Transcripts For CSPAN Small 20240705

Friends dont have to be rare. This is joe. When youre connected youre not alone. Cox, supports cspan as a Public Service. Along with these other television provirs. Getting you a front row seat to democracy. Next a look at the covid19 Small Business administration fraud report. The Inspector Generals report found that about 200 billion of pandemic loans were potentially fraudulent. In contrast with the s. B. A. Administrators estimate of 36 billion. The Inspector General testified before a House Committee on the report. The administrator of the s. B. A. Did not attend reportedly due to previously scheduled commitments. Before we begin were going to take a moment to have an opening prayer and the pledge. I recognize congressman dean. We know theres businesses that put food on the table and provide jobs for americans. We know its scary out there, we know its a challenge to run a Small Business. Today we ask a bless, thank you and protection for these businesses. May they thrive. Theyre the backbone of america. Its we ask leaders to do the right thing and continue to make this the greatest country on the greatest country to continue to do great things. Around the world. All this we ask your name ahman. Please join me in the pledge of allegiance. I pledge allegiance to the flag of the United States of america and to the republic for which it stands, one nation, under god, indivisible, with liberty and justice for all. Good afternoon, i now call the committee on Small Business to order. The chair is authorized to declare a recess of the committee at any time. I recognize for my opening statement. Welcome to todays hearing which will focus on two recent reports examining fraud in the covid19 pandemic lending programs. These contradicting reports, one from the s. B. A. s office of Inspector General and the other from the Small Business administration were released within hours of one another on june 27. The s. B. A. Inspector general concludes the s. B. A. Disbursed more than 200 billion in potentially fraudulent loans while the s. B. A. Reported fraud in these programs is closer to 36 billion. This large discrepancy more than 160 billion certainly demands answers. Given the drastically different figures in these reports and lack of an adequate plan to recoup stolen taxpayer funds we invited s. B. A. Administrator guzman to join us here today but as you can see by her empty seat she declined the offer. You would think that a report from a nonpartisan watchdog claiming hundreds of billions of dollars of criminal activity would warrant her showing up to this committee today but that obviously isnt the case for administrator guzman. During the pandemic, the s. B. A. Oversaw an unprecedented amount of lending. While there was an understanding that getting money out quickly could lead to higher levels of fraud nothing of this magnitude was ever imagined. The o. I. G. Report estimates that roughly one in five loan, i repeat, one in five loans disbursed through the pandemic programs have been labeled as potentially fraudulent. This afteraction report shows the s. B. A. Was not up to the task when the American People needed their help the most and we must have this track record in the back of our minds as the agency looks to take on additional responsibilities. The American People need accountability and transparency and as a Small Business accounts receivable were as high as the s. B. A. s theyd take all actions possible to get this money back. It belongs to them. Unfortunately, it does not appear that the s. B. A. Is taking every action possible to give get these stolen funds back from taxpayers. So we cannot sweep this under the rug or write it off write off all this fraud as a loss for the taxpayers bottom line. Inspector general ware, thank you for taking time to join us today and we look forward to your examination of these reports and their discrepancies. Also the honorable guzman is not here but her chair is there. We understand the fail dwhroifers s. B. A. Are independent of you and your office but on behalf of main street america it is our responsibility to hear about your findings and work toward a solution to combat freud moving forward. We must obtain a better understanding of what went wrong, how to fix these issues and what we can do to recover these stolen taxpayer dollars which we must begin to go forward and recover what we can. We stand ready to work to ensure the s. B. A. Has the oversight met ribs in place to correct their past mistakes and restore integrity in the agency. In closing, i would like to note that the s. B. A. Included a formal letting declining our invitation in which they accused the o. I. G. Of overestimating the fraud and misleading the public. I ask unanimous consent for that letter as well as the two reports well be discussing today, one from the o. I. G. And one from the s. B. A. To be entered in the record. Without objection, so ordered. So i also ask unanimous consent to waive the chairman of the select subcommittee on the coronavirus pandemic, dr. Brad wenstrup for the purpose of asking questions in his hearing. Without objection, that will be so ordered. So with that, i will yield tour distinguished Ranking Member from new york, ms. Velazquez. Ms. Velazquez thank you, chairman williams. Welcome back to the committee, mr. Ware. First, let me thank you for your work for the office of Inspector General. The past three years have been extremely challenging for the s. B. A. And your office as well. The agency executed 14 years of lending in 14 days to help keep Small Businesses afloat in a pandemic. It is important to note the impact of the agencys efforts on american Small Businesses. Since President Biden took office, entrepreneurs have started a Record Number of Small Businesses who have created jobs at a rapid pace. This has paved the way for some of the lowest unemployment rates in recent times and we got more good news yesterday as inflation dropped to its lowest rate since 2021, to 3 . Despite this, any program of the magnitude of s. B. A. s covid lending measures is bound to encounter serious issues. And your office has been working around the clock issuing reports and launching investigations to combat the potential fraud in the Pandemic Relief Program. Turning to your report, your office estimates that there is 200 billion in potentially fraudulent covid loans which is unsettling. The s. B. A. Issued a report the same day and found that 36 billion of the 1. 2 trillion in pandemic relief was likely obtained fraudulently. Further, 86 of the fraud occurred in the first nine months of the pandemic, under the Trump Administration. The findings in these two reports are widely different and quite frankly, confusing. I understand there will be discrepancies in the report bug im concerned about the degree to which the estimates vary. If our committee is going to conduct proper oversight of the s. B. A. , we need to be assured that the reports we are receiving, whether from the o. I. G. Or s. B. A. Are measured and accurate. I also look toward to continuing to work with the g. A. O. On expanding of the nonpartisan entity. It is our duty to drill down to ensure we are prepared in the event of another global catastrophe. Today, your oversight and investigative work has resulted in over 1,000 indictments, over 800 arrests and nearly 500 convictions. An opportunity 30 billion in aid was seized or returns. More needs to be done to hold wrong doers accountable and recover taxpayers dollars. As you know, i sponsor Bipartisan Legislation to extend the statute of limitations for fraud in the programs which became law. This sent a strong message that unscrupulous behavior will not be tolerated and those that committed fraud will be held accountable in the years to come. Cocapitalize on these two new law, i understand youll need the full f. Y. 2024 budget request. Unfortunately, republicans in Congress Want to pare fund back to f. Y. 2022 levels and the most recent proposal provides 32 million for the o. I. G. , hindering your ability to recover fraudulent funds. I appreciate your oversight and investigative work and thats why im supporting i am supportive of the president s increed funsing for for your office. Im fully committed to work withing working with my colleagues to oppose any shortsighted cutbacks. With that, i fully expect youll work closely with the s. B. A. To further respond refine this data and help close the gap between the two estimates. In closing, i would like to request that the s. B. A. s response to your invitation to testify before the committee today and their response to the o. I. G. s white papers be entered into the record. Mr. Chairman. Thank you, and i yield back. Mr. Williams thank you. Its my honor to introduce our witnesses. Our first witness, isabela Isabella Guzman chose not to come today. She was asked more than once to attend, to defend her position. So she chose not to do that. We have an empty seat for her. Secondly, the honorable mike ware is here. And Inspector General ware holds a bachelor of arts degree in accounting from the university of ve the Virgin Islands. In may of 2018, following his confirmation by the u. S. Senate, he was sworn in as Inspector General of the Small Business administration. Prior to his appointment he served as deputy Inspector General. He has over 30 years of experience in the o. I. G. Community. In 1990 he joined the department of interior of o. I. G. s field office in the Virgin Islands and became the field office supervisor. He later moved to d. O. I. Of Inspector General, office of management and served as Deputy Assistant Inspector General for management. In his current role, mr. Ware are spe is responsible for the oversight of the Small Business Administration Programs and operation which is normally encompass more than 100 billion in guaranteed loans and more mrd before the committee in april. Inspector general ware. Im looking forward to our conversation. Our office knew from the offset that s. B. A. Would prevent widespread fraud and disbursing relief funds. The biggest concern for our office was quick delivery to qualifying Small Business without first establishing internal controls. We issued two reports prior to the first p. P. P. Loan stressing the to mitigate the risk of fraud. To address the easy that created golden opportunity. To date we have should 33 pandemicrelated reports with dozens of recommendations and provided 100 congressional briefings. Both to supply corrective action and strengthen internal environment. Over the course, cab disbursted funds. Using our investigative case work, and analytics and additional review procedures, we estimate s. B. A. Had 200 billion in fraudulent loans. This estimates 17 of disbursed funds in those programs. In conducting the review, our office unleashed the data. Fueled by the expertise and experience of our criminal investigators auditors and analysts, the report identified 11 fraud indicators that we use to signal potential fraud. I have the report in my written statement. Our office was able to reduce false positives by using link analysis. This allowed us to focus on loans highly suspected of being fraudulent. They conducted additional reviews using sampling and professional judgment taking into consideration Prior Experience and investigative case work across the entire Law Enforcement spectrum. The transparency afforded by the fraud landscape report and our well founded recommendations served to mitigate fraud. S. B. A. Made progress and prevent further losses. We look forward to continueing to partner with s. B. A. To stop fraud. This has resulted in 30 billion in covid funds being seized or returned to s. B. A. With our Law Enforcement partners we have taken it to the step of wrong doers. 800 arrests and 550 convictions and important to note we arent alone. We are on the Justice Department strike force. We continue to work hand in hand with the f. B. I. , the secret service, i. R. S. Criminal investigation, homeland security, the United States Postal Office and o. I. G. Too many to to mention. Our oversight capacity is dependent upon the availability of sufficient budgetary resources to continue to address the fraud. Absent the total budgetary resources requested in the 2024 budget we will not have a sufficient budget to combat the fraud or provide trusted oversight over its flagship programs. We wouldnt have a sufficient operating budget to capatalize on the laws extending the statute of limitation for 10 years for fraud. The nation once again can depend on us to provide independent objective and timely oversight of s. B. A. Thank you for the opportunity to speak to you and happy to answer any questions you have for me. Mr. Williams you know the drill, when the light turns red. We will move to the member questions under the fiveminute rule. I recognize myself for five minutes. I am disappointed that the administrator did not show up today. This is a big deal and i would assume she would have an army of her staff here to defend her work and s. B. A. But not even the army is here. But we the hearing with her seat being empty. The s. B. A. Released a statement expressing concern that the o. I. G. Had significant flaws and mislead the public. I dont know if i remember an agency accused their nonpartisan watchdog of misleading the congress. Mr. Ware, did you and all the employees within your office put this report to lie about the pandemic rams . Mr. Ware absolutely not. Our goal is that we be independent and keep an object jeghttive eye so you can see these programs along with us. I am super confident in this report. Mr. Williams the two total fraud numbers are drastically different. The s. B. A. Claims they had a more diligent process that ruled out much of the fraud that your team has flagged. First, who has access to more did ita to find the levels of fraud the o. I. G. Or s. B. A. . Mr. Ware o. I. G. Mr. Williams what was the initial value of the potential fraud you looked at before you got it down to 200 billion . Mr. Ware 650 billion. Mr. Williams have you communicated that to s. B. A. . Mr. Ware we have. Mr. Williams others claim that the number was higher. Rainshower report says the 200 billion is conservative. Are you underestimating rather than overestimating . Mr. Ware as the data becomes available that the number could be calibrated. It could go up, but could go down. We have a cap on where that fraud level is currently and that is a little over 200 billion. Mr. Williams what money was object taped and criminals who took advantage of the taxpayers and give the money back. We are talking about doing this. Good to identify the fraud that has occurred it is going to be in vein if we dont get this money back and just talking about it and dont deliver. It will make it harder to get back some of the illegally obtained funds. Can you tell us what actions the s. B. A. Could take immediately that would get more of these illegally obtained funds back to the taxpayers . Mr. Ware we have partnered hand in hand to pull back the 30 billion that we have pulled back. There is more in the chute right now but we are working through the agency to try to streamline the process for getting the money back. The secret service is working with us on individual cases, we pull back 1 billion. And there are quite a bit still in the chute and working with the Postal Service inspection as well. Mr. Williams that is an awful lot of money. So i now recognize the Ranking Member for five minutes of questions. Ms. Velazquez the s. B. A. Averts that 86 of the likely fraud originated in the first nine months of the pandemic under the Trump Administration. Does your report include such detailed information of when the likely fraud occurred . Mr. Ware no. Ms. Velazquez does your report that the Biden Administration put internal controls in place to combat fraud upon almost immediately . Mr. Ware yes. Ms. Velazquez do you agree the vast majority of the fraud occurred in the first nine months of the pandemic, yes or no . Mr. Ware yes. Ms. Velazquez did the controls that the Biden Administration put into place successfully reduce the potential for fraud . Mr. Ware yes. Ms. Velazquez your approach puts an open limit on the fraud. You may weed out a number of loans that produce a false positive . Mr. Ware yes. Ms. Velazquez could you lower the estimate . Mr. Ware it could go both ways. Im going to tell the truth. Whatever the number is. Ms. Velazquez we are all here for the truth to enact legislation to correct the shortcomings of what was in place. Your estimate of potential fraud is much higher than s. B. A. s estimate. In fact, s. B. A. Expressed concerns that the approach contains serious flaws that significantly overestimates fraud and misleads the public, how do you respond . Mr. Ware the s. B. A. Is mistaken and i think they know that. There are two main reasons for that. One, we are the independent watchdog. We have demonstrated that throughout the pandemic and we have demonstrated that. Secondly, we have access to data sets that they didnt have access to. Ms. Velazquez they controlled a framework to defect fraud. S. B. A. 3. 4 million files totalling 400 billion as potentially fraudulent and humanled interview lowered this to 36 billion. Did your office conduct a review in each and every file . Mr. Ware the manual review does not meet the qualifications. Ms. Velazquez s. B. A. Reported 3, 300 employees and contractors reviewing these files and some were easy to create. I also understand s. B. A. s level of review as the o. I. G. Review which can take up to 250 days, but s. B. A. Is on the amount of likely fraud as opposed to reporting on the upper limits of potential fraud. So is there a reason you should this report on potential fraud given the significant discrepancies . And you say you ever been working hand in hand up to this point where two reports shows clear discrepancies in terms of the numbers. Rather than work with s. B. A. To come up with a better estimate for likely fraud, why did you issue the report . Mr. Ware is not just semantics. Likely fraud for us is 650 billion. No assurance. Potential fraud to us means we will open an investigation on every single one of them that we have identified if we have the resources. Ms. Velazquez and thats the point. If you have the resources. Going forward, we have 10 years that we gave you through the law we enacted as a result of the work that we did. So based on the budget that the republicans are going to pass and are calling for fiscal year 2022 levels, you wouldnt have the resources . Mr. Ware if i dont have my 2024 budget. Mr. Williams i recognize mr. Luetkemeyer from the state of missouri. Mr. Luetkemeyer appreciate your hard work and integrity of that work. Quick question for you with regards to the chairman talked the 100,000 level of s. B. A. Not going after those folks. Are you going after that at all . Are you identifying those folks . Ware care if they show up as a fraudulent actor, they go through the same process as anything else in terms of our prioritization strategy. Mr. Luetkemeyer it they say they dont have the manpower to do this. Is there any thought handing this over to the Collection Agency . Mr. Ware our position in the p. P. P. Report is that they have not done a sufficient study to determine whether or not its Cost Effective. Mr. Luetkemeyer we need to go back to the s. B. A. Who is not here today to ask that question. If they dont think it is Cost Effective to them, hand it over to the Collection Agency and the i. R. S. To be a backup. Do you have an idea of what the recoverable amount would be in that00,000 range . Mr. Ware it would be difficult for me to provide. Mr. Luetkemeyer in your report you say certain lenders prioritized quickness over profit. Can you tell me who those certain lenders are . Mr. Ware i could give you the names. But there were certain industries. Mr. Luetkemeyer if im not mistaken, the Tech Industry was the culprit. Mr. Ware yes. Mr. Luetkemeyer s. B. A. Is to allow them to participate. Mr. Ware io. Mr. Luetkemeyer are you making sure that our problem children are not going to be problem children in the new program . Mr. Ware im on record ensuring that they have the same rules that properly regulate the more traditional lending institutions to apply here as well. Doesnt matter if it is a tech. It is on a level Playing Field and avoid what happened. Mr. Luetkemeyer it is concerning to me allowing the folks who are bad actors to be able to participate in it again. That makes no sense to me. Another question for you here with regards to the money thats claude back. Does that money go to treasury . Mr. Ware for the eyed will program, that money went back to s. B. A. , their account. And for p. P. P. , it goes back to the banks as the lenders. Mr. Luetkemeyer are you tracking those dollars . Mr. Ware we are. 40 billion. Mr. Ware yes. But we have others and still working with the agency on creating a better more efficient way to track the money. Mr. Luetkemeyer you havent gotten the money all tracked yet . Mr. Ware we know money that is still in the pipeline and where that money is to go and where to we issued a report on this giving them some recommendations on how better to do this. Mr. Luetkemeyer we have 30 billion and dont know where its at. Mr. Ware we know where its at. Can i look back to one person real quick . Yes, we know. Mr. Luetkemeyer all right. I trust you Inspector General. One more question. In the s. B. A. May 22, 2023 report, 54 of the performing loans are past due, totalling 114. 2 billion. Mr. Ware thats the number the agency provided to us. Mr. Luetkemeyer 114 billion more in these programs not being fraudulent is in really big trouble. Mr. Ware im not certain about that. Mr. Luetkemeyer past due or liquid weighings means they have problems there. Not only fraudulent problems but those dollars are going to people that wont pay it back. Mr. Williams i recognize mr. Mcgarvey. Mr. Mcgarvey thank you for being here and for the important work that your office carries out to protect the Small Business administration and taxpayer dollars. We are talking about fraud that happened during the pandemic. So im glad that you have the opportunity to talk about what Fraud Controls work and recover fraudulent loans. No one on this committee wants money going out to fraudulent businesses or lenders. I want to take a second to set the stage and remember what it was like when the pandemic started. This was an Unprecedented Program and putting things together in two weeks and saying we have to get the businesses money out to these businesses. I know businesses in my community got it. The s. B. A. Stood up programs and issued over a trillion dollars of loans and small percentage went to fraudulent businesses but the vast majority went to people who need it. Just this week, headliners would not be here today if it werent for a Successful Program like this that enabled this business to be here. These programs saved our economy and saved the businesses in our community. There are some bad actors that took advantage of this and we have to make sure to go after them. As you have testified today, the vast majority of the fraud took place in the first nine months of 2020. Between march of 2020 and january 2021. Who was the Small Business administrator at that time, mr. Ware . It wasnt ms. Guzman, was it . Mr. Mcgarvey they are not here to answer why this fraud took place under their watch. I am glad that you put that out. S. B. A. Analyzed the data and 74 of payments and once the deferral expects 85 of borrowers borrowers. This contradicts. Why didnt you take into consideration the repayment data which would have lowered your estimate . Mr. Ware that data that you are talking about they gave it to us two days prior and came with the other information after. So repayment data for us was not a factor for idle but p. P. P. , where those loans were intended to be for given and be a grant. If you dont come back for for giveness and dont try to repay. That is an indicator. In idle, we are arresting people that are making payments. Our criminal investigations across the nation are telling us that fraudulent actors do repay those loans and we know why. They could be like businessmen that fraud is their thing. They are conducting business and paying the loans back never to be found. In the plea agreements to show good faith to u. S. Attorneys, people pay their loan. And with all the publicity a that this is getting and whole another approach, people are paying. Mr. Mcgarvey we want to go after the fraudulent actors and getting this money back particularly by people who were taking advantage of a Successful Program when we needed. The vast majority of the fraud took place during the Trump Administration and Biden Administration reinstated new safeguards and reviewing loans flagged as fraudulent. Are these security measures like the s. B. A. For Fraud Control, are they being effective and combatting it . Mr. Ware it is curbing the tied. We are still reviewing it and reviews coming to an end exactly how those controls performed. More importantly if the controls promised were indeed implemented as they were. Mr. Mcgarvey i appreciate you being here and this Committee Works together. This is not a partisan attack on the administrator. Mr. Williams i recognize mr. Meuser. Mr. Meuser thank you. So we are not trying to assign blame here over on this side of the aisle. We would like to find answers and solutions. The numbers offered by my colleagues are just not accurate. Idle was the loss of fraud. The p. P. P. Was heroic safer of savior. Slightly 30 . Theres a lot of plame to go around. Its a shame that majority of the time being spent. It does not dismiss the fact that the administrator guzman under this terrible situation where fraud exists is not here. I know damn well if i was the administrator, i would be sitting there to solve the problem and explain it to the American People how this occurred and where things are and what is being done to create and whether its republicans or democrats. Thats why, mr. Inspector general we appreciate you being here and forthrightness and honesty and your courage and willingness to help solve some of these issues. Let me ask you this, did you work with the banks and lending institutions to gain information to figure out which budgets the 2 billion in estimated fraud . Mr. Ware yes and used to validate our findings. Mr. Meuser the bangs were cooperative the banks were cooperative . Mr. Ware they were incredible partners throughout oversight of these programs. Probably within the first month, the banks gave me 5,000 fraud referrals. Mr. Meuser did you know the customer was less fraud than lack thereof . Mr. Ware yes. I found the banks were able to quickly identify not only identify but gift wrap cases or evidence cases for us. Mr. Meuser and 135 billion estimate out of 300 and p. P. P. Was 880 billion and still had a 60 billion or so of potential fraud. Mr. Ware that was part of it. Different rules, different requirements. Self certification was an issue. Mr. Meuser s. B. A. In cooperation with banks was able to show less percentage of fraud. Mr. Meuser one hearing that said 85 of the fraud came from five players, have they been arrested . Mr. Ware i cannot speak to that ongoing investigations. Mr. Meuser some arrests have been made and some have been brought to justice. Mr. Ware the arrests are out there. I cant specify in this forum. Mr. Meuser thats fine. What would you like to see us help you with in order to claw back and provide resources to you working to bring these fraudulent people to justice as well i would like to ask can you provide the data and im sure to the s. B. A. , there are huge discrepancies. 100 billion in difference. Mr. Ware administrator guzman and i are in lock step. We have worked together very, very closely. I was surprised about the report that those words. We meet every other week. We meet on these things and transparent and open and can have heated discussions. Mr. Meuser you were perplexed that they refuted your findings . Mr. Ware off guard. We need full support for our 2024 budget but there is one other thing and that is access to already available government data. Mr. Meuser i will call you on that. I yield back, mr. Chairman. Mr. Williams i recognize representative chu from the state of california for five minutes. Ms. Chu i have worked with administrator guzman on numerous occasions and i have known her to be nothing but con sheen yows when invited to meetings and had she been apprised of some alternate date she would have been here as she has been here at numerous meetings. And i would like to submit the letter to chairman williams which says that administrator guzman was unable to testify due to previously scheduled commitments that required her to be outside of washington, d. C. , on this date. I would have hoped there would have been some consideration for her schedule. Let me say, mr. Ware, i do find it unsettling that your white paper estimates 200 billion in potential fraud and the s. B. A. Is so different with 36 billion in likely fraud. I know in the s. B. A. s letter, they said 86 of all funding without important controls in place in the previous administration. Biden and harris rebuilt antiFraud Controls such as checking the do not pay data base and verifying tax income. And to design the major relief programs that launched in 2021. And the restaurant revitalization which were well below 1 . Do you acknowledge that is true . Mr. Ware i cannot validate. We are conducting on res fawrnt revitalization and shuttered venues. But they did implement many of our recommendations like do not pay. These are recommendations that we made in writing to everyone. And they have been a very willing partner in doing this. Ms. Chu s. B. A. 400 billion worth of further investigation i would say but then they continued beyond that additional layers from to manual review in order to weed out false positives and got the 36 billion and they argue that your white paper estimate of 200 billion because that figure is based on initial automatic screening and includes false positives, what do you say to that . Mr. Ware absolutely false. It is important on record to state that the only investigation that s. B. A. Conduct are those conducted by the investigated arm of s. B. A. We are the Law Enforcement authority. Fraud, this is our business. Fighting fraud is what we do. We are fully equipped to opine on what the potential fraud in the program is. S. B. A. Does not have access to the data sets that we have access to. Number two, they dont sit in the middle of the fraud fight across the nation in u. S. Attorneys Office Working with task forces and working with the different law entities. Ms. Chu you say he refine your false positives. Mr. Ware which we did in this report. Ms. Chu can you reconcile to provide the committee with a more consistent estimate of the likely fraud . Mr. Ware i believe with the reconciliation of those numbers, they are never going to be possible. They cannot access to have many of the data sets for Law Enforcement purposes. I can provide the s. B. A. Every loan number and under u. S. Attorneys rules and Everything Else. Thats what i can do. However, more importantly which is surprising that it would be such an attack on a number, we get sidetracked with the number when we should be talking about the control environment thats necessary in any future Program Going forward and our ability to claw back as much funds as we possibly can. I would be as upset and passionate if i found tay the number was 30 something billion but im sitting in the middle of the fight and that is not just a logical number. The s. B. A. Administrator, shes saying you are misleading the public and that they have more diligent process to investigate the fraud. In other words, are you incompetent. That is what she is saying and you are the Inspector General for the u. S. Small business administration. I just want you to tell me how do you respond when openly in public everyone is listening that your report is really not that good, wow did do say, misleading the public. If someone tells me im misleading the public because that is compromising my reputation. Mr. Ware i get that but i still give her the benefit of the doubt, because i know her. If you know her and not sitting next to her and she is the administrator and we have 36 billion and 200 billion and you have the resources in order to find out what happened with the money. Mr. Ware i think the committee based on my track record before this committee know that i am an independent broker of the truth. Im talking about the relationship you have with the administrator and the administrator is questioning your report publicly and on top of that she is not sitting next to you, what do you say. Mr. Ware i spoke to the administrator last week. We have passionate disagreement. The administrator sitting here would say i am not misleading the public. She said it. Im an independent broker of the truth. You said you have to work for her, my constituents i dont get this. The guy being the watchdog is doing his job and the lady supervising doesnt like it. Dont you think the public will say that . Not only that, she has huh, that the administrator reached out to you to review the disparity. The question is has she asked you, how did you get to 200 and we got to 36. Mr. Ware yes. What did she say to you to prove you are wrong . Mr. Ware they cannot prove their case based on their response to the report. If there is no proof, if the evidence isnt there, what is there . Mr. Ware mine is based on facts. Mine is on cross linked analysis and criminal investigative work and art and sample technique. You forewarned her, sir, that so much money going out so fast could be opened up for fraud and what did she say . Mr. Ware she was not the administrator in the beginning. Pretty much the same argument. Youre not right. Im not sure the public knows this that 90 of the loans that were given by the s. B. A. , are valued at less than 100,000, correct. And the s. B. A. Has decided not to put any effort in collecting the money that you guys believe that was stolen because thats the only word we can say. Explain to us that we are not going to pursue to try to recoupe that money less than 100,000 . Mr. Ware i should have clarified this earlier. S. B. A. Averts that any loan with a fraud quote on it are not in the number that they will pursue actions. Give it to me simpler. Mr. Ware if there is a potential fraud assigned to the loan 100,000 or less, they pursue those. They do not go away. They are going after every penny. Thank you, mr. Chairman. S. B. A. Created an ad hoc committee, thats their own investigation and they are saying they are interviewing 3,000 people a day. Do they have the personnel and rigor to do that . Mr. Williams i now recognize representative thanedar from michigan. Mr. Thanedar thank you for your. Despite the fraud that is certainly concerning in the covid relief program, recovery has been nothing short of remarkable and able to keep businesses afloat and save jobs. As a result our recovery has been faster than any other industry in the economy. We must address concerns regarding fraud to prevent future abuse from transpiring. I represent the city of detroit and the 13th district. And i have spoken im an entrepreneur myself having started Small Businesses, grown Small Businesses. And the pandemic has been especially hard on Small Businesses in my district. And when i look at the fraud numbers whether it is 35 billion or 200 billion it worries me and bothers me that many of my Small Businesses in my district were denied any kind of assistance for one reason or another while billions of doll dars got defrauded some domestic and some overseas. And many of the small hardworking entrepreneur Business Owners in my district suffered through because they could not qualify or get any assistance and unfortunately lost their livelihood businesses. So that is a concern of mine. And it just doesnt seem fair for the hard working Business People who couldnt get federal assistance while the bad actors walked away with boil i dont know, sir of dollars billions of dollars. My question to you is how can the Small Business administration restore confidence in its operation and rebuild trust among the public following the massive fraud that occurred during the pandemic particularly under the Trump Administration, because it appears that the majority of the fraud did happen under the Trump Administration. Mr. Ware i tend to stay away of any discussion of administrations because to me it makes no difference. Mr. Thanedar you agree that the majority of the fraud happened under the Trump Administration . Mr. Ware happened in the beginning when there was no controls. Everything was calibrated to speed. Mr. Thanedar it did happen in that period. Mr. Ware it happened in that period. Relative to restoring of the trust, i think under administrator guzman working closely with our office, i think we have built an internal control environment back to what it was all those couple years ago, right. I believe administrator guzman and her teams are moving toward that end. However, we have not fully tested the controls and more importantly because of my experience with s. B. A. Whether or not the controls were actually followed. And implemented thoroughly. That would be the test. There will be quite a bit of work coming forward on this. Mr. Thanedar i yield back. Mr. Williams now i recognize allford. Mr. Alford i yield 30 seconds to the gentlelady from florida she left. Thank you mr. Chair and thank you for holding this important hearing and i thank you for showing up and doing your job. The sole p. P. P. And idle are stolen taxpayer dollars and from the constituents of everyone here, the people that we represent, the 4th Congressional District of the state of missouri. And the s. B. A. Administrator said it is 36 billion. The s. B. A. Should increase their scope to oversee more lending. The American Public elected republican majority bus of the incompetence shown by the bidenharris administration. The job of this committee is to conduct oversight and we showed up. It is time for the administrator to show up and do hers. To answer us, to answer to the American People. The title on that name card starts with honorable. There is nothing honorable about not showing up to do your job. So im going to ask her questions any way. She needs to be here. And hopefully wherever she is she will hear these questions. Administrator guzman, the report you released estimates the fraud to be 36 billion and the Inspector General says it is closer 200 billion. What is the reason for the large discrepancy. Administrator guzman the Inspector Generals office has decades of experience and experts when it comes to waste, fraud and misuse, why does your team know better than the actual experts . These concerning numbers come during a time the s. B. A. Wants to oversaw lending, why should this committee be confident in the s. B. A. To act as a regulator . Thank you, administrator guzman. Now moving on to you Inspector General ware. Thank you for showing up. Did President Trump cause this fraud, 200 billion worth of fraud . Mr. Ware not that i know of. Mr. Alford they want to blame trump everything. He did not bring down the behinden burying or sink the titanic. We need to get the money back to the taxpayers. Do you feel the same way . Mr. Ware i want to get the money to the taxpayers and bottoming of the fraud. Mr. Alford they got nun and the goal to move fast and expected to be some fraud. That was over three years ago and biden has taken minimal efforts to recoupe these funds. Last two years what you have seen, has the s. B. A. Enhanced any of their internal controls or improved any of their efforts to mitigate, reassess and get that money back to the taxpayers . Mr. Ware yes, they have. My report goes down the list of the many things they have done especially in response to the recommendation that we have worked hard to resolve with the agency. Mr. Alford do you feel confident that we can move forward should this happen again that we will have the regulatory tools in place to limit and mitigate fraud . Mr. Ware i feel confident that which are moving in that direction. There has to be a focus on eliminating selfcertification in these type of government programs. Forward on forward i thank you for being here today someone we pay out of the federal taxpayers dollars cannot be here to answer questions in the primary oversight capacity that we have to help us all do better, to help americans, to help Small Businesses. Its just a shame and im very disappointed. Im very disgusted. Thank you, and i yield back. Mr. Williams i now recognize the representative from washington. Dpleus glues i would like to ask you about the fraud landscape, find the trend of size of loans . Are we talking about mom and pops or talking about larger operations that receive more significant funding . Mr. Ware it was all of it. But there was quite a bit of larger people went after it larger numbers. I dont know if they even existed in many of the cases. But after larger numbers, more larger than what a mom and pop shop would get. Did you consider the size of fraudulent loans being prioritized which ones you are going to go of or did you determine how you prioritized . Mr. Ware size is one of the factors. It takes into account our hotline data and the task forces that we are working on. We could look at much smaller amounts particularly that is involved in a criminal ring like for example, one of the flags in the report was i. P. Addresses and instance where we find there was 8, 500 loans that went to one place, we know they gave 13,000 out here and 50,000 and we wouldnt go after them unless there were Public Trust Issues or criminals and the like. Link analysis helps us and it goes from one person and explode out to 800. I want to play on the role of technology. You spoke about the indicators of pandemic relief fraud being durable like footprints in sand. And your testimony that you talk about the use of certain Automated Technology and your office of the Technology Solution division to use Artificial Intelligence to identify outliars. Could you expand on the kind of data you are using to investigate these cases and how your office is improving upon the use of certain kinds of technology to go after fraud steers . Mr. Ware the only place we are using Machine Learning is our hotline. We went from 100 complaints to 250,000. We needed to get to the bottom of that and Pandemic Response committee helped us a great deal and giving us bodies and then access to their Data Analytics before we were able to move on our own and find common i had fires base odd the case work and thats what we are using, the loan files, overlaying them with the hotline information and being able to determine what is actionable, most likely actionable. One way we are doing it. But in terms of Data Analytics, link analysis helps to validate the numbers in this report because it deals with common fraud clusters that starts in one place and then put it in the next program. If we found it in p. P. P. , and then in idle, Unemployment Insurance and find it in the other programs as well. Thank you very much for being here. Im appreciative of the work you are doing and your office. Thank you very much as a taxpayer and Small Business owner, i sincerely appreciate the leadership you are showing here. Thank you very much. I yield back. Mr. Williams i recognize representative bean for questions. Ms. Bean good afternoon we had a meeting that s. B. A. Talked about changes to the s. B. Program and labeled washington, d. C. , town. Would it come before and ask for more to expand programs to go forward. Only in crazy town candidate handle the money thats given to you. Only in crazy town would you ask for more money when you cant handle the money we are giving you now and do it with a straight face. That is crazy. One of the most disturbing stories is the p. P. P. And idle scams that involved the barbie face doll scam. Everybody knows one of americas favorite dolls is barbie. We love malibu barbie, president ial barbie, doctor barbie or but con men have hijacked and i present to you swindler barbie. This is actual faces, barbie was taken hostage and created swindle barbie where people up to no good used barbie and other dolls to create Fake Identities to steal taxpayer money. So clearly someone is living in swindler barbie world. We are not just living in crazy town but moving into the dream house on loony tune lane. I appreciate you coming forward with your testimony and i love you are a man of truth. Its going to take a lot of work to claw back this money. According to your own report of the more than 250,000 hotline complaints you have received, more than 90,000 were actionable leads. This represents, according to your data 100 years of investigative case work. Let me say that again, 100 years of investigative case work, only in crazy town does this happen. Will you be able to keep the committee updated on how much money is claude back as you begin this centurys long case work load . Mr. Ware absolutely. Ms. Bean what is the plan to begin clawing back this money . Mr. Ware the number that i have given in terms of what the result of what our office are are not the only results in government. F. B. I. Has their own cases, secret service, i could go on, and on and on. And the number is a lot larger and magnified, maybe more impactful with the d. O. J. Task forces relative to my office, we have prioritization framework that allows us to go after the most egregious actors fast. Ms. Bean some of these egregious actors have hundreds of loans under their name or under a single fake number, is that correct . Mr. Ware correct. A single case. We have had a single case have 800 mr. Bean should they be worried right now . Mr. Ware i think you should be worried. We have a 10year statute of limitations and were bringing im just one part of the enforcement , activity that is taking place across the nation. Mr. Bean now, weve been told, weve if you stole less than 100 grand, were not gonna worry about you anymore. Were just gonna let it go and pretend it didnt happen. Lets say you to somebody that stole still stole, but below that threshold, are we gonna go after them too . Inspector ware . Mr. Ware i believe we had a recent, very recent, press release with, with 13,000. So it, it, it depends on where it, where it falls, right . Mr. Bean are you familiar with swindler barbie . Now, have you heard that before . Mr. Ware not in that way, but i did, i did get, pulled up to speed on this today. Mr. Bean i yield back the remainder pf my time. Thank you, mr. Chairman. I yield back. I now recognize representative phillips from the great state of minnesota for Philando Castile mr. Phillips thank you, mr. Chairman. Welcome, mr. Ware. Let me start with gratitude to you to the many thousands of employees at s. B. A. Who do this important work. Many of the same ones did it under the trp administration Trump Administration. That are doing it right now. And i dont think we express enough gratitude to those who are doing what we want people to do, which is to look after taxpayer dollars. I like this committee when the spirit is to restore faith in government casting stones and blame is absurd. Donald trump didnt cause the fraud nor did joe biden. I want to make sure that we go after the fraudsters. All of my colleagues on the other side of the aisle want to do the same. What troubles me is that President Biden requested 47. 4 million to appropriate dollars to this effort. And my colleagues on the Financial Services committee and in the general government appropriations bill trimmed that by 16 million. So its just a little incongruent. I might say to say we need to go after this and yet not appropriate the resources to do it. I would like to make the case to all of my colleagues that we should appropriate the dollars necessary to go after the fraud. So if i could just ask you, mr. Ware, does that 16 million shortfall impact your ability to do so . Mr. Ware it impacts my ability tremendously. Mr. Phillips can you say it one more time . Mr. Ware it impacts my ability tremendously. Its important to understand that the supplemental funding that we had for our office runs out in 2024. We had a lot of term criminal investigators. The term, a lot of them would have to go home and be depleting us in at the time when the fight is the hottest. In mr. Phillips mr. Chair, i have Great Respect for you. I would ask that we try to appropriate the resources necessary to do what we all want to do, which is to eliminate the fraud and repatriate the dollars, reclaim and claw them back. Pleased that 30 billion has been done so already. Mr. Ware, one thing i suspect anecdotally and otherwise is that a number of companies over represented their employee counts to obtain p. P. P. And, and eidl loans. Your written testimony provides an example of a bad actor who was caught doing exactly that. Can you shed some more light on, on that of practice of companies exaggerating their employee counts and whether the s. B. A. Has been effective in your recommendations to crack down on the practice . Mr. Ware sure. Well, at the beginning, we were dealing with selfcertification as a general rule. And to be fair, thats what the law called for, to be fair. It was selfcertification. You couldnt review tax records, you couldnt review much of the employee information as well. You know, for speed. But since then, those things have been tightened up quite a bit, but the way it worked it was, it was pretty simple. Im selfcertifying so theres nobody checking. So i could easily say 50. The fraud triangle is a wellknown concept. There was pressure, financial pressure, everybody, you know, where we were as a nation and then there was the opportunity with the lack of controls and then you rationalize it in terms of, well, why not everybodys doing it . Mr. Phillips you spoke about data sharing between agencies to support your work. I presume it would include the i. R. S. Mr. Ware yes, it would. Mr. Phillips are there systems and structures and technologies up to par right now in a way that is necessary to give you the information you need on a timely basis . Mr. Ware i dont know if it is, but i know that when we work through certain agreements, were able to get it. But i would argue that not just oversight entities, but some of these agencies could communicate when it comes to issuing government funds. Mr. Phillips i would just argue that it might not be wise to reduce funding to the irs when we need to go after both fraudsters and tax cheats. But let, let me just wrap up by one more time just saying we can distill this entire hearing down into a simple question. We all agree that theres fraud. We all agree, we should go after it. We should also all agree to resource it to the level that the administration has asked. We should not be cutting it by 16 million. It makes this entire hearing. Hearing, unfortunately, nonsensical. With that, mr. Ware, i want to thank you. I know hundreds of p. P. P. And ooeld recipients in my own district say thank you. Thousands of businesses and millions of employees around the country say thank you. When we did this, we were under duress. We knew it would be complicated, we knew there would be fraud. I was here when we did this. Im so glad we did because if you look at our economy right now, the highest g. D. P. Ever. The best the lowest inflation now in the entire g7 universe. The lowest unemployment in my lifetime. My goodness. And the highest wage growth in a long time. I think we did a darn good job businesses around the country. Country thank you. And i hope you can expand that gratitude to those that work with you. Thank you, sir. Thank you. I now recognize representative van dyne from the great state of texas for five minutes. Ms. Van duyne thank you very much, mr. Chairman. And Inspector General ware, it is good to see you again and i really appreciate you taking the time to be with us today. And its clear, you understand the importance of todays hearing and i just wish that we were being joined by administrator guzman as well. Weve heard a lot of conversation today about pointing fingers. I kind of want to figure out when that money was spent, on how much s. B. A. Had to spend and what the resources were. So in 2019, do you know what the s. B. A. s budget was . Mr. Ware no. I do not know off the top of my head. Ms. Van duyne do you know if it was increased in 2020 . Mr. Ware i dont think so. I dont know. You dont think it was, it was, i think that was a time when we were all asking to be flat lined. I dont know. Ms. Van duyne well, in 2020, let me just when we had the pandemic. So did s. B. A. Receive any additional funds for the pandemic . Mr. Ware i think supplemental funding was given at some point. Ms. Van duyne the fact is, is that when we look at where the, when the money had been given out, doesnt it make sense that it was given out during the pandemic at the beginning of the pandemic. Yeah. Thats when the, thats when the, thats, that, thats when the money was supposed to be 14 years worth of days if we had if ms. Van duyne i am going to ask you to move your head the other way. If we would have taken two years to do it wouldnt have been an emergency, would it . The whole point was to try to get that money out faster. We know the tremendous amount of rules and responsibility were given to the s. B. A. Who really had a skeletal staff at that point and they were expected to give out tens of millions, hundreds of millions of dollars, billions of dollars. Without having adequate step. But we wanted to make sure that money got out because it wanted to do the best good at a time when everybody was in an emergency pandemic. We are now facing, what, three years later, and we know how much money are we expecting has gotten out fraudulently has stolen from taxpayer dollars . Mr. Ware potentially over 200 billion. Ms. Van duyne does it make sense we try to avoid this in the future . Mr. Ware yes. Thats why im here. Ms. Van duyne is it does it make sense that we try to go after the bad actors who have stolen over 200 billion of taxpayer dollars. Mr. Ware absolutely. Ms. Van duyne so does it make sense that we sit here and we spend a whole lot of time during this hearing on . Well, that happened then and no, that happened then. Does that make a whole lot of sense to you . Mr. Ware i could say that this is what ive been avoiding from the very beginning. Ms. Van duyne and i appreciate your direct answers instead of playing, you know, blaming the, the blame game, playing the blame game. I would really hope that everybody on this committee, everybody in this congress would be focused on trying to prevent 200 billion of fraud from ever happening again and trying to get that money back. So with the s. B. A. Distributing approximately 1. 2 trillion in covid ooeld and p. P. P. Loans ooeld and p. P. P. Eidl and p. P. P. Loans, the i. G. Who is trained and responsible for the investigator, investigatory process estimates over 200 billion was wasted. However, in order to save face to the public, the s. B. A. Who has admitted they have no role in investigating fraud. Reportedly roughly 36 billion in wasted spending. The 164 billion difference in wasted dollars alone is troubling. But what concerns me the most is the s. B. A. Who again has said that they are not an investigatory entity, has wasted additional time in dollars to put out a completely false report to cover their previous waste. The American People deserve more taxpayers deserve definitely is he deserve more and Small Businesses deserve more. Mr. Chairman, i seek unanimous consent to enter into the record administrator guzmans response to our letter sent on april 19, 2023, relating to the fraud in the Pandemic Relief Program where the s. B. A. Told us that when it comes to investigating fraud and recovering taxpayer dollars, it is important to note that s. B. A. Is not an enforcement agency. The s. B. A. Reports suspected fraud and Identity Theft to the Inspector General and we collaborate with Law Enforcement authorities on their investigations. End quote. Mr. Chairman. Mr. Ware, just looking at a typical Fraud Investigation case on average, how long does a standard oig Fraud Investigation take about take . Mr. Ware about 250 days. Ms. Van duyne so do you agree with the s. B. A. They were able to meaningfully process 300 humanled reviews of potentially fraudulent loans per day . Mr. Ware absolutely not. Ms. Van duyne so, two months ago, you testified from the subcommittee on oversight investigations and regulations where you shared your concern, the s. B. A. Decision not to collect on p. P. P. And eidl loans under 100,000, do you maintain that position . Mr. Ware i do. Ms. Van duyne has s. B. A. Communicated to you whether they intend to pursue fraudulent loans if theyre less than 1,700 100,000 . Mr. Ware yes, they are. That is their intention to pursue those that have a fraud. Ms. Van duyne. I yield back. Now i recognize representative stuber from the great state of minnesota for five minutes. Mr. Stauber thank you, inspector ware, for being here. Inspector, every time i hear you testify, you become more and more impressive. Thank you for being here. Mr. Ware thank you. Mr. Stauber in march 10, more people were indicted for the feeding our future scam, a supposed nonprofit in minnesota meant to feed children that used 250 million of covid19 federal funds to buy luxury cars, real estate and other unlawful futures. This brings the total up to 60 people indicted. It is considered the largest covid19 fraud scheme in the nation. Our agencies must make recouping taxpayer dollars a priority on july 27, 2023, the Small Business administration Inspector General issued his report underscoring how vulnerable the p. P. P. And eidl programs were to fraudsters. Not three hours later, the s. B. A. Administrations Office Released a contradicting report three hours later. Unfortunately, the s. B. A. And the Biden Administration have failed to provide a detailed account of how this significant misappropriation of taxpayer funds occurred and how they, how they planned to recover these stolen items or funds. Stolen items or funds, rather. Given the roughly 160 billion discrepancy between the o. I. G. Report and the s. B. A. Report, it would be pertinent to hear from both parties as to why the discrepancy. Unfortunately, as indicated by the empty chair next to the Inspector General right there, she has declined to come before this committee, the Small Business administrator who we talk about Small Business being the engine of our economy. She was notified in time to be here under the rules and she has failed the request by the chair of this committee to answer questions on behalf of the American People. Like where is the discrepancy and why the discrepancy on multiple occasions. The office of the Inspector General has described sbs Data Tracking environment as informal and ad hoc as the designated investigatory body for the s. B. A. , the o. I. G. Holds the authority to shed light on this matter. Therefore, i would appreciate some insights on the following Inspector General ware, aside from the Inspector Generals office, do you consider the s. B. A. To be the subject Matter Experts in Fraud Investigation . Mr. Ware no. Mr. Stauber how much weight should we give to the s. B. A. s assessments of your Fraud Investigation . Mr. Ware well, id say that s. B. A. Is not positioned to define fraud for the office of Inspector General. Mr. Stauber if administrator guzman were present, it would have been beneficial for her to provide us with her perspective on why she believes her report is more accurate, despite finding substantially less fraud. I wanted to be able to have the dialogue and question both of you why the discrepancy only in washington, d. C. . Would an administrator not show up when theres 100 and 60 billion discrepancy . I mean, how does that happen . The American People want to know why the discrepancy why the fraud and the administrator doesnt show up so we can ask questions and get answers for the constituents, the taxpayers of this country. What is the likelihood of the s. B. A. Recovering most of that money . Mr. Ware most of the money is tough to say what the likelihood is. I could tell you that we have a 10year statute of limitations and we will not stop coming. And i believe thats the case for all our Law Enforcement partners across the nation. Mr. Stauber the American Public deserve answers and we deserved answers from the administrator guzman today and her failure to testify alongside you should not go unnoticed. It is a slap in the face of the taxpayers who are out 200 billion. Chair williams, thank you for holding this hearing. Thank you for making the notifications on time within the rules and to the Small Businesses across this country who are on the backside of this covid and starting to ramp up, it is beyond me why this Small Business administrator would not come here and testify to the 200 billion in fraud. I yield back. Chair williams the gentleman yields back. And i now recognize representative lalota from new york, the great state of new york, for five minutes. Mr. Lalota great state. And thank you, sir, for your leadership on this important issue. And its important that we get down to the issue of hundreds of billions of dollars being fraudulently stolen from american taxpayers. Mr. Ware, thank you for being here and for your leadership and being accountable to this committee and to the American People despite the s. B. A. Administrator being timely and properly invited numerous times, the head of the very agency with so much fraud in it. Sadly, is not here today to answer our important questions as a result of the administrators absence, my constituents can be left with no other reasonable conclusion that the s. B. A. Losing 200 billion is simply not important enough for the s. B. A. Administrator to be accountable to this committee and to the American People. The effects of the fraud are not limited to just 200 billion of taxpayer money being lost. There are countless stories of innocent people being victimized by s. B. A. s carelessness. One such example, inspector, occurred in my district. A constituent in my district fraudulently had loans taken out in her name in excess of 90,000. My constituent did not find out about this fraud until way after it was initiated too late to reverse when the bank sent her a note in the mail indicating her of that fraud. The criminals who stole 90,000 in her name used a fake license and a Social Security card to open that account. The lender told her they had not run a credit check because the s. B. A. Is required to pay them back even if the borrower does not. As a result, my constituent ultimately had to freeze her own credit for seven years because of these incidents. This severely limits her freedom to do things like buy a car, buy a home, and acquire insurance or even cell phone service. My constituent is far from the only victim of covid fraud and s. B. A. Must make it a priority to continue to investigate those who have committed fraud and recover as much of the money as stolen as possible. Mr. Ware, sir, the office of the Inspector General and s. B. A. Have recovered about 30 billion of the potentially 200 billion of fraud. Thats only about 15 . What is the s. B. A. Doing to recover the other 170 billion . How can the s. B. A. Be more successful in getting more taxpayer money back . And how much does the o. I. G. Expect it will be able to recover . And what is the timeline for these investigations, sir . Mr. Ware thank you. So, its important to note that, it is the responsibility of the office of Inspector General to carry out Law Enforcement activity, to make arrests, and to attempt to recover along with s. B. A. Because theres there could be other reasons s. B. A. Is recovering money. It could be people trying to give back the money real quick. And so its not just for fraud, that money would have been recovered. So its interesting because it seems like thats 30 billion of the 200 billion. But we dont necessarily know yet. Right . But we have a prioritization docent within our organization and we are working with Law Enforcement entities across this nation to bring fraudsters to justice and to claw back as much money as we can. We have an agreement in principle currently with the United States Postal Inspection Service that will help us with our seizures. The secret service did them before. Mr. Lalota would you talk a little bit about the timeline and your expectations of when a month from now, six months from now, 12 months from now, youll be able to ascertain the full scope of the issue and be able to provide a remedy to it, right . Mr. Ware so the remedy is to these programs are finished. Like was said earlier, the evidence is footprints in concrete. So once we get to the evidence, once we start to investigate each of these potentially fraudulent instances, thats when you will see the results. So that would that mean that thats continuing. Its basically, i mean, its rare that we open a case and its not what it is. Mr. Lalota would you keep us posted as to your progress, sir . Mr. Ware yes. Mr. Lalota the s. B. A. Claims that 30 billion in return funds was not retrieved. Pandemic fraud lending despite o. I. G. Reporting and could you explain the discrepancy, sir . Mr. Ware yeah. The discrepancies for two reasons. Right . And it was an important one. My office is the independent arbiter of the facts here. So we bring forward what we find based on our criminal investigative work. It wasnt just a Data Analytics exercise for us, criminal investigative work. And our audit work came to bear in this thing, and we have access to data sets that they simply cannot have access to. And its a good way to see whether the discrepancy is valid or even logical is in their response, the agencys response to the report and the rebuttal contained inside of it. Mr. Williams your time is up. Mr. Lalota thank you. I appreciate your time and i appreciate you being here accountable to us, sir. Thank you. Chair williams thank you. I great state i yield to the gentleman from the great state of new york. Convenient to from the great state of new york. Sadly, however, one of the states with some of the greatest cases of fraud, but that said mr. Chairman, grateful to you for your leadership, mr. Ware. Thank you for being here. I too want to echo the comments of my colleagues that the s. B. A. Administrator would choose simply not to be here. It is insulting, it is embarrassing and it is absurd. It is not insulting to this committee or to congress. It is insulting to the american taxpayers, the families, the farmers, the Small Businesses who for 2 1 2 years struggled through a pandemic and economic shutdown that was well beyond their capacity to manage it. Its insulting to the people who pay every day, their taxes to support an institution and a government meant to provide for their best interests. It is insulting that the administrator of the s. B. A. Doesnt think that the issue of monumental fraud for an agency its size is worthy of presenting before congress. Now i say this not simply as some member who just got here. I say this because for the last 12 years, i was a county executive in the state of new york. It was my job to stand in front of countless residents and businesses and explain to them why their government was shutting them down and what resources and support would be available to them. In fact, my county was among the first in the state to secure s. B. A. Loan capacity so that we could move effectively to support businesses. And we worked with the chambers of commerce and others to be to to be sure they had access to the resources they need. And for me, this is important because like countless families across america, i too lost a loved one. My father lost his life to covid in april of 2020. And in response to that loss, so many families like mine tried to muster up what we could to be of help to the people who lived on with great struggle. It is embarrassing. It is insulting and it is absurd that the s. B. A. Wouldnt be represented here today despite adequate notice. And as importantly that they wouldnt be a part of an effort to secure what is what has been lost. And so i worked hard to ensure with my colleagues, both in congress and in state government, to ensure that assistance and rapid delivery of that assistance would be made available to Small Businesses. Never did. Never did we think there would be so little, however, vetting and security procedures in place, especially since we knew early on that there were red flags and we were able to identify them, but the s. B. A. Failed to implement basic safeguards even as warnings and reports of fraud were published. Can i ask you, mr. Ware, was suggested that you are unintentionally misleading the public as to the magnitude of fraud. Are you unintentionally misleading the american taxpayers . Mr. Ware absolutely not. Mr. Molinaro are you intentionally misleading the american taxpayers . Mr. Ware absolutely not. Mr. Moll narrow do you believe that the s. B. A. Lost track of 200 billion . Mr. Ware i believe there was potentially over 200 billion in fraud in these programs. Mr. Moll narrow in my own state of new york, there was a case in 2021 where nearly 20 public state and municipal employees conspired together to submit and process false applications and defraud the s. B. A. Of over 1. 5. Now, schemes like this were all too common and resulted in this at least 200 billion in outstanding fraudulent payments. Now, i certainly know that this congress could make better use of 200 billion. But more importantly, the american taxpayers could, could make better use of 200 billion. And so at this point, were challenged with how to recover these dollars. Its your agency. Its you, your investigatory capacity, criminal prosecutor and the partners that youll work with obviously to secure recovery. Can you speak to, though, however, the deficiencies in any collaborative effort that has been going on with the s. B. A. And what strategy may or may not exist to recover the fraudulent payments . Mr. Ware yes, i can. Which is surprising, again, because we work really closely with the s. B. A. To set up the controls and to go after seizures and forfeitures. This is something that we partner really well with. I do believe that administrator guzman is serious about it. She has implemented numerous of our recommendations to ensure that the control environment is stronger. So that discrepancy is kind of still puzzling to me in light of all the work that weve done together. Mr. Molinaro so a collaborative effort has been in place yet, the failure to acknowledge the problem will lead to the inability to solve the problem . Mr. Ware well, i think quite honestly, the internal control environment doesnt really shift whether its whatever the billion they said and the 200 billion this its the same. Mr. Molinaro so my time is up, mr. Chair. I will follow up certainly after, but i thank you, mr. Ware. And on behalf of those of us who led during the covid pandemic, were grateful for, for your stewardship. Thank you and i yield back. Mr. Williams i now recognize the chairman of the select subcommittee on the coronavirus pandemic. Mr. Dr. Wenstrup from the great state of ohio, for five minutes. Mr. Wenstrup thank you and mr. Ware, thank you so much for being here today and for your work, general williams. Thank you for allowing me to wave on to the committee today to ask a few questions. Im grateful for the work of this committee and, you know, were trying to have the u. S. Be prepared for the next time if there is a next time and to do better. And in this case, help Small Businesses if there is another pandemic in the future. As chairman of that committee as was mentioned, were charged with investigating and finding solutions for any waste, fraud, or abuse with, you know, pandemicera relief programs. And essentially throughout this, the broad task of the subcommittee, its an afteraction review and lessons learned. And so we can create a path forward that does better and look at the things that maybe worked and those that didnt work and be honest with ourselves about that. Because, you know, were gonna have to for our committee, look at what we hear from our victims. Look at what we hear from the committees, from the agencies, hopefully administrators and, and definitely from you. So thank you very much for that, you know, when the pandemic hit, no one knew, no one knew what to do. I mean, this was, its called novel for a reason, right . I mean, you know, and the science and Everything Else and what was going to do to the economy and what we are going to do next, people were often flying blind and theres no doubt about it. We had to move quickly to help businesses survive. And that was bipartisan agreement too that we needed to, it included getting money out the door quickly. But unfortunately, as these things often do, theres an opportunity for people that have nefarious measures in mind. We got fraud and abuse. We dont want that to happen again. So your report acknowledges that the s. B. A. Relaxed its internal controls to get money out the door quickly. And that allowed for a lot of this fraud to occur. I dont know that anyone disagrees that the money had to get out the door quickly. I can remember secretary mnuchin being pretty much in a panic that we had to do something fast fast. In your estimation, which of the s. B. A. s relaxed controls contributed most to most directly, i would say to these high fraud rates . Mr. Ware selfcertification. Mr. Wenstrup thank you. Im on ways and Means Committee and that was a debate we had there that, that was a problem and we continued that going forward, unfortunately, for some other programs. Moving forward, which of these is existing, internal controls are easy and effective enough to implement, that would enable s. B. A. To get money out the door quickly while still preventing fraud . Mr. Ware so thats the challenge, right . Mr. Wenstrup yeah. Mr. Ware so it is about setting up first of all, getting rid of selfcertification. Having quick verification measures and learning from the, the, the, the hold flags that we established not, but having a procedure in place to clear them. Just ask a followup question. My biggest thing from in the beginning was ask a followup question. Youre getting people who normally dont commit fraud. You ask one question, theyre gone. Theyre not coming back to answer a question when they figure youre on to them. So i thought that would be very, very important. Mr. Wenstrup i appreciate that input. Are there additional controls, s. B. A. Should implement, and i guess maybe you just answered that, to any others that you can think of . Mr. Ware im pretty sure i could get back to you with that. Mr. Wenstrup well, i would appreciate that. Thank you for the record if you would do that. And while most controls deal with risk management, are there any that could i we could implement to make detecting and more prosecuting fraud easier after the fact . Like you kind of gave me an example where you might sniff somebody out but in the actual prosecution of the fraud, any suggestions there, right . Mr. Ware again, theyre doing away with selfcertification because once people certify right with their docents that this is what it is, its much easier in terms of prosecution in that regard. Its much more difficult when they can just say anything. Mr. Wenstrup got it. Real quick. There are some things what safeguards did p. P. P. Lenders have against fraud that eidl did not . Mr. Ware Bank Secrecy Act is one of them. The know your customer under that was a big, big deal. The banks, like i said earlier, we got over 500 referrals from the banks basically gift wrapped like, these are fraud. We know these people dont have a business. That came quickly. Mr. Wenstrup real quickly. Do you think s. B. A. Should partner with the private sector . Mr. Ware i think that is a what do i call that . Mr. Wenstrup for Fraud Control is what im talking about. Mr. Ware well, i its difficult for me to answer that question because you know me, i provide oversight. I dont want to build a program for them i cant oversee it, then. Mr. Wenstrup but i appreciate it in youre being honest and fair and thank you very much for your time. Its been helpful. Thank you. Chair williams all right. Id like to thank our witness today. Id like to also say again, ms. Guzman, to account for questions we all had for her. Maybe we can try again. But thank you, mr. Ware, for being here. Without objection, members have five legislative days to submit additional materials and written questions for the witness to the chair which should be forward to the witness. I ask the witness to please respond promptly and if there is no other further business without objection, committee is adjourned. Mr. Ware thank you very much. [captions Copyright National cable satellite corp. 2023] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] [indiscernible] today, the house passed the 2024 defenserograms and policy bill 219210. Republican representatives andy biggs, ken buck, crane, and ie voted no. And danny davis, jared golden, marie perez, and gabe vazez two democrats, dwight evans a Ruben Gallego didntote. And republicans kelly, smith, and williams. The bill provides nearly 875 billion in funding for e pentagon. 300 million in aid to ukrae and a 5. 2 incree r military personnel. Thugut the week,emrs considered hundreds of amendments to theil it is now being sent to the senate. You can wah e proceedings next week on cspan2 and live coverage of the house here on cspan. Today, interior secretary deb haaland and e. P. A. Chief of staff dan utecht will meet with acting secretary julie su. 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