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The government showed how fast it could spend money when  Congress printed trillions for pandemic relief. Well, now it’s the morning after. Our next guest led a nationwide criminal investigation that so far has clawed back more than a billion dollars anyway, awarded to frauds under the Paycheck Protection Program and prevented maybe twice that much from going out in the first place. He’s an assistant special agent in charge with the Secret Service in Jacksonville, Florida, and a finalist in this year’s Service to America Medals program. Roy Dotson joined the Federal Drive with Tom Temin  to talk about the investigation.

Interview transcript:

 Tom Temin: And how does this fall under just to put this in the government, pantheon? Homeland Security, Secret Service versus say, the Small Business Administration? Is that because of Secret Service’s history of money investigation and money stewardship?

Roy Dotson: Yes, you know, we were founded originally to combat counterfeit currency back in 1865. Since that date, we are heavily involved in investigation of financial crimes. Most people obviously know us as protecting the President or the Vice President or heads of state. But we are heavily involved in cybercrime. And it just so happens that annually, we work these types of programs where U.S. government funds, state funds as an unemployment benefit programs, they suffer fraud and loss. And we look into those cases.

Tom Temin: And tell us about how this investigation was structured. I imagined it was an interagency affair led by Secret Service and what kind of resources did you marshal to be able to begin to even know where to look for fraud?

Roy Dotson: Well, like you said, early on, shortly after the Cares Act started to be distributed, we started seeing fraud and hearing that from the financial sector, and the Secret Service works closely with our banks and third party payment systems. In our job, we tried to safeguard the U.S. financial infrastructure. And in that we develop these relationships with the financial sector, they started to call us to tell us that they thought they were seeing a lot of fraud, we started looking into that, at the initial it started out as unemployment. We thought we were really getting hit, and we weren’t getting hit in the unemployment insurance benefit program. That quickly migrated to the Small Business Administration loans. Whether that was PPP or EIDL loans, we quickly again, partnered with Small Business Administration office’s inspector general, and with the Department of Labor, to start working jointly on looking into these cases and what we could do to really to stop the bleeding at the outset. And then now go back and really look into these cases as far as criminal investigations.

Tom Temin: So in many ways, your eyes and ears, your whistleblowers, if you will, on the ground, were the financial institutions close to where the fraud was taking place.

Roy Dotson: Yes, this case, or I’ll say our national investigation started from a bank investigator at a very small credit union in Florida, who saw a customer receive multiple payments from the state of Washington. Unemployment payments. And that was the first call that kind of set off, you know, the warning, and we started looking into it more heavily.

Tom Temin: And as he drove off in his new Maybach, that really made things more suspicious looking, I suppose. But this was a nationwide investigation, even though it touched off in Florida, where you are located, you really were overseeing something coast to coast?

Roy Dotson: Yes, again, I think quickly realizing that this could be national or even international, and the scope of it. The Secret Service has over 44 cyber fraud taskforces across the world. And our global investigation, operation center oversees, all of our field offices, which is I think, encompasses almost 160-plus field offices across the world. We quickly got together, formulated an investigative plan got the word out to those offices to start coordinating with not only SBA and DoL, but also with their financial institutions within their communities to see what was going on and what we could do to help.

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Tom Temin: We’re speaking with Roy Dotson. He’s an assistant special agent in charge with the Secret Service and a finalist in this year of Service to America Medals program. And were you able to discern patterns? Or did you look at databases and so forth to reveal where fraud might be taking place? Geographically, or what form it might take commonly?

Roy Dotson: Well, you know, these benefit programs, it wasn’t a real sophisticated crime as far as on the front end. It was a merely an online application where you needed very little information about yourself or another individual. You submitted that application. Those funds were quickly distributed. You know, there’s no doubt that Congress and the states were looking to help people that were in dire straits and they wanted to get those funds out quickly. It’s been widely discussed that some parameters were lowered some guardrails were lowered, I think is the actual term, to allow that to happen with good intentions. But unfortunately, our international, our transnational organized groups, even our domestic organized criminal groups, took advantage of that, and started to attack the program with literally hundreds of 1000s,or if not millions of fraudulent online applications.

Tom Temin: How do you decide which ones are the ones you’re going to nail and prosecute, and try to get the money back from among that volume of possibly fraudulent transactions.

Roy Dotson: So we start looking like you brought up earlier, data,  anything today has massive data, with literally billions of data points involved in these online applications and just the processing of them, we have to weed through those to find the most egregious cases, you talked about people that buy the Maybach, or people that buy the yacht or the the residence at Disney. So those stand out, of course, and then also going through that data and looking at organized groups, we want to target those people that aren’t just your one-off application, or somebody just trying to take advantage of the problem. We want to look at organized criminal groups that have a tendency to do this type of fraud, and really go after them and to try to circumvent what they’re doing. Because they don’t just do pandemic fraud. Obviously, this was just a crime of opportunity. They do the normal business email compromises, the ransomware,  the romance scams. And the other thing that I will say, you know, there’s also groups that are known to do different types of violent crime, whether that’s drug distribution, human trafficking, and some of those took advantage of these programs to help fund those activities. So it’s not just a white collar financial crime that we’re talking about, it has truly impacted people or could impact people on a personal level.

Tom Temin: Basically, then you had to almost prioritize the cases. And if it was just some small owner that got $50,000, he didn’t deserve. That’s not good. But you’d really want it to get to the organized and the large dollar volume ones to get the most bang for the buck that you had in terms of resources.

Roy Dotson: Yes. And, you know, working with SBA OIG, and with DoL OIG, and in the States, you know, they’re gonna look to go back to maybe those that for some reason, whether fraudulently or not obtained funds in a smaller amount, and they’re going to request those back, and hopefully work that out. But you know, there’s just too many cases for us. There’s not enough investigators across the federal, state and local community to investigate each and every one of these cases. Yes. So we’re going to prioritize, and go after groups to organize groups.

Tom Temin: And then getting money back. What did that require? It sounds like you would have to raid a place perhaps or indict someone? I mean, what’s the mechanism to get that $1.2 billion back to the government?

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Roy Dotson: Well, there’s a couple of different ways. One of the main ways is, you know, like I brought up earlier working with the financial sector, as part of our initial investigation, we worked with FinCEN, the Treasury Department, to get out notifications to the financial sector, giving them fraud indicators for the different types of fraud, whether that was unemployment, or SBA, which they could then utilize to watch for those type of activities within their accounts. They could then investigate and voluntarily hold those funds, and then contact us which they did. And they did an outstanding job of safeguarding literally billions of dollars reaching out to us. And then we go through the legal process of recovering that with a seizure warrant. We also had many, many 1000s of investigators as part of this investigation that were in the field, going out and interviewing individuals that received funds that were considered to be fraudulent, worked with those individuals, whether that was again with a seizure warrant, or with them voluntarily returning those funds to the government.

Tom Temin: And is the investigation ongoing? And do you have any sense in your own mind as to what the outer limits of how much bad money went out?

Roy Dotson: Well, that is the question I get all the time. It is obviously very much in the continuing stages. You know, we’re at the point now where we’re really deep diving into the data to develop those criminal leads. So we are working those cases. We are also, as I spoke to Congress a couple of weeks ago, and I get this question, and my colleagues, the inspector general, SBA and DoL get this question all the time. Do we know how much fraud? I can say this that we know it’s substantial? It’s multi-billions. They are working to determine the actual dollar amount now for Congress’s request, but it’s substantial. And this is not going to be a short-term fix. This is going to take  five to 10 years of investigation, at least, to try to get through most of these cases.

Tom Temin: And understanding the mechanisms by which this fraud occurred. Is there any way that this information is being fed back to future distribution systems or in some ways, tightening the rules on other benefits programs that are ongoing and not related to the emergency? Just simply so the government can start getting after some of those improper payment perennial problems that it has?

Roy Dotson: Well, yes, I think we’ve all learned a lot after this experience, I will say that we could have safeguarded a lot of funds on the front end, if there was just some basic cyber protections in place, some updated software, better identification tools. And I think out of this, the Department of Labor, the statewide workforce agencies, SBA, they’ve all learned and you know, several other benefit programs have all learned that they needed to update which they have updated their software and their identification mechanisms in order to catch it on the front end. I believe the inspector general for the PRAC recently spoke about that. Billions of dollars could have been saved on the front end, if we just took a minute, made sure that we were ready to do that. So I think I know and I’m confident that the next natural disaster or heaven forbid another pandemic, we’ll do a much better job of distributing these benefits and protecting those funds for the U.S. taxpayer.

Tom Temin: Roy Dotson is an assistant special agent in charge with the Secret Service. He’s from Jacksonville, Florida, and a finalist in this year’s Service to America Medals program.

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