Reclaiming “Forgotten” Fraudulent Pandemic Unemployment Funds Frozen by Banks

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.

Thank you, Mr. Chairman. Mr. Chairman, unemployment insurance helps American workers and our economy bounce back after hard times. The Department of Labor should certainly continue collecting collaboratively with states to recover past fraudulent payments. But our committee's primary focus should be ensuring that the unemployment insurance system can pay earned benefits accurately and prevent fraud in the future. A year ago, our economy was on a solid path, in part due to the bipartisan pandemic unemployment benefits provided by the CARES Act. We had the fastest post-recession jobs recovery in modern history. Both jobs and worker wages were growing, outpacing our peer countries. Over the past year, the economic chaos caused by the president's tariffs and praised economic policies has led to almost no job creation, few job openings, the retreat of manufacturing, and last quarter, lower GDP growth than in any quarter during the last administration. The economic turmoil means that our unemployment insurance system might be needed sooner than we had hoped. But states need more help from Congress. Part of the reason fraud exploded during the pandemic was that federal funding to administer unemployment insurance was at a 50-year low, which meant that computer systems were antiquated and there was a severe shortage of the experienced, well-trained staff who are our first line of defense against fraud. Unfortunately, the Trump administration and the current majority have returned to that bad policy of underfunding the staff and systems we depend on to prevent fraud in the states, at the Department of Labor, and in the Office of the Inspector General. Many states also had to cancel contracts for innovative fraud prevention strategies when the administration abruptly ended the ARPA grants last spring. This subcommittee should build on that ARPA model of investment collaboration to ensure states are prepared for the next recession. Our subcommittee has had four hearings on past pandemic fraud. Today is our fifth. I hope that we soon will have a hearing focused on how to strengthen state unemployment systems, which we know is one of the most effective ways to prevent fraud. Even with all our new tools and systems, the best way to protect unemployment insurance and prevent fraud is having enough well-trained staff to use the tools and spot the new challenges. We should fix access and benefits now so that the U.S. is ready to help workers and prevent fraud. I look forward to talking to our witnesses about the best way for us to collaborate with states and the Inspector General to accomplish that. I thank you, Mr. Chairman, and yield back.

Thank you, Mr. Davis. We will now go to our witnesses. Our first witness will be the Honorable Anthony D'Esposito, our former colleague who is now the Inspector General at the U.S. Department of Labor in the Office of Inspector General. Welcome. Next, we'll hear from Ms. Linda Miller, and she is the president and co-founder of the Program Integrity Alliance here in Washington, D.C. Glad to have you here. Next, we'll hear from Dan Williams is the founder of Origin Payments in Greenville, Ohio. Great to have you here, Dan. And lastly, Michele Evermore is a senior fellow at the National Academy of Social Insurance here in Washington, D.C. Welcome to you all. And we'll begin with you, Inspector General D'Esposito. You're now recognized for five minutes.

Well, thank you very much. It's great to be back here with all of you, Chairman LaHood, Ranking Member Davis, members of the committee, and the American people. Thank you for the opportunity to testify before you during this very important hearing. While I miss my colleagues here in the House, I am honored to serve as the ninth Inspector General at the United States Department of Labor. When President Trump took office a year ago, he said that he was committed to the American people and to rooting out waste, fraud, and abuse throughout the nation. After taking office in January of this year, I made clear that rooting out unemployment insurance and pandemic-era fraud, including holding accountable those who defraud taxpayers, are top priorities under my leadership. The American people deserve nothing less than strong enforcement, real accountability, and zero tolerance. During the COVID-19 pandemic, the federal government provided unprecedented support by vastly expanding the Department of Labor's unemployment insurance programs, dispersing more than $880 billion in total benefits. The Office of Inspector General previously reported that at least $190 billion in pandemic unemployment insurance payments could have been improperly paid, including more than $76 billion in United States taxpayer money lost to fraudsters. Criminals exploited this federal emergency response on a historic scale. That is money stolen from hardworking American taxpayers and from the very safety net program meant to help honest workers who lost jobs through no fault of their own to keep a roof over their heads and their families fed. To date, the Office of Inspector General's investigators have relentlessly pursued those who defrauded the program. Our unemployment insurance criminal investigations resulted in more than 2,300 individuals charged, 1,800 convictions, 55,000 months of incarceration, and $2.2 billion in monetary accomplishments, which includes recoveries, restitutions, and forfeitures. Despite our aggressive investigative efforts and our warnings to the Department of Labor and the states' suspicious benefit payments, hundreds of millions of dollars in suspected fraudulent funds remain. There is urgent work still needed to recover every possible dollar for the American people. Today I will discuss the Office of Inspector General's findings in two recent alert memos issued to the Department of Labor's Employment and Training Administration regarding significant unspent unemployment insurance funds still being held in prepaid debit programs that were administered by financial institutions during the pandemic. We learned that these unemployment insurance funds are, one, still being held and soon may be turned over to various state unclaimed property administrators, or two, have already been disbursed. Through our data analytics and investigative work with financial institutions, we found that more than $1 billion, $1 billion in taxpayer-funded unemployment insurance benefits remain unclaimed or unused in 21 states. Of that amount, approximately $912 million is linked to potential fraud. The Office of Inspector General's investigators further identified that $720 million still remains loaded on unused prepaid debit cards. It is important to note these findings include more than $472 million taxpayer dollars that we previously flagged as suspicious to Department Labor in 2022 under the Biden administration. No action was taken by the Department of Labor or the states to recover the funds. No action was taken by the Department of Labor or the states to recover the funds. Continued inaction will likely result in states not fulfilling their responsibilities to prevent and detect improper payments and recover potential overpayments, including fraud. Compounding the risk, $192 million have already been turned over to state unclaimed property offices due to dormancy. In the next 45 to 90 days, these financial institutions are expected to escheat hundreds of millions in additional funds. Once turned over to the state unclaimed property administrators, recovery by the federal government becomes extremely complicated. Based on the Inspector General's investigative efforts, the shared goal of the Department of Labor and the states should be to review these accounts, detect improper payments, and pursue recoveries through the financial institutions before more funds are permanently lost to fraudsters. I also want to thank Chairman Smith for his leadership in passing H.R. 1156, the Pandemic Unemployment Fraud Enforcement Act. Unfortunately, it has stalled in the Senate. Without this critical legislation, we will lose the ability to investigate and prosecute major cases and to return stolen unemployment funds through civil forfeiture laws to the United States Treasury. Mr. Chairman, the Office of the Inspector General remains committed to serving the American people. I would like to recognize the dedicated Office of Inspector General staff whose oversight work make these robust results possible. I appreciate the committee's attention to these matters, and I look forward to answering your questions.

Thank you Inspector General D'Esposito. I now recognize Ms. Miller. Thank you, Inspector General D'Esposito. Now recognize Ms. Miller for five minutes.

Good morning, Chairman LaHood, Ranking Member Davis, and distinguished members of the committee. Thank you for the privilege of testifying before you today. My name is Linda Miller, and I am the president and co-founder of the Program Integrity Alliance, a nonprofit, nonpartisan organization created to improve integrity in government programs, including federal and state programs. I've spent over 20 years of my career on the front lines of federal fraud prevention, including as deputy executive director of the Pandemic Response Accountability Committee, where I watched this crisis unfold in real time from the very first days of the pandemic. I want to state something plainly at the outset. What happened to our pandemic unemployment system was not a bureaucratic failure. It was not waste or mismanagement. It was theft on a scale this country has never seen before. Pandemic unemployment insurance fraud was the single largest theft of American taxpayer dollars in history. And I mean that in absolute terms. It completely dwarfs the fraud scandal we've seen in Minnesota or any other fraud scandal to date. The hard truth is that close to half of all pandemic unemployment insurance assistance funds were stolen. And not by ordinary opportunists gaming the system, but by sophisticated transnational criminal organizations. Criminal enterprises with deep technical capability, vast stolen identity databases, and automated tools that allowed them to file fraudulent claims by the thousands simultaneously in state after state. One botnet alone, developed by a Chinese national, has been linked to $6 billion in pandemic unemployment insurance. $6 billion from a single criminal organization. The damage this did to public trust in government cannot be overstated. Americans opened their newspapers and learned that their tax dollars had been looted by criminals, foreign syndicates operating halfway around the world. As this committee knows well, pandemic unemployment fraud is a case study in how not to design an emergency relief program. When speed became the only priority, eligibility verification was stripped away. Fraud controls, where they existed, were suspended or bypassed. States were utterly overwhelmed while also trying to implement a brand-new program. And the federal government failed to provide the oversight and guidance that could have caught the warning signs before it was too late. We cannot allow these lessons to go unlearned. But today we're here to discuss the matter of recovery. The Inspector General has identified billions, hundreds of millions of dollars in potentially fraudulent funds sitting right now in financial institutions. This is low-hanging fruit. These are recoverable funds, identified by federal investigators and waiting for action. The financial institutions holding these funds saw suspicious patterns and often they filed reports, but they operated in a legal no-man's-land. No statute directed what to do with the funds they suspected were fraudulent. No designated federal point of contact existed to return the money to. And the consumer protection framework created genuine liability for freezing accounts, even when those accounts were almost certainly fraudulent. In fact, two major banks were fined a combined total of a quarter million dollars, quarter billion dollars, sorry, during that period because they erred too far on the side of caution. We built a system that made it too risky to stop fraud in motion. Last year, the Department of Labor issued its first formal guidance on how financial institutions should return pandemic UI funds. A welcome step, but one that arrived five years too late and still rests on administrative guidance rather than statutory foundation this problem demands. Congress must provide the statutory framework and the safe harbor that allow institutions to act. While much of what was stolen may never be fully recovered, we owe it to the public to pursue every avenue still available to us, and Congress must ensure those avenues remain available. That is why it is important to pass the statute of limitations extension that this committee put forth but has not yet been passed. I also urge this committee to look at what other nations have done. The United Kingdom appointed a dedicated national pandemic fraud coordinator. The United States should follow suit. The complexity of recovering funds scattered across financial institutions, 53 states, and dozens of unclaimed property administrators demands a coordinated federal response. Finally, I want to be clear about what this is and what it is not. It is not a Democratic issue, and it's not a Republican issue. The criminal organizations that exploited our system targeted red states and blue states equally aggressively. Fraud perpetrated against American institutions is a bipartisan crisis. And ultimately, this is about more than money. It's about whether Americans can trust their government to safeguard their public resources. Every dollar we recover, every fraudster we hold accountable, is a step toward earning Americans' trust back. Thank you. I look forward to your questions.

Thank you, Ms. Miller. Appreciate that. Mr. Williams, you're now recognized for your five minutes.

Chairman LaHood, Ranking Member Danny Davis, and members of the committee. I greatly appreciate the opportunity to present here today. Today I'll provide a brief background on myself, set the context of this funds recovery opportunity, and make several recommendations on how to proceed. My goal is to help the committee streamline the recovery of money held at financial institutions associated with COVID-era unemployment fraud. I am Dan Williams, the business owner of Origin Payments. I have spent a 25-year career at the complex intersection of money and technology. Specifically, I designed automation solutions for state agencies. This included unemployment filing and child support collection. I have direct experience preventing card fraud. I manage fraud prevention products for a portfolio of over 65 million debit cards. I spent 15 years as a senior leader at two different financial institutions and have designed governmentally compliant products. The COVID pandemic had a massive impact on the economy and led to governmental action to expand unemployment programs. Unfortunately, fraud is like water against the dam. It's always there pressuring the system, and if there is any opening, it will flow through with velocity. Fraudsters applied for benefits at an unprecedented scale. Agencies responded to stop fraud, but not before significant funds were dispersed to fraudsters. Fast forward to today, and there are still significant dollars held at financial institutions associated with prepaid cards. This is summarized in the multiple OIG alert memorandums issued ahead of this hearing as a potential billion-dollar recovery opportunity. In August of 2025, the state of Maryland recovered 520 million. Funds recovery success is dependent on how widely the funds are spread across the financial system, how many times they may have moved, and the probability of false positive. This makes it best to separate potential fraud into narrow groupings or tranches. The reason I make this point is that by fraud recovery standards, the tranche in front of us has very favorable characteristics for success. First, the OIG-identified funds are associated with prepaid cards. This means that these funds, instead of being deposited across thousands of financial institutions, are concentrated with the few qualified FIs that service unemployment insurance. Prepaid cards use large accounts held at the card-issuing bank. Second, the funds identified are dormant. This is evidenced by the amount of money that has already been escheated, which only happens when there is no activity for a multi-year period. We are fundamentally presented with an opportunity to get a big savings that benefits state and federal agencies by asking for a few financial institutions for the money back. The complicating factor, however, is the varied stakeholders involved. Financial institutions, regulators, SWAs, cardholders, and investigators are all different. However, they all want finality. To achieve finality, my recommendations are as follows. Banks returning funds will wish to be indemnified against claims from cardholders and regulatory fines associated with Regulation E. Banks should be held harmless when honoring the government's request to return funds. Data needs to be shared across stakeholders. Banks will require data from state agencies around the specific cards involved so the account can be fully reconciled. The pitfalls to avoid are: not acting will cause remaining funds to be escheated in the name of the claimant, whether legitimate or not, to local unclaimed property. This would make recovery significantly more complicated by adding new parties and potentially make the funds accessible again to fraudsters. This should be avoided. As soon as fraud recovery becomes too broad, it becomes unmanageable because the edge cases multiply. First keep action focused on the identified prepaid recovery in front of us, then separately address later broader issues or the recovery of the funds that have already escheated, which are more complicated. Technology is touching every aspect of society and fraud is changing at a rapid rate because of it. As we solve this past fraud, we must also prepare for a future that is different. Continued investment and an adaptive framework are necessary ongoing topics. Fraud is a societal problem hurting honest beneficiaries. It requires collaboration between federal, state, and local authorities. It is certainly a domain where teamwork wins out over partisanship. Thank you.

Thank you, Mr. Williams. Ms. Evermore, you're recognized for five minutes.

Thank you, Chairman LaHood, Ranking Member Davis, and members of the committee for taking the time to examine this critical issue. Taxpayer dollars falling into the hands of criminals at the expense of people experiencing one of the worst moments in their lives is something we all want to avoid. Any effort to promote program integrity has to be approached with a steady seriousness that engages states and all stakeholders in good faith and focuses on concentrating public funds on the most effective methods of fraud detection and prevention going forward. The prospect of an economic downturn is never if, but when. Having a functioning unemployment insurance system will be critical no matter the cause. As we consider fraud detection and prevention, we should take into account the context of an economic downturn. On the topic of bank fraud, while I have some concerns, it is worth examining. It is true that fraudsters have balances, but funds may remain on some cards for a variety of legitimate reasons. In any fraud recovery effort, given the return on investment for chasing previously paid fraud declines over time as cases grow colder. Given recent cuts to the DOL OIG and staff loss within state agencies, the agency may therefore wish to concentrate more on detection and prevention. One best practice to consider when looking at bank card balances is helping identity theft victims along the way. Notifying people whose identities were stolen about how they can protect themselves from further exposure also helps prevent loss in other programs and in the private sector. When considering promising practices that will be the most effective in preventing and detecting fraud, the National Academy, in collaboration with NASWA and with support from Arnold Ventures, recently sent states an extensive survey, 77 questions, about their fraud efforts. 34 states responded. A full report is forthcoming, but we are pleased to share some of our top-line results today. First, the good news is that fraud is declined, and in some states, close to zero. The bad news is this does not mean states can relent on their efforts. Fraud is only in decline due to steadily evolving responses to ever-changing criminal activity. One of the more surprising findings is that while there are some discernable trends, the face of fraud varies widely across states. States reported quite a bit of difference in the types of fraud committed and the schemes and characteristics of fraudsters themselves. Given the prevalence of ID fraud, for example, it would be reasonable to expect all states to report dealing with it on a daily basis, but some states see this kind of fraud only on a monthly or yearly basis. Other types of fraud that several states commonly report include bank account takeover, fake employers, and claim takeover. Nearly every state reported expecting fraud attempts to increase over the coming year, with several citing AI as a growing concern. It would probably be helpful to think about the threats AI might pose in the future and provide guidance to states to combat it. I believe this committee would be pleased to learn the number of interventions and cross-checks states are already using. The incredibly long list of these cross-checks is available in my written testimony. Identity verification also continues to evolve. As with other fraud prevention tools, many states regularly review their flags to ensure accuracy and provide ample alternatives for claimants who do not pass ID verification. Consumers should be aware that fraudsters are using ever-evolving tactics to steal identities. Public information campaigns could be helpful to understand fraudster tactics and this again would help with fraud outside the UI system as well as within. Another efficiency to consider is retesting the accuracy of fraud flags. One state reported that at one point in the past couple years, over 50 percent of claimants were flagged for fraud and most of those were cleared as innocent, so accurate flags is important. Another thing that could improve fraud rates is greater due process for those accused of fraud. Systems do make mistakes in identifying fraud. Clearing innocent claimants is a win-win for states and the accused. Finally, I would be remiss in this testimony not to mention data security. Early in 2025, the Department of Government Efficiency accessed personally identified information associated with UI claims and then posted about it on social media. DOGE has also been sharing Social Security data on an unsecured server. DOL having greater insight into better data is a good thing, but going forward the agency should adopt a stronger security posture than the administration exhibited in 2025. In closing, I want to recognize the hardworking state employees who tirelessly work to ensure the right people get benefits on time and safeguard systems from fraud, as well as the federal partners working with them in good faith to keep our systems secure. I urge members of Congress to continue to engage the workers responsible for program integrity as it takes on the heady task of keeping UI systems secure now and into the future.

Thank you, Ms. Evermore, and I want to thank all of our witnesses for your important testimony here today. We will now proceed to questions and answers from the members of the subcommittee and I will begin by recognizing myself. Inspector General D'Esposito, last March H.R. 1156, the Pandemic Unemployment Fraud Enforcement Act, which we have discussed this morning, passed the House with a large bipartisan consensus with over 80 Democrats supporting it. The bill would extend the statute of limitations for prosecuting pandemic unemployment fraud from five years to 10 years, allowing prosecutors the ability to go after the criminality that was committed. Does the Inspector General's office support an extension of the statute of limitations and do you believe it will result in recovery of additional taxpayer funds? That is number one. And as a follow-up, can you speak to the statute of limitations as it relates to civil forfeiture tools needed to get back frozen funds on the bank debit cards and transferred to state unclaimed property?

Sure. Thank you, Congressman. So first and foremost, yes, we absolutely do support the extension. We believe that it will give investigators the tools and resources that they need to continue to investigate the crimes and work with their prosecutor partners in order to move these cases forward. One of the things that we were encountered with in the last four years is prosecutors that did not want to move forward in some of these cases. And now we are doing our best to open the doors of communication and open the lines of communication with prosecutors throughout this nation in order to prosecute cases just like this, but extending the statute of limitations is key to that. It also goes into the statute of limitations into those billion dollars that is on those debit cards. We have information that has come from interviews during arrests that there are some criminals that are actually waiting for the statute of limitations to expire to then remove the money from those cards. With regards to the civil forfeiture tools, H.R. 1156 would extend the clock to do seizure and forfeiture. It does not give our office the statutory authority it requires to engage in that activity and I do encourage Congress to make amendments to the Inspector General Act to give the Inspector General's office the ability of asset forfeiture.

Thank you for that. Ms. Miller, thank you for your testimony. I was struck by your description of the level of criminality and complexity and the vastness of what has occurred in this space. And so I appreciate your candor on that. You talked about the factors that might have led to funds being left in banks and the need for a pathway for banks to be able to work with states to return the funds safely. Acknowledging there are liability and regulatory issues that banks must navigate, can you describe why you think a federally defined recovery mechanism is needed and what that would look like?

Yes. Thank you for the question, Chairman. It is very clear to me and it is clear to anyone that has been watching this for a while that we did not have the systems in place to deal with the kind of fraud that we were seeing during the pandemic. And when the fraud became very clear to banks, they were unable to do anything about it because in some cases, and I do a lot of interacting with financial institutions just like my colleague on the panel here, and I was told from early on, we called and we could not get the money back. We could not, we did not know who to, nobody answered the phone, they did not tell us how we could give the money back. And so a lot of it had to do with uncertainty. There were concerned that if they frozen an account and gave that money and tried to return that money to the government, they would be held liable. And so we need a statutory framework that provides the financial institutions both a mechanism, so a way to get that money back, but also the safe harbor and the protections for if they, you know, freeze those funds and somebody comes and tries to say that those funds were inappropriately frozen, that they are not held liable for that.

Thank you for that. Mr. Williams, I will now turn to you. Your testimony, you talked about this being a unique situation in terms of the ability to identify funds in a specific financial institution and recover those dollars versus other types of fraud that might be more difficult to recover. Why do you think this scenario is different in terms of our ability to actually get those dollars back?

Thank you for the question, Chairman LaHood. Again, I going back to my testimony, what is unique is that these are funds specific to prepaid cards, which means that the way prepaid works is they are fundamentally concentrated. You have many cardholders, many accounts, large amounts of money that are sitting with a few financial institutions. So instead of really having to systematically deal with thousands, there is money you can get with by direct action with a few that service this niche. The alternative to that, other ways funds may have been distributed would have been like a direct deposit to an existing bank account. They could have quickly moved from there, they are much less likely to be present.

Thank you. Those are all my questions for now. I will turn it over to our Ranking Member Danny Davis.

Thank you, Mr. Chairman. And thank all of our witnesses. Ms. Evermore, in a previous hearing, one of the constituents from my community testified about Illinois's important work to simplify and user test unemployment benefit applications. And an effort was funded by the American Rescue Plan Act. Could you explain how simplified applications and other efforts to make it easier for people to access their earned unemployment benefits also help reduce fraud and overpayment?

Absolutely. So, you know, the main cause for improper payments is claimant error. The more complicated you make forms, the more difficult you make systems to access, the more likely a sophisticated fraud scheme can get through, slowing the system for everybody else and making it harder for actual claimants who legitimately deserve a benefit to get through. Simplifying claims also helps, you know, streamline the process and really helps people to understand that unemployment insurance is a benefit for them.

And with the economic chaos that President Trump has unleashed with his tariffs, occupation of American cities like Chicago and military actions, it concerns me that we may soon see a rise in unemployment. Is our current system prepared to pay workers their earned benefits accurately and on time?

No, sir. Our current system is not prepared for a massive economic downturn. States are still relying on outdated technology. I would say fraud flagging has gotten a lot more sophisticated and we're a lot more down the road than we were several years ago, but there's still definitely progress that needs to be made there. I also think that systems may need to be bolstered so that when the pandemic happened, we knew there were states where it was difficult to access benefits and that those benefits weren't sufficient to provide a countercyclical stabilizer. We need to look at that as well. States are going to want to look at whether or not their benefits have kept up with inflation because a lot of states don't increase their maximum weekly benefit amount with inflation, and we've had quite a bit.

Thank you very much. Thank you very much. Mr. Inspector General, I know this happened before you became Inspector General, but I assume that you're aware that your predecessor notified us that the Office of the Inspector General had to reduce its staff by 20 percent in fiscal year 2023 because of congressional budget cuts and that laying off inspectors meant fewer fraud investigations. My understanding is that money has not been restored. How many fraud investigators have you lost since 2023?

Well, thank you for the question, sir. Our investigators investigate a wide range of crimes, not just fraud. And I am a firm believer that when you have a leader that can promote efficiency and do more with less, and you have quality investigators doing the job like we do in the Department of the Inspector General in the Office of Labor, we can continue to investigate and audit, whether it's unemployment insurance or the many other crimes including human trafficking and labor crimes that we investigate, we can continue to do them in an efficient manner which is obviously explained by the prosecutions, by the convictions, and by the time that we've put people behind bars.

Well, let me thank you for that answer. Reminds me of my mother who always said you can do more with less. But what happens when you're understaffed, if you really don't have the personnel?

Well, right now we do have the personnel. We have the personnel that's continuing to conduct these investigations and these audits, which is clear and indicative by the two memos that were forwarded to this committee over the last couple of months identifying nearly a billion dollars on unused pandemic debit cards. That work was done by the hardworking auditors and analysts and investigators in the Department of Labor.

Thank you. Thank you very much. I yield back, Mr. Chairman.

Now recognize Mr. Carey of Ohio.

I want to thank, thank you, Mr. Chairman and the ranking member for having this hearing. In Ohio, Governor Mike DeWine continues to lead on limiting the ability of fraudsters to take advantage of the COVID-era unemployment compensation. The Ohio Department of Jobs and Family Services has recovered over $400 million from financial institutions. Additionally, Governor DeWine is leading efforts to return unspent unemployment back to the federal government. And I want to shout out to my dear colleague, Max Miller, for leading in his efforts on the CLOSE Act, which would address the issue of outside of the legal system. So just want to mention that. Mr. D'Esposito, it is great to see you again and as a point of personal privilege, you know, I got to spend a lot of time with you on committee and looking at the overview of everything that you have right now, I couldn't have picked a better spot for you and I know your commitment to what you do is beyond reproach.

Thank you, sir.

In your own words, can you tell me what led you to issue subpoenas against certain financial institutions last summer that informed the reports we're looking at today?

Well, it was really multifaceted. One was a request by this committee. Two was intelligence that was gathered by our auditors and investigators which led to the subpoenas over and then the analysis of that information over the last year led us to the two memos that were issued earlier this year where we identified, again, nearly a billion dollars still on these prepaid debit cards. One of the single debit cards had over $85,000 on it just sitting there. And as I mentioned to the chairman in my previous testimony, one of the things that we're concerned about when it comes to the statute of limitations is that we have good intel and good information that there are criminals, whether they are here in the United States of America or our adversaries across the globe, who are waiting for the statute of limitations to run out so that they can cash in on some of that $1 billion.

I want to thank you for that. Mr. Williams, I'm going to turn to you. First, can you identify what's on your lapel?

That would be the Ohio State block O.

For the record, I just want everyone to know the Ohio State block O that he's wearing on his lapel.

Two daughters there, sir.

Very good. My oldest son graduated from there. I understand you spent a lot of time obviously in Dayton, Cincinnati, and also all over Ohio. You're a Xavier grad. I grew up on Winding Way as a kid. Can you explain briefly how banks were able to identify fraudulent claims and payments? Can you just kind of just basic, I'm going to open it up to you, give you a little time to talk about that.

Yeah, just from an Ohio perspective, but to clarify a couple of Ohio things. UD graduate, Xavier grad school, and the Winding Way reference is not lost. I went to Saint Albert's.

Oh, there you are.

Now, if you look at like, you know, it requires as a financial institution your primary fiduciary responsibility is safekeeping of money. That in you put an unbelievable amount of work into that. Some of the basic practices are time of establishing relationship. Government agencies do this as well. You do all the checks to make sure that you know who you're servicing. It's required by law and it's in the best interest of the financial institutions. And then as money moves, you're in a state of constant vigilance, watching, monitoring. These are highly technical, high investment areas of a bank. The amount of every single financial transaction that is happening throughout this country within seconds is potentially being monitored for statistical anomalies. Does this look unusual? You've mostly likely have experienced that as a consumer where you get a text that is, is this you? And all of that is to again move from a recovery position to a prevention position. The two biggest changes that I've seen happen, one is there is a lot more secondary communication where you're always trying to confirm things to make sure. And then the last one is just that the rise of AI is making this all change.

Absolutely. And I want to thank all the witnesses. Very, very good group of witnesses. And with that, Mr. Chairman, I will yield back.

Thank you, Mr. Carey. Now recognize Ms. Chu of California.

Thank you, Mr. Chair. First, let me be clear that Democrats strongly support recovering fraudulent unemployment insurance payments, including any fraudulent funds that may be sitting in bank accounts. In fact, we were willing to work on a bill to extend the statute of limitations if it were done on a bipartisan basis. But the partisan bill that was put forward punished innocent workers for state errors and also did not address the Trump firing of the independent, supposedly independent, Inspector General. So we could not support it. But in fact, Democrats support going after UI fraud so much that we were the ones trying to get full funding for the office responsible for investigating potential fraud and bringing criminals to justice, unlike this Republican majority which slashed appropriations year after year for the Office of Inspector General. These cuts have forced the Inspector General to lay off staff, cancel a contract to help triage fraud tip line calls, and curtail their audits and investigations. And Inspector General D'Esposito said that you can do more with less, but Ms. Evermore, can you expand on why a fully funded DOL Inspector General office is essential to go after existing fraud?

Oh, absolutely. I have tremendous respect for the work that the Office of Inspector General does. They have unique tools to be able to identify patterns and collaborate with states in order to make sure that everybody's learning from each other. I also have great respect for the work that the PRAC has done on fraud throughout all pandemic programs. What you really need is a strong central authority that understands all of these patterns in great detail and can share what's shareable across states and learn from what's unique in other states.

Very good. And talk about full funding, how about the state UI agencies? We know the best defense against unemployment fraud is a well-trained, well-equipped frontline workforce, which is more likely to spot unusual applications or fraud patterns and they can prevent the fraud from occurring in the first place. The American Rescue Plan did do that full funding, but then that was cut drastically. So why is that important, Ms. Evermore?

Absolutely. You'll see in my testimony a graph of the decline in UI administrative funding over this century. So what I've seen, especially when we interviewed all of these states about what was actually going on there, picking up on patterns is sometimes a very human thing. So for example, understanding when the people calling in seem to be working off a script, or when the people calling in all seem to have a similar story, or even are answering certain questions that are strange in a weird way. That's a thing that sometimes humans can pick up on before the algorithm does. And so it's really important to have human beings involved in the process of fraud detection and prevention. And if we can't afford the humans, then fraud detection and prevention just isn't as accurate.

Thank you. Mr. D'Esposito, the Inspector General position is an independent nonpartisan office and under the Hatch Act you are prohibited from running for political office. It was reported in Newsday last night in this article that you are planning on running for New York's 4th Congressional District. Do you plan on resigning your position as Inspector General after only two months and have you been engaging in campaign activities when you've been serving as Inspector General?

Well, thank you for the question, Ms. Chu. And I don't think that that article was in the financial memo that we issued about the billion dollars in fraud. Today I am here to serve as the presidentially nominated Inspector General of the Department of Labor. I was confirmed by the United States Senate and I'm here on this panel today answering your questions as the Inspector General.

But this article does say that you do plan on running for this position.

Ms. Chu, if I may, can I ask who wrote that article?

Billy House.

Right. Not Anthony D'Esposito.

And it actually says that you are confirming that you are running for this office.

It actually says in the article that there was multiple calls made to Anthony D'Esposito and there was no comment made. That's what it says.

Well, I hope that if you are indeed doing this, you do resign. There is a Hatch Act that prohibits that kind of activity.

Ms. Chu, I am well aware of the Hatch Act. I'm also well aware, if you want to talk about the work that the office is doing, which is why we're here, our agents and our auditors are doing tremendous work because we are embracing technology and utilization of different resources in actually to get this job done. Unlike places like New York City where they're cutting 5,000 hardworking NYPD cops, we are embracing technology and utilizing different resources in the Inspector General's office to get the job done. So if we want to talk about defunding police and defunding criminal investigators, we should look no further than Democrats like in New York.

The Inspector General...

I now recognize Mr. Miller of Ohio.

Thank you, Mr. Chairman. Appreciate your time, and thank you to all the witnesses for being here this morning. I'm just going to dive right into it. Ms. Evermore, so far in this hearing, we've discussed some of the most extensive and systematic fraud in federal unemployment programs in United States history. On the low end, at least $130 billion was stolen from American taxpayers by organized criminal networks around the world. Can we agree that this fraud is bad and we should have done much more to make sure that it didn't happen in the first place?

I can guarantee you there's probably nobody who's lost more sleep over this issue than I have. This is a terrible issue, and money shouldn't go to criminals, it should be going to people who've just lost their jobs.

So fraud is bad, yes or no?

Yes.

Thank you. So now that we can at least agree that fraud was bad and needs to be investigated, do you think it's important that we review these funds found in banks and recover those that can be demonstrated as attributable to fraud?

I think to the extent that you can do that, sure, absolutely. I've talked to some states and they've tried to do it, and it was very labor intensive, and they were really concerned about future fraud going out the...

So reclaiming my time. So if the work is too hard, we should just stop, yes or no?

No, we should actually provide...

Reclaiming my time, but is that not what you just said? That it shouldn't be looked into, so to speak, because it's too labor intensive and that the Department of Labor should look into other things because it would be a better use of their time?

OIG and the states should be funded enough to look into all of these things.

Right, but that's really not what you said, is it, ma'am? I mean, you're master of the spin right now. Fraud is bad, and these...

Fraud is bad.

Okay, yes, and these funds have been frozen by banks, but you're saying because the work is too hard that the United States government shouldn't look into it. I find that that is unacceptable. But thank you for your opinion on that. But in my home state of Ohio, there's an ongoing lawsuit and it's funded and pushed by left-wing groups to sue the state and to force Governor DeWine to retroactively disperse pandemic funds. Meanwhile, in your testimony, you express concerns about going after fraud associated in unspent debit card balances. If it isn't recovering these funds, should we just leave them on the cards and just simply walk away with billions of dollars just frozen?

No, I said it's worth examining and I also think...

Can you please use your mic?

I turned it off instead of turned it on. It's worth examining, it's worth working on. And I also think it could be a great tool for figuring out who victims of ID fraud were so that we can give them the tools that they need to lock down their credit so that their identities aren't used to steal money from banks or other institutions.

So I'm glad that you and I agree, because previously it sounded like you said it wasn't looking into, and now it seems like with the secondary question I asked you as a follow-up, it is worth looking into. So I appreciate and thank you for changing your answer. But Ms. Evermore, everyone is here talking about how this low-hanging fruit that was found in banks and how we need to recover these funds, however your testimony once again suggests that you believe that these accounts aren't that big of a deal, that in quote, "balances may remain on cards for a variety of legitimate reasons," because money is apparently everywhere. And that some people may have decided to save it, which you've addressed inflation earlier, times are expensive, there's not much to save for the American people for their next layoff or car repair. Those are your own words, those are out of touch with the American people and it's very upsetting. But your conclusion in your words is that the Department of Labor may therefore wish to concentrate more on the detection and prevention than on this kind of recovery effort. I find that that line of justification to be highly questionable, and even yourself are having trouble with these questions and concerning. So I want to give you a chance to clarify for the last time because you've given me back and forth answers. Is it your position that it isn't worth the time or effort to look into these funds in accounts and recover what we can attributable to fraud, yes or no?

Yes or no?

Yes or no?

It might be...

Yes or no? I'm not... yes or no?

The question... can you repeat the question?

Yeah, it's simple. Is your position that these funds aren't worth looking into because it's too labor intensive? That we should just not look into them because it's not worth the United States government to look into what banks and others have already frozen the funds and said that they are fraud and fraudulent?

No, I didn't say it's not worth looking into. I said in my testimony it's an area worth examining.

Okay. Thank you very much for your time. I think you really need to dive down in the education. Fraud is fraud, I'm glad that you acknowledge it as bad, but anyone who's been taken advantage of by the federal government or by the private sector, if they are taken advantage of by fraud, they are entitled, okay, to go ahead and to seek restitution or to get that money back or for it to be spent in other ways that is in the benefit of that individual. The country is no different, and it is obvious you have never been in the private sector. Mr. Chairman, I yield back.

Thank you. Now recognize Ms. Moore of Wisconsin.

Wow. Hello everybody. I just want to... I'm not going to put any words in your mouth, Ms. Evermore, but I suppose I ought to start with you. I was sitting here, I didn't hear you say the things that the gentleman from Ohio said that you said, that it wasn't important to track down fraud and, you know, that it's just too much work. I didn't hear that. What I thought I heard, and from your testimony, is that we shouldn't abandon some of the real concerns like, for example, my governor of the state of Wisconsin talked about the unemployment insurance data equipment that we have from the 1960s and how this administration clawed back $29 million in federal funding that we need to prevent waste, fraud, and abuse in the unemployment insurance program. What I thought I heard you say is that there might be $85,000 on a card like that, but there might be many, many, many more cards that got $10 on them and $15 on them. And there are people... I know people who were on SNAP, for example, Mr. Miller, you might be upset to hear this, but they get $10 a month in SNAP and they save all of the $10 debit card EBT cards until Thanksgiving so they'll have $100 to spend on a dinner. No, no, no, no, no, that's my time, excuse me. So I just want to yield a second, I didn't intend to do this, to Ms. Evermore to clarify what she said.

Yeah, I just think if we have limited dollars, we should concentrate on what's going to capture the most fraudsters.

Like giving Wisconsin the money we need, right?

Right, right. And in Wisconsin in particular, you raised the issue of antiquated technology. In our survey, that was one of the most cited things that states were concerned about when it comes to detecting and preventing and fighting fraud and recovering fraud, is they just... their technology isn't up to the task. I would say that also in Wisconsin, I was on a panel recently with the unemployment agency in Wisconsin, they've been doing some really interesting things on technology. It's worth talking to them about it, and I'll leave it there so you have your time.

And notwithstanding that, every Republicans in Congress have slashed unemployment insurance appropriations every single year, and they've reduced the administrative funding for state UI offices to a 30-year low in 2020, just for the record. All right, let me move on. Let me ask the honorable Mr. D'Esposito some questions. There's... economists argue back and forth about whether or not we are facing some sort of recession perhaps in the next year or two. You know, they look at labor market conditions, the labor market problems were bound to... the pandemic was certainly one of those times, it was horrible with regard to the high unemployment rate. We're seeing unemployment rates rise now. We of course have this tariff and trade policy which is increasing inflation. We see this AI bubble and, you know, a little bit of history here. October 1929, we saw the stock market on October 15th or October 1st just as high as it had ever been, and then October 29th stock markets crash and we went into the Great Depression. You're too young to know that. But what I am saying is that I guess ma'am, maybe I'll ask Ms. Evermore, are we prepared for the next pandemic or a recession that may come?

No, we're not. We currently have very old technology, states are underfunded, there are some questions that we still need to answer. But I think that states have been doing their best since the pandemic to bolster the systems and to...

Patch it up with spit and bubble gum and tape and so on. Exactly. Mr. D'Esposito, do you think that we're ready, in a notwithstanding the debit cards, do you think we're ready for the next big thing, a recession or a pandemic with regard to our readiness?

Do I think the federal government or states individually or the Inspector General's office?

Everybody, yeah.

Well, I believe the Inspector General's office is ready. I do think that it is a little bit insincere to blame the lack of technology in certain states on a specific president.

The 1960s.

On a specific president. I mean, if we're saying that the funding was cut under the... on President Trump's administration...

Yes, it was cut.

Right, but you mentioned that the technology in your state wasn't updated since 1989. There's been...

No, no, 1960.

Okay, 1960. There's been multiple Democratic presidents since 1960.

But for 30 years it's been cut every single year. Now, Mr. Chairman, I thank you for your indulgence because I want to enter something in the record. I want to enter a report from the Center on Budget and Policy Priorities that talks about the unemployment insurance system unprepared for another recession. I just want to thank all the witnesses. I really enjoy this job like you enjoyed it, I'm sure, Mr. D'Esposito, and want to come back because you just learn an awful lot, Mr. Chairman.

Without objection, those will be submitted for the record. Thank you, Ms. Moore.

Thank you, sir.

Recognize Mr. Feenstra of Iowa.

Thank you, Chairman LaHood and Ranking Member Davis for holding this important hearing. I appreciate all of you witnesses for sharing your expertise in this... this is a concerning situation. I mean, this is very concerning. Fraud often happens out of sight and we don't find out until the funds have been spent. I say that, until they've been spent, but in this case fraudulent unemployment funds were being reported to the Biden administration as it was happening. The banks were filing strict anti-fraud laws, flagged and they froze accounts when fraud was detected. They then reported the activity to regulators, then the Biden administration told the regulators fine banks for not getting the money out fast enough. Blowing past all the stops, just get the money out. Even the Biden-nominated Inspector General at the time warned the hundreds of millions of suspicious funds were sitting in bank accounts and could be lost without swift action, but the Biden administration did nothing. That's why I'm glad that we have a Trump administration and our committee working together to solve this problem. And I want to thank Inspector General D'Esposito, I want to thank you for what you're doing. You're doing a great job. Okay. You noted prosecutors are not moving cases forward. That's a problem. And then you noted extending the statute of limitation, which I think we can do. Is there anything else that we as Congress can do to help these efforts? I mean, this is taxpayer dollars. I mean, this is my money, your money, everybody's money that's being fraudulently taken. What advice do you have to us that what we can do?

Well, thank you very much for the question and it's great to see you. So I think that the work that we're doing is intense and the collaboration between not only U.S. Attorneys' offices but the collaboration that we are now building with local, state, and obviously our federal partners. I think that having Congress help us to make sure that task forces are something that can be utilized in this specific space is critically important. I think that there are some amendments that have been proposed to the Inspector Generals Act that would allow us certain abilities such as asset forfeiture, which would enable us to asset, forfeit assets and then utilize that funding for much of the resources, technology, to supplement some of the the funds that we need in our office. I also think that it's important that hearings like this take place. And I want to thank the chairman for putting it together because not only is it great to have a conversation, but it's also important to let the American people know what is exactly happening. And these hearings need to be about finding solutions to the problem. Like was said, this is not a Republican or a Democrat issue, it's an American issue. And these hearings should be spent more not for the clips on X, but more to actually find the solutions to the problems.

I agree, I agree. And thank you for your comments. I look forward to working with you. I agree. I agree. And thank you for your comments. I look forward to working with you and trying to figure out the solutions. Ms. Miller, you have substantial contacts in the financial service industry. You know, I I struggle, the banks are in the middle of this. And the CARES Act UI funds, they're having a hard time returning them because in essence they're froze, frozen. So statutory framework, you noted to get the money back and there's safe harbors, there's liability risk under the consumer protection laws. How do we navigate this and and how do we get the money back?

Yeah, I mean, I think as far as problems go, this one is quite solvable. And I think that's one of the reasons I'm heartened by this this hearing today because this is something that can be done. There is a path, we see where the money is sitting. The financial institutions want to work with the government, they want to work with the states and the federal government to return the money. And what we need to do is Congress needs to do and you have the ability to do this, is to provide that pathway for them to do it. We didn't ever experience anything like this before, the banks didn't have this this problem before them until the pandemic. And so creating a pathway and and protecting them from liability is important. They need certainty. Right now they have uncertainty.

You nailed it. And and Mr. Williams, I got 30 seconds left. Can you address that? They need certainty and and they need safeguards, protection laws. How do you see that happening to to contract, protect them?

Thank you for the question. I completely agree with the point. And I think for it's just really if there's any perceived conflict, not just now but in the future. If you operate in a bank, regulations change over time, you have to think about the long run. So I think it's less about hey, at this moment, but yeah, we they will absolutely return the funds if asked. Just you got to protect them down the road as well.

Yep. Thank you each witness, thank you, I yield back.

Thank you, Mr. Feenstra. Now recognize Mr. Evans of Pennsylvania.

Thank you, Mr. Chairman, and thank you Ranking Member for this hearing. I would like to follow up something my colleague Gwen Moore from Wisconsin to Ms. Evermore. What what confident workers data did the Secretary of Labor and DODGE obtain from the Office of Inspector General as by what is the risk to workers of DODGE shared that data as they did with IRS, SSA?

Sure. So the the current face of fraud as big as it is comes from leaks generally outside the system. And so, you know, it came from breaches that happened that we've all heard about in the press. And they were able to use those fraudulently stolen IDs to apply for for benefits and fraud got as big as it did. My concern is creating a single point of failure and information not being securely stored. I do have confidence that that when the OIG was the only one with with access to the PII, that personally identifiable information, that they were storing it securely. I have less confidence with DODGE.

Ms. can you talk more about overpayment versus fraud and why the overpayment rate is much higher than the fraud rate?

Sure. Overpayments are mostly mostly mistakes falling into two categories. One is work search and the other is reporting earnings. Work search is sometimes states ask claimants to keep their work searches in a log and they're not very good at keeping those work searches and they ask, get asked weeks and months later what their work search was for that week and they can't report accurately. And so that's a huge percentage of work search error. And then income reporting is also very difficult. If you have a part-time job, you're not going to really understand the difference between reporting earnings and reporting when you got paid. And if you have a part-time job, you might not know what you earned that week, but you'll know what you got paid. So a lot of part-time workers report when they got paid instead of what they earned and that's an improper payment.

Ms. I thank you for your testimony. Can you talk more about the confidential data that was leaked by DODGE from the Inspector General's office? What are the risks of the data being shared?

Well, so far the only thing that we've really seen is the, you know, a discussion of some practices on social media, which isn't great. But but we, you know, we're concerned because, you know, SSA data was transmitted on an unsecured server and so in general, you know, that particular agency's handling of information doesn't seem the most secure.

Can you talk more about ways to prevent future unemployment insurance fraud? What are changes that that would you implement?

Boy, that's a big question. I think states should really implement as many cross-matches as possible. They should, you know, states should regularly engage with their frontline staff who see day-to-day what these patterns are. I think that's incredibly helpful. I think improving technology, figuring out where and when to put in various fraud interventions. For example, in some states it might not make sense to check everybody's ID at the door, but rather check ID once you're not as sure that somebody is a a fraudster. There may be some more cost-effective ways of doing things and we're in the process of figuring that out and we will have a report that we will be able to share with you within months.

If Ms. Moore, if she you have any questions to Ms. Moore? Comments?

Oh, no, this is your time.

Okay to I want to thank you sincerely. Thank you very much. I yield back to the chairman.

Thank you, Mr. Evans. Now recognize Mr. Yakym of Indiana.

Thank you, Mr. Chairman, for holding this hearing today. And thank you to our witnesses for being here. As we previously discussed in this committee, unemployment insurance or UI fraud ran rampant during the COVID-19 pandemic. The Government Accountability Office estimates that pandemic UI fraud totals up to $135 billion. Private sector estimates, of course, run that up to potentially $400 billion. This fraud is completely unacceptable and a blatant waste of taxpayer money. UI benefits are typically administered through direct deposit, issued on a state prepaid debit card, or sometimes via paper check. In instances where the benefits are loaded onto prepaid debit cards, these debit cards are managed by financial institutions. Some of these fraudulent funds were issued on prepaid debit cards and are still being held in bank accounts today. It's estimated that there are about $1 billion in fraudulent UI payments still in banks. Mr. Williams, what hurdles do banks face in returning the funds they have identified as fraudulent?

Thank you for the question. I think at the end of the day the, you know, if you're a bank, you're the fiduciary. If you're requested by the account owner, the state who fulfilled the funds, to return it, you absolutely will. It is a process though. One of the fiduciary responsibilities you have is what's called reconciliation. Your bank account, the individual cardholder's account, they can never be wrong. Like we you can't ever go to an account and have it say something that's incorrect. So there's a lot of work that goes into that. So one of it under the, you know, in addition to kind of the legislative points that have been raised earlier, one is just the ability to execute this process. And the ability to provide the data that every all the books are clean so to speak. The other one, but you know, that really comes down to just a direct request and supporting information to be able to execute the return of funds to the entity that funded it. The other one is that's the funds that are on the prepaid cards. Once it's escheated, again, remember it's left that bank. That's a whole different thing, that's now with whoever the state's unclaimed property is.

Yeah, and and briefly, Mr. Williams, are there steps the federal government can take to help alleviate some of those hurdles?

I think the biggest step that could be two big steps that could be taken. One is any barrier that actually just prevents the delivery of data back and forth is a good expediter. The second one, in my statement I made a comment on deconflicting regulation. Certainly as raised by earlier comments, you know, there were fines issued, regulatory fines from the CFPB to financial institutions for the handling of fraud. I think the main thing is upon returning it upon request of the government, you just want that conflict and uncertainty eliminated so that you can do your job, your fiduciary responsibility, return it, and not have to worry about anything down the road.

Great. And last fall the the Department of Labor Office of Inspector General issued a report that found that the Biden administration DOL issued guidance that allowed states to issue categorical or blanket waivers for quote, unquote, non-fraudulent overpayments. Inspector General D'Esposito, according to your report, that guidance directly resulted in more than $30 billion in improperly waived funds that states failed to investigate. In your assessment, did this DOL guidance contribute to allowing states to walk away from investigations of fraud?

It absolutely lowered guardrails and took away checks and balances.

And and what do you think could be done in the future to prevent that from happening again?

I think that proper identification is key. I think that as we've seen in many states throughout the nation, especially recently, as President Trump continues his war on fraud, that we can still be compassionate elected officials and provide these social resources while following the rule of the law. So I think it's important that states do their best to invest in in important technology and make sure that their staff is ready when these situations come about because the idea that we are going to try to blame one administration for the failed technology of a state over decades is just not the truth.

Thank you, Inspector General. Mr. Chairman, I ask that the DOL OIG report be entered into the record.

Without objection. Thank you, Mr. Yakym. Now recognize Mr. Horsford of Nevada.

Thank you, Chair LaHood and to the ranking member. I agree, fraud is bad, and I agree that no one administration is at fault for decades of a lack of investment in our basic infrastructure when it deals with unemployment insurance. Nevada is the canary in the coal mine for our national economy. When things are good, people flock to our state to travel, to participate in our great outdoors and everything that we have to offer. But when it's down, we also see the impact of that. And unfortunately, right now, Nevada has the third highest unemployment rate in the country, behind California and New Jersey. That's not a ranking anyone wants to be at the top of. But it's the people behind these statistics that matter. And to be clear, workers pay into UI with their employer contribution. So we need to center the worker who needs to rely on their benefits as a bridge when and if they become unemployed. Unemployment benefits and the systems that deliver them provide a critical bridge during these times. And as I said, currently right now, we're dealing with what I call the Trump slump. It's more important than ever that we take the lessons from the past, whether that was the downturn in the housing economy or the pandemic, to strengthen our unemployment systems nationwide. I've had a bill, the GUARD Act, for some time now, waiting for action, that would actually put resources into place in the states to update their unemployment systems and to develop a national model for unemployment systems so that we don't have this hodgepodge system all over the country. Ms. Evermore, in your written testimony, you mentioned that assisting identity theft victims alongside pursuing the perpetrators is a critical part of fraud response. Why is victim assistance essential to an effective fraud response, and what are states doing right now to ensure individuals whose identities were stolen are not left navigating that fallout alone?

Yeah, can I tell you about a friend of mine in Connecticut who called me up and said, somebody applied for unemployment insurance using my name. The Connecticut DOL must be responsible. And I said, no, no, actually, this is probably the easiest way for you to find out that your identity was stolen instead of somebody applying to buy a car in your name or something like that, right? And so they reached out to the Connecticut Department of Labor and got a lot of good information about how to lock down their credit. And so therefore, that ID wasn't able to be used in future fraud attempts. And so I think that that is a good best practice that states should adopt is sharing information with claimants when they find out that they've been impersonated so that they can lock down their credit.

Yeah, and identity theft is a central component of what we should be addressing when we're talking about rooting out fraud. And I don't hear enough about protecting people's identity, particularly at a time where this administration under DOJ has allowed people's identity to be stolen. Literally the largest issues of theft dealing with people's personal information has happened at the Social Security Administration and we've done nothing to address it. I would like to enter into the record, Mr. Chairman, a letter from the Connecticut Department of Labor dealing with the identity theft notification process.

Without objection.

Thank you. I also want to commend my state of Nevada. We actually used some of the TIGER grant money to invest in updating our systems. Our system failed workers during our last downturn in the economy, and regardless of party, we should be working together to fix this. Unemployment is not a partisan issue. Unemployment affects everyone and we need a system that works for everyone. Mr. D'Esposito, I would like to ask if you would just for the record clarify, are you or are you not currently campaigning for Congress? And two, are there printed petitions with your name on it as a candidate for New York's 4th Congressional District?

I am not campaigning and I have no idea if there's petitions printed.

Thank you for stating that for the record. Thank you, Mr. Chairman. I yield back.

Well, thank you. Before we have closing comments here, I know Mr. Davis, you wanted to address one issue.

Yes, Mr. Chairman, thank you. Thank you so much for your indulgence. I understand that the State Department is not doing much to help Americans across the Middle East get home from safety, so the U.S. repatriation program, which we oversee, has not yet had to assist them to reach their final destination. And so my question is, have you spoken with Secretary Kennedy to see if he expects the administration to eventually help evacuate those people? And if so, whether there would be enough funds or money in the repatriation program to help unite them with their families once they get back?

Well, thank you, Mr. Davis. I don't have specific answers on that, but I will tell you the State Department issued yesterday specific guidance and direction for the repatriation of Americans back from the Middle East to the United States. That's been articulated on their website for people to look at. So appreciate your comments in raising that today. Let me just thank our witnesses for this important hearing today. Grateful for your ideas, your suggestions, your expertise. As we look at this problem of fraud, it is, Ms. Miller, as you articulated, it is vast and it is wide, but we have a solution to it. We have solutions for it. And we ought to act again like we did in the House in a bipartisan way on our legislation, get that enacted in the Senate and at least try to recoup the $1 billion of taxpayer money that is out there that we can recoup. And so having this hearing today, raising the exposure of that, hearing your voices, I think adds to that. So I just want to thank all of you for being here today. And I will just advise members that they have two weeks to submit written questions to be answered later in writing. Those questions and your answers will be made part of the formal record. And with that, the committee is adjourned. Thank you.

Thank you. Thank you.