Key Takeaways
- •Anthony D'Esposito (Inspector General, U.S. Department of Labor) reported that nearly $1 billion in potentially fraudulent pandemic unemployment funds remains sitting on unused prepaid debit cards at banks.
- •Linda Miller (President and Co-Founder, Program Integrity Alliance) testified that pandemic unemployment fraud was the largest theft of taxpayer dollars in history, driven by sophisticated transnational criminal organizations.
- •Rep. Max Miller (R, OH-7) pressed Michele Evermore (Senior Fellow, National Academy of Social Insurance) on whether recovering fraudulent funds was worth the labor-intensive effort required by states.
- •Rep. Darin LaHood (R, IL-16) criticized the Biden administration for inaction on flagged fraud, while Rep. Danny Davis (D, IL-7) blamed underfunding of state unemployment systems.
- •Passage of the Pandemic Unemployment Fraud Enforcement Act remains pending in the Senate to extend the statute of limitations for prosecuting fraud and recovering funds through civil forfeiture.
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Hearing Analysis
Overview
The House Ways and Means Subcommittee on Work and Welfare held a hearing on March 5, 2026, titled "Reclaiming ‘Forgotten’ Fraudulent Pandemic Unemployment Funds Frozen by Banks." Chaired by Rep. Darin LaHood (R, IL-16), the hearing focused on an investigation revealing nearly $1 billion in taxpayer funds tied to pandemic unemployment insurance (UI) fraud that remains sitting in frozen bank accounts or has been transferred to state unclaimed property offices. Chairman LaHood opened the session by citing Government Accountability Office (GAO) estimates that $100 billion to $135 billion in pandemic funds were lost to fraudsters. He highlighted that while these specific funds were successfully blocked by financial institutions, they have not been returned to the federal Treasury due to administrative inaction and a lack of clear guidance from the Biden administration.
Key Testimony
The subcommittee heard testimony from four witnesses: The Honorable Anthony D’Esposito, Inspector General for the U.S. Department of Labor (DOL); Mr. Dan Williams, Founder of Origin Payments; Ms. Linda Miller, President of the Program Integrity Alliance; and Ms. Michele Evermore, Senior Fellow at the National Academy of Social Insurance. Mr. D’Esposito testified that the Office of Inspector General (OIG) estimates at least $163 billion in UI benefits were paid improperly. He noted that while the OIG has opened 15,000 investigations leading to over 1,000 indictments, a significant portion of recoverable money is currently "forgotten" in private bank accounts because there is no standardized process for banks to return suspected fraudulent funds to the states.
Organizations & Entities
Mr. Williams, representing the fintech firm Origin, explained that his company identified over $2 billion in potentially fraudulent funds. He emphasized that banks are hesitant to return this money due to "double liability" concerns—fearing they might be sued by account holders if a claim is later found to be legitimate. He argued that without a federal "safe harbor" or clear directive from the DOL, banks prefer to hold funds in suspense accounts. Ms. Miller added that the UI system faced a "perfect storm" of legacy IT systems and relaxed controls, particularly in the Pandemic Unemployment Assistance (PUA) program, which allowed for self-certification. She advocated for a national data hub to cross-check claims against death and incarceration records.
Overview
The hearing highlighted significant industry impacts, particularly for the banking and financial services sector. Financial institutions are currently managing the compliance burden of thousands of frozen debit cards and accounts. Witnesses warned of "escheatment," where funds unclaimed for three to five years are transferred to state general funds rather than being returned to the UI trust funds or the federal Treasury. The technology sector was also discussed, specifically the need to modernize state workforce agency systems, many of which still run on the COBOL programming language from the 1960s.
Organizations & Entities
Several organizations were central to the discussion. The U.S. Department of Labor (DOL) and its Employment and Training Administration (ETA) were criticized by Republican members and the OIG for failing to issue formal guidance (specifically an Unemployment Insurance Program Letter) to facilitate fund recovery. The Department of Labor Office of Inspector General (OIG) was praised for its investigative work in identifying the $1 billion in frozen funds. The U.S. Department of the Treasury was identified as the ultimate destination for recovered federal pandemic funds. Origin was noted for its role in providing a platform for banks to identify fraud, while the Program Integrity Alliance advocated for better public-private data sharing. Law enforcement entities, including the U.S. Department of Justice (DOJ), Federal Bureau of Investigation (FBI), Europol, and Interpol, were mentioned in the context of pursuing international criminal syndicates operating out of the People's Republic of China, the Russian Federation, and the Federal Republic of Nigeria. Bank of America was specifically cited by Rep. Judy Chu (D, CA-28) as a partner with the state of California in successfully recovering hundreds of millions of dollars.
Overview
Partisan dynamics were evident throughout the hearing. Republicans, led by Chairman LaHood and full committee Chairman Jason Smith (R, MO-8), focused on the Biden administration’s alleged "inaction" and the need for aggressive recovery of taxpayer dollars. They expressed frustration that only 5% of fraudulent payments have been recovered. Democrats, including Ranking Member Danny Davis (D, IL-7) and full committee Ranking Member Richard Neal (D, MA-1), agreed that fraud must be addressed but emphasized the importance of due process. Rep. Gwen Moore (D, WI-4) and Ms. Evermore raised concerns about "false positives," noting that vulnerable populations and legitimate claimants often had their accounts frozen by overzealous automated filters and lacked the resources to contest the seizures.
Notable Exchanges
Notable exchanges included a discussion between Rep. Mike Carey (R, OH-15) and Mr. Williams regarding whether banks earn interest on frozen "suspense accounts." Mr. Williams clarified that while the funds contribute to liquidity, the compliance costs and legal risks far outweigh any financial benefit. Rep. Nathaniel Moran (R, TX-1) questioned the OIG on the "low-hanging fruit" of recovery, with Mr. D’Esposito confirming that while much of the money sent overseas is gone, the billions in domestic frozen accounts are highly recoverable.
Overview
The hearing concluded with a consensus on the need for a "safe harbor" provision for financial institutions and a centralized reporting system. Chairman LaHood indicated the subcommittee would continue to pressure the DOL to provide the necessary roadmap for states and banks to reconcile these "forgotten" funds before they are lost to state escheatment processes.
Transcript
Our subcommittee will come to order. I want to welcome everybody here today to the Work and Welfare Subcommittee. The title of today's hearing is Reclaiming “Forgotten” Fraudulent Pandemic Unemployment Funds Frozen by Banks. And I want to welcome our witnesses here today and I'll get to you in a second or in a couple minutes here, I should say. My name is Congressman Darin LaHood, proud to be the chairman of the Work and Welfare Subcommittee here. And I'll start off by talking about what GAO has estimated, which is $100 to $135 billion in pandemic unemployment funds that were lost to foreign or domestic fraudsters and international crime rings. The Ways and Means Committee has conducted considerable oversight of fraud exposed during the COVID-19 pandemic to find out the causes of fraud and also to find out how to prevent it and to recover what we can for the American taxpayers. Almost six years after the CARES Act was passed, a new investigation has found nearly $1 billion in forgotten taxpayer funds held by banks and tied to pandemic unemployment fraud. These funds were identified on thousands of prepaid debit cards issued by states to distribute benefits during the pandemic. Many of those cards were flagged for potential fraud and essentially left ignored, unreconciled, and in some cases transferred to state unclaimed property for inactivity. The good news is those funds did not get into the hands of the fraudsters. The bad news is instead of rightfully being recovered and returned to the Federal Treasury, the funds are now being transferred to state coffers as a result of inaction. I want to talk a little bit about these findings and we've done a summary table that can be seen on the screen so everyone can get a clear picture of it. The table shown to my left and right shows investigation findings from subpoenas of two financial institutions that have contracts with multiple state workforce agencies to issue the debit cards. According to the reports issued by the Inspector General on January 30th and February 11th of this year, financial institution number one, which is on the display, is holding $523 million in potentially fraudulent pandemic unemployment funds representing 2.7 million debit cards. Financial institution number two is holding $197 million representing 774,000 debit cards. Another $192 million was identified by those financial institutions as having been transferred to state unclaimed property. In total, nearly $1 billion was found with an estimated 78 percent of the funds identified as federal. I would I'll submit these two Department of Labor Inspector General memos for the record. I also have concerns about the findings that nearly half of the unemployment claims associated with these funds was previously flagged by the Inspector General in 2022 as suspicious and potentially fraudulent. And of course, that was under the Biden administration. Claims identified as potential fraud were associated with individuals with Social Security numbers filed in multiple states of deceased persons and federal prisoners. Despite being alerted to these warning flags in 2022, the Biden administration essentially took no action along with many states. In an effort to move forward from the pandemic, the Biden administration largely abandoned efforts to go after fraud and issued guidance that made it easy for states to sweep fraud under the rug. This includes guidance in 2022 to allow states to issue blanket categorical waivers of "non-fraud overpayments." At the request of this committee, the Inspector General conducted an investigation out of concerns that suspicious claims would be waived. Their report found that the authority to waive non-fraudulent overpayments led to millions in improperly waived funds. It should be no surprise in this environment that according to the DOL, Department of Labor, only $6 billion or 5 percent of the fraudulent UI payments made during the pandemic have been recovered. It may be true that much of the funds lost during the pandemic, especially those lost to international cybercrime networks that went overseas, are unrecoverable. But these funds held by banks are identifiable, recoverable, and must be rightly returned to taxpayers. It is not too late to recover this money and we must act to do so. I hope that this will be something we can address on a bipartisan basis. However, I must admit my frustration and many others that we have not been able to tackle this issue of pandemic unemployment fraud together. Surely, I know my Democrat friends would want to recover as much of these lost funds as possible, but so far my Democrat friends on this committee have opposed efforts to recover pandemic fraud. Last year at about the same time, this subcommittee held a hearing to call attention to the fact that the statute of limitations for prosecuting pandemic unemployment fraud started to expire in March of 2025. We subsequently marked up legislation to extend the statute of limitations from five to 10 years to give federal law enforcement and prosecutors more time to go after fraudsters. Unfortunately, every Democrat on the committee voted against the bill. The Pandemic Unemployment Fraud Enforcement Act, which was the legislation that was subsequently passed by the House with a large bipartisan support on the floor, we had 81 Democrats voting for this bill to go after these fraudsters. These new findings from the Inspector General underscore the need for the Senate to pass that bill so it can be signed into law. And I hope this time around we can find some common ground, some bipartisanship, so I invite my Democrat colleagues to work with us to find a path forward to make sure every dollar in these banks is examined and that those attributed to fraud are recovered and people are held accountable. We still we can still recover these taxpayer dollars. And so I want to thank our witnesses here today and look forward to your testimony. And with that, I'm pleased to recognize the gentleman from Illinois, the ranking member, my friend Mr. Davis.
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