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Romney Leads Senate Hearing to Examine Federal COVID-Era Spending and Prevent Future Fraud

WASHINGTON—U.S. Senator Mitt Romney (R-UT), Ranking Member of the Senate Committee on Homeland Security & Governmental Affairs (HSGAC) Emerging Threats and Spending Oversight Subcommittee, today led a bipartisan hearing with Senator Maggie Hassan (D-NH), Subcommittee Chair, examining federal COVID-era spending. Senator Romney’s opening remarks and line of questioning shed light on the amount of waste, fraud, and abuse in the pandemic assistance loan programs—estimated at close to $200 billion—and sought ways to prevent fraud in the future. Senator Romney also supported extending the Treasury Department’s Special Inspector General for Pandemic Recovery past its expiration in March 2025 to continue to recover federal funds.

A transcript of Romney’s opening statement and questioning can be found below. Video can be found here.

Opening Statement:

Senator Romney: Thank you, Chair Hassan. I am pleased to see a number of colleagues that I respect enormously who are here telling us how we can use our money better and assure that it’s being spent wisely. I hate taking you away from your work and having you have to sit here and speak with us, and yet this becomes part of our record. As part of that, I guess we each get a chance to speak. And I apologize for slowing you down by listening to me speak. But I also want to make this part of the record. Far be it for me to change the traditions of the United States Senate.

So, we agree that the CARES Act was critically important for the country at a critical time, and I applaud the efforts that were carried out then, as I do today. But it’s become clear, particularly as a result of the work that you all have done, that the oversight of funds tied to the CARES Act and other COVID relief legislation was lacking.

And I look to understand how we can recover some of the things which have been fraudulent taken, but what we can do to prevent mistakes like this in the future. In April 2020, just a week after the passage of the CARES Act, Senator Tester and I wrote a letter to then President Trump, asking him to provide Congress with a detailed plan on how the government would execute the use of those funds and accountability measures that’d be put in place to ensure that our dollars were spent efficiently and effectively.

We also noted the vital role played by inspectors general in ensuring the public’s trust in our government. Chief among those concerns was the level of fraud reported by the SBA. It concluded there was some $36 billion of waste, fraud, and abuse in the pandemic assistance loan programs. But General Ware and his team have estimated the true number as closer to $200 billion.

So, what the true number is, we won’t know precisely, but it’s an alarming, alarming figure in and of itself. I’m also concerned about the pending expiration of the Treasury Department’s Special Inspector General for Pandemic Recovery, currently scheduled to sunset at the end of March 2025. Considering this timeline also coincides with the maturing of loans under the Treasury Department’s Main Street Lending Program, it’d be unwise to have these authorities expire at that time.

So, the COVID pandemic was, of course, a unique crisis. It upended much in our country. But I believe we have much to learn for how we can do a better job in the future when there are tragedies of that nature. So, that is the purpose, I believe, of at least for me, in our hearing today, and I look forward to hearing you with regards to your testimony from what you’ve learned, but also your advice on what you think we can do in the future to be better guardians of the people’s money. I know that it is not your job to tell Congress how to do our job better. That’s not why you’re inspectors general.

But nonetheless, you’ve been around long enough to say, “Why do these guys not do this? They should have done that instead.” And so we want to learn from that experience. So, with that, Madam Chair, I’m happy to turn back to our testimony.

Questioning:

Senator Romney: General Ware, with his comment about repaying government loans and being honest with funds that one receives from the government, reminded me of a movie. I don’t think I would have ever imagined the circumstance I would be bringing up a movie named “Nacho Libre.” But in that humorous comedy, there was an occasion when someone was stealing the chips that were going to be going to the orphanage and the main character, Jack Black, said, “These are the Lord’s chips. You can’t steal the Lord’s chips.” And he said it with a most interesting accent, which I won’t try and imitate. Of course, I’ve watched that movie more than once. And somehow, I mean, I understand the sense that taking money from a church is stealing from God. And the Book of Malachi talks about the punishments for that.

But I also think stealing from the government falls not far behind in that we’re stealing the resources of people who’ve worked and have put aside what they have earned to help our government. And for people to steal from that, either by not paying back a loan or by being dishonest in their use of the funds, is something I find quite extraordinary. And we have a responsibility to try and minimize that. 

And I’ve got to ask you about who it is that’s doing it. From your experience, is it small-time individuals that [think], “I can make $25,000 bucks, I can make $50,000.” Is it organized criminals that, you know, have a system for doing this? Is it foreign entities, organized or disorganized? And I know it’s going to be, I presume, it is going to be different for different programs, different for SBA than it might have been for unemployment insurance, and so forth. But, based on your experience, who are the folks doing this today in these programs? And it may be different than other government programs, but for those associated with the COVID relief programs, who is doing it? We’ll start with Chairman Horowitz.

Honorable Michael E. Horowitz: Thank you, Senator. Yeah, it’s sort of all of the above. And the problem is it was so easy for some of these programs that it was almost an invitation to come in. So, we have foreign entities. Nobody checked foreign IP addresses to see if they were foreign IP addresses. We have state actors…

Romney: They didn’t even have to put a U.S. address and so forth down—they could even put in anything and we just said, “Oh ok, here’s the money.”

Horowitz: Nobody checked. In fact, we are trying, to the point of controls, we’re trying to look at SBA data to see the IP addresses and they didn’t keep the IP addresses because it wasn’t required to for them to maintain it. So we don’t even have a way of going back to try and figure that out.

Romney: Mind numbing. What proportion would you think is foreign entities or is it just impossible to know at this stage?

The Honorable Hannibal “Mike” Ware: We issued a report on loans that went to foreign IP addresses, and I can’t recall what the number was, but it was a significant number—significant enough that I led a U.S. delegation earlier this year that went to Nigeria to discuss partnerships in getting some of our money back that went to bad actors over there.

Romney: I wondered why I had stopped receiving investment opportunities from Nigeria—I think I know now.

Horowitz: Just give you a sense also of the opportunistic nature of this. For the UI program, we have identified a bunch of Social Security numbers were used across various states. We have one number that was used in more than 40 states because the states didn’t speak to one another, and that program is so decentralized. So we see this in a large and a small scale. And one of the concerns I think we all have is we’ve trained people at some level to say, go try and defraud a federal program because it’s easy to do it, and that’s a bad message.

The Honorable Brian D. Miller: We participate in the Department of Justice COVID-19 Task Force, and in that capacity, we look at a number of cases and our staff member, a prosecutor, of course, has told me in my notes, he says we have seen volumes of overseas IP addresses identified and associated with unworthy individuals obtaining CARES Act funds. So it’s hard to quantify, but we are seeing money going to IP addresses overseas. In some of our other programs, Main Street Lending, for example, we have seen money going to South America, to the Middle East, and to China.

Ware: The figure was $5 billion—$5 billion was what we reported that went to foreign IP addresses.

Romney: $5 billion. It’s extraordinary. Why is it do you believe that people are so willing to defraud the government, to steal from the government? I mean, are our penalties too small? I mean, should we have far more punitive measures to go after people who steal from our government?


Ware:
Perhaps. I have two examples of this. And one is, in one of the cases our agents was working, as they started to pull the text messages and the emails, they were saying “they aren’t checking anything,” is what was routinely being said across the board. So there were there was a second one that when questioned as to why did you do this, he said, “I’d do it again.” He said, “it was worth it. It was highly unlikely that I’d be caught doing this.” Which brings me back to the beginning in talking about the importance of having a proper control and risk framework in place to mitigate this. There were folks that committed fraud probably who wouldn’t normally commit fraud, and they were being told things, and we see this in the record, like the government has just giving away money.

Romney: Well, I just want to underscore the outrage and frustration that you all feel, that I feel, and that the people in our country feel as this goes on. I would just note that if something like this were attempted with a credit card—your Visa—or if you were trying to charge account at a store or some kind, this couldn’t happen or they’d be out of business. Yet, it happens with our government all the time, and I wonder why we are singularly ineffective in in being able to control this to the extent that basically every corporation is able to control or they’d be out of business or their CEO would be out of out of a job. I just want to conclude by saying I, I concur that we need to continue the PACE program and continue to get data. And I also believe we need to get the Social Security data and other data. I recognize privacy concerns, but what we’re losing through fraud, hundreds of billions of dollars—that’s the number that I’ve heard from you today—hundreds of billions of dollars. We have to recognize that’s money that could go to Americans in need. It could go to help Israel and their defense of their of their land. It could help the Ukrainians. The idea that this money is being used for fraud is just simply outrageous. I also agree that we should extend the life of SIGPR well beyond 3/25 (March 2025) because the timing is not propitious.



Horowitz: I was going to echo what IG Ware said, which is I’m not sure the penalties are the problem because we, for example, recently got a 25 year sentence on a fraudster and tried to get the news out about that. The problem are the opportunities that were presented and having basic controls, like you said, when an individual tries to commit small dollar fraud and gets stopped, they usually don’t try again because they understand there’s something there. That doesn’t help, perhaps with organized crime that are more sophisticated. But we could have stopped a lot, I think, of the lower dollar frauds, the non-organized crime, which is probably most of what occurred, because they wouldn’t have had the attitude that, IG Ware mentioned, this is easy. The government is saying, come in, just take the money. We’re not going to ask any questions. And if you tell people that, sadly, as you said, even in the worst pandemic, even when their citizens need the money, they’re willing to come in and take the money.

Romney: Yeah, Americans aren’t stupid. If we’re handing out free money, they will be willing to take some.