, the ultimate or very effective solution for all the scams that you see is awareness, training the elderly, aarp is doing a good job of that. Its an awareness issue. Educate. Also protect. The standards of protecting just the home pc but also open networks. It should ideally be a federal , training the elderly increased awareness. That an awareness issue also protects. Of protecting networks should ideally be a federal standard so that everyone can comply. As we can see come it isnt working. Thank you to all the panelists for your presentation today. I have none you at least since staffer,a young senate thank you for your Public Service now for a long time on behalf of our fellow kansans. I appreciate what you do for all of us. I now recognize senator blumenthal. I want to join in thanking you as a former fellow attorney the nextnd just say time we have a hearing with you as a witness, maybe we can do it out in kansas instead of here. You are always welcome, sir. I want to ask you specifically because mr. Smith thesaid he would welcome price scouting law at the federal level and i completely agree because right now, there really is no federal price gouging law and that is a great obstacle to effective federal enforcement and i encountered this issue when i was state urging theneral attorneys general of the United States to take action and they said to me, well, we had no federal law. In kansas, you have a price auging law that says that price increase is presumed unjustified if it exceeds by 25 the precrisis levle. Tell me have you feel about that law, whether it has helped or harm your offices ability to bring enforcement action and whether you would recommend it to us and the United States senate and the congress. I think it has been useful as mr. Smith has suggested a couple of times. Sure, we tried to use our general kansas version. Unfairally dont have an standard that we have deception or unconscionable standard to deal with price gouging. It is really clunky to do that and it is much better if there is something that looks more like a bright minds standard, that way everyone knows that the experienceight our has been by having that on the , it has allowed us to give voluntary compliance almost universally at least from legitimate actors. The crooks and scammers are crooks and scammers, that is a different category but youre talking about price regulation, were talking about at least, to some extent, dealing with very legitimate enterprises and the bright line rule in law. At least it has been for us. Clarity is always good for enforcement. Let me ask you, and this is a little bit of an unfair question because senator moran is not here. If we were to adopt a federal statute, i personally would be of against making it preemptive of all state laws, probably preemptive. I dont know how you feel about that issue of preemption when it comes to either price gouging or other federal statutes. Philosophically, as i suggested early, as a state guy, im not a fan of federal preemption generally as a philosophical matter. Having said that, i recognize there are times makes perfect sense, as i discussed in the data privacy, i understand why you cannot have, as a practical matter, 50 plus, with territories, different sets of standards, or focus to manage folks to manage that privacy. So, the one thing i say on that, and i am quick to say, this is always true, but it is particularly true in this area, i speak only for myself, i have colleagues in the state and territory attorney General Community who are very different views on this but speaking for myself, when congress is made the determination appropriately by subject matter for a federal standard, and some area, lets say data privacy or maybe it is on price gouging, or whatever it is, as a general matter, if that is gonna be what congress does and if its going to preempt state from having any different standard, my own preference would be, dont go further than that in the preemption. Dont prevent me from having a state law that quantifies in state law the same standards so, it is the same performance part of the regulated entity that i can then enforce independently under state rules and state court with our state procedures because that is what my team is accustomed to doing and perhaps in some larger states where they have very large protection shops, Consumer Protection shops, they are accustomed to going down every day to enforcing federal law, whether it is a super statute overrun for it might be. I think it is not true for a lot of smaller states and so as im making enforcement decisions, just to be blunter than i should, but just to make the point, i will overstate it, i mean, ive got enough to do and forcing the laws of the state of kansas that i was hired by my voters to enforce, and forcing federal law is not a great privilege than i aspire to. It is Something Else to do. It is not very high on the pecking order. So i would much rather, if congress is going to set a standard, set it, but then let me work with my legislation, perhaps in addition, i have no objection to that. Dont make it my exclusive option. Let me work with my legislature to find a way to bring state law alongside and enforce that standard our way. Thank you. I appreciate your perspective which i find very valuable. On this topic of privacy, i want to ask you, mr. Smith, Contact Tracing apps are not regulated under hipaa or any other privacy laws. I have introduced bicameral legislation to regulate these acts. The proposal is called the Public Health emergency privacy act, but isnt there more than that the ftc could do . I know you have issued general guidance but nothing recent and nothing specific, as far as im aware, such as advisory notices to the tech company. If the system of Contact Tracing is going to have any chance of work, privacy has to be assured to consumers. That is the ftcs job and im concerned that the ftc has been silent. So, the privacy of Contact Tracing have to be would address now in the absence of any federal legislation, using our unfairness and deception authority and i cant comment at specific companies or any specific investigations, whether we might have them open or not, but this is an area where we have been heavily focused and part of that is because consumers, you are right, consumers have to trust these contact racing apps if theyre going to work. We need a lot of updating in order for Contact Tracing apps to work. Apps developers also need to know the rules of the road, so, we have recently within the last month issued business guidance to App Developers where we have five or six specific points that they should take into account when developing apps. Now, some of these are not going to be anything new to you, like privacy by design, for example. But there is one thats kind of interesting which is, use privacy protective design features, such as decentralized protocols. So, one of the things that i think is really interesting about these contact racing apps that weve been running into recently is that they dont actually collect everybodys location in one big centralized database, and everybodys Health Information in one big centralized database. It lives here, and it is, and i have my bluetooth turned on, and you have your bluetooth turned on, and it has, these devices all have a single bluetooth identifier and if i test positive for coronavirus then that gets uploaded to the database and you dial into the database and you see, is anyone in any of these bluetooth ideas that ive been in close proximity with, is in the database or not . So, by using those kind of decentralized protocols we solve a lot of privacy issues up front. Other guidance which, again, no surprise, dont use identifiable data, use aggravated data to the extent youre able. Some of these apps will do things like display heat maps for where there is particular risk of exposure so that you dont need to know, you dont need to have even unique personal data, much less personally identifiable data. The aggregated data will be just fine. So, we have in the last month or so issued business guidance for App Developers but, you are right, that this is an area where we need to be vigilant and we are heavily focused on it because this is the privacy issue but 2020. For 2020. It is one of the key privacy issues and has such freedom as youping ramifications know, as well or better than i, and im just thinking that more clarity and specificity. More information made available to the public, i am aware of those protocols of decentralization, the use of bluetooth, amazon and google are working on systems. There is a coalition of groups that is hoping, i think, to have it ready by the end of the summer but an explanation to the American Public about how this data is safe, what those rules of the road will be and how they will be impervious or at least highly protected against intrusion or interference. I think it would be very valuable. Excellent point. Our consumer ad so far has focused on how to spot a scam. If they ask for money, its not legitimate, that kind of stuff. But we might have to explain that this is what a Contact Tracing app does and how it works. Because, as you know, as you well know, Contact Tracing does not work unless you reach a threshold level of participation. And now, we are nowhere near anywhere in this whole country, and very few places in the world, if any have reached that threshold level. So you know, we talk so broadly and frequently about, we need testing, we need Contact Tracing, we need a vaccine, we need therapeutics, and in some ways the Contact Tracing maybe the most difficult of all to achieve because we dont have that trust and credibility. So, im not up to date us today but i do not believe there are very many statements of help state boards of health that have Contact Tracing apps and i do think in the past, cases passed a contact racing law but i have heard only one or two states that have developed these apps and then of course the apps are going to have to be able to Work Together, right . Virginia will have to be with oklahoma and the different apis, whether it be google or apple, will have to Work Together so, it is a significant challenge. Right, well, we can talk about a lot more. I have one more area of questioning that i want to cover. You mentioned that the warning letters are, i think you said, effective, maybe even very effective. Maybe in some cases, but i talked about 255 warning letters. A lot of those scammers have come back, maybe not with exactly the same language, but they are back, and in some part due to the lack of vigilance on the tech platforms that i mentioned earlier and miss mick larry very articulately described need to be held more accountable but i just want to say about warning letters. Speaking as a prosecutor, you know, i used to try to get actual court judgment. Not even consent order, because you have to go back to court to enforce it. With a warning letter, you have nothing to enforce. It is no deterrent. If you leave here and you drive above the speed limit, 85 miles an hour in a 60 mile an hour zone, and you get a warning letter, the deterrent effect, especially if you know that the next time youll get another warning letter, has very little impact. If you leave here and you drive above the speed limit, 85 miles an hour in a 60 mile an hour zone, and you get a warning letter, the deterrent effect, especially if you know that the next time youll get another warning letter, has very little impact. So, i wonder whether a more aggressive use of, whether it is administrative or actual judicial process for judgments, for fines, for even criminal reform, would be appropriate. There is a lot there and i agree with you 100 than a warning letter by definition is a warning letter. There is nothing to enforce, but, in the last, lets say weve been at this for three and a half months, middle of march. Maybe four months. In that time, we have succeeded in getting almost all of those 255 companies to take down the claims and for those that have, that havent. For those that havent, there are some, taking the claims down only to replace it with something that is equally misleading, we are pursuing Law Enforcement action, both in federal court and in front of our Administrative Law judges. Youve seen the fruits of some of that and it is outlined in our testimony, there is a lot more than in the pipeline, though. Those cases take time. Particularly when youre talking about fake cures, the way that we will typically prove that it is with the expert testimonies. That takes time. It also takes money but i think in we have the resources, i think we have the man power to do it. We are doing it but it is not something that can be easily done overnight and so, you know, these warning letters have been very fast and very effective and when not we backing up with Law Enforcement but you are absolutely right that a warning letter on its face is not worth much. Now, general smith said that with respect to price gouging that a lot of the challenges just telling companies that are legitimate that hey, look, you cannot do this. You cannot say this, and when you do that, if we can fix the problem through that kind of communication, then we need to be doing that, but i appreciate your concern, absolutely. I think there are all kinds of different potential violations close to the line. Some are in a gray area. You know, when you recommend the equivalent of somebody swallowing Hand Sanitizer or Something Like that right. Or bleach or whatever and youre making money from it right. I think that something more than a warning letter may be appropriate. Well, there are also we have been working with the fda, as you know. Yeah. And fda has been as they outlined in their testimony, theyve been bringing actions criminally. Weve been making criminal referrals. So, we work with a wide variety of partners. Sometimes in our cases we get there and realize that the crims are involved too. Well defer to them unless they want us to come along with them do to them. L at the risk of being tossed out, im going to close the hearing but im certainly interested in holding up at any of these issues. I want to thank each of our witnesses, mr. Smith, attorney general schmidt, all of you for your excellent testimony, and for important for your excellent work. You are trying to make these laws work. We make the laws, but you try to make them work. And i really appreciate your being here today. Im sure the chairman joins me in that sentiment and hope we have an opportunity to talk soon again. This hearing record will remain open for two weeks. During this time, senators are asked to submit any questions for the record. Upon receipt, the witnesses are requested to submit their written answers to the committee as soon as possible. I, again, thank the witness, witnesses, for being here, and this hearing is adjourned. Thank you. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] announcer live this morning, featuring campaign 2020 discussions on battleground states, where candidates trump a nd biden are making efforts to voters. Watch cspans washington journal live this morning at 7 00 eastern as we discussed battleground states and join in with your phone will phone calls, facebook comments, text and tweets. Announcer tuesday, a Campaign Event with President Trump and the North Carolina airport