Rep. Darin LaHood urges recovery of nearly $1 billion held by banks in pandemic unemployment accounts

Rep. Darin LaHood (R-Ill.), chair of the House Ways and Means Work and Welfare Subcommittee, opened a subcommittee hearing saying investigators have identified nearly $1 billion in pandemic unemployment funds left on prepaid debit cards and held by financial institutions.

"GAO has estimated 100 to 135 billion in pandemic unemployment funds that were lost to foreign or domestic fraudsters and international crime rings," LaHood said, framing the scope of pandemic-era fraud and the need for recovery efforts.

LaHood cited Department of Labor Inspector General memos from Jan. 30 and Feb. 11 that, according to subpoenas of two financial institutions, found one institution holding $523 million associated with 2.7 million debit cards and a second holding $197 million associated with 774 cards. Investigators also identified about $192 million that had been transferred to state unclaimed property, a total LaHood described as "nearly a billion dollars," with an estimated 78% of those funds federal.

LaHood told the subcommittee that many of the prepaid cards had been flagged for potential fraud and left unreconciled. "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," he said.

He also repeated concerns that nearly half of the unemployment claims associated with the identified funds had been flagged by the Inspector General in 2022 as suspicious or potentially fraudulent. LaHood said guidance issued in 2022 allowing states to grant categorical waivers of non‑fraud overpayments contributed to improper waivers and reduced recovery opportunities.

Citing Department of Labor figures, LaHood said roughly $6 billion (about 5%) of fraudulent unemployment insurance payments made during the pandemic have been recovered so far. He argued that, unlike funds sent overseas by international crime rings, bank-held funds tied to prepaid cards are identifiable and recoverable and therefore should be returned to taxpayers.

LaHood recalled that the subcommittee previously marked up legislation to extend the statute of limitations for prosecuting pandemic unemployment fraud from five to ten years. He said the Pandemic Unemployment Fraud Enforcement Act later passed the House, with 81 Democrats voting for the bill on the floor, and urged the Senate to act so the measure can become law.

LaHood framed recovery as a bipartisan objective but expressed frustration that Democrats on the committee had opposed his earlier efforts at markup, and he invited colleagues to work together to "make sure every dollar in these banks is examined and that those attributed to fraud are recovered and people are held accountable." He then thanked the witnesses and recognized the ranking member, Mr. Davis, to proceed.

The hearing proceeded to witness testimony and questions after LaHood's opening remarks.