RISK TO HOMELAND SECURITY FROM
IDENTITY FRAUD AND IDENTITY THEFT
SUBCOMMITTEE ON IMMIGRATION,
BORDER SECURITY, AND CLAIMS
SUBCOMMITTEE ON CRIME, TERRORISM,
AND HOMELAND SECURITY
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
JUNE 25, 2002
Serial No. 86
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://www.house.gov/judiciary
COMMITTEE ON THE JUDICIARY
F. JAMES SENSENBRENNER, JR., WISCONSIN, Chairman
HENRY J. HYDE, Illinois
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR SMITH, Texas
ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
CHRIS CANNON, Utah
LINDSEY O. GRAHAM, South Carolina
SPENCER BACHUS, Alabama
JOHN N. HOSTETTLER, Indiana
MARK GREEN, Wisconsin
DARRELL E. ISSA, California
MELISSA A. HART, Pennsylvania
JEFF FLAKE, Arizona
MIKE PENCE, Indiana
J. RANDY FORBES, Virginia
JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
PHILIP G. KIKO, Chief of Staff-General Counsel
Subcommittee on Immigration, Border Security, and Claims
GEORGE W. GEKAS, Pennsylvania, Chairman
DARRELL E. ISSA, California
MELISSA A. HART, Pennsylvania
LAMAR SMITH, Texas
ELTON GALLEGLY, California
CHRIS CANNON, Utah, Vice Chair
JEFF FLAKE, Arizona
J. RANDY FORBES, Virginia
SHEILA JACKSON LEE, Texas
BARNEY FRANK, Massachusetts
HOWARD L. BERMAN, California
ZOE LOFGREN, California
MARTIN T. MEEHAN, Massachusetts
GEORGE FISHMAN, Chief Counsel
LORA RIES, Counsel
ART ARTHUR, Full Committee Counsel
CINDY BLACKSTON, Professional Staff
LEON BUCK, Minority Counsel
Subcommittee on Crime, Terrorism, and Homeland Security
MARK GREEN, Wisconsin, Vice Chair
HOWARD COBLE, North Carolina
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
BOB BARR, Georgia
RIC KELLER, Florida
MIKE PENCE, Indiana
ROBERT C. SCOTT, Virginia
SHEILA JACKSON LEE, Texas
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ADAM B. SCHIFF, California
JAY APPERSON, Chief Counsel
SEAN MCLAUGHLIN, Counsel
ELIZABETH SOKUL, Counsel
KATY CROOKS, Counsel
ERIC HULTMAN, Full Committee Counsel
BOBBY VASSAR, Minority Counsel
C O N T E N T S
JUNE 25, 2002
The Honorable George W. Gekas, a Representative in Congress From the State of Pennsylvania, and Chairman, Subcommittee on Immigration, Border Security, and Claims
The Honorable Lamar Smith, a Representative in Congress From the State of Texas, and Chairman, Subcommittee on Crime, Terrorism, and Homeland Security
The Honorable Robert C. Scott, a Representative in Congress From the State of Virginia, and Ranking Member, Subcommittee on Crime, Terrorism, and Homeland Security
The Honorable Sheila Jackson Lee, a Representative in Congress From the State of Texas, and Ranking Member, Subcommittee on Immigration, Border Security, and Claims
Mr. Paul J. McNulty, United States Attorney, Eastern District of Virginia
Mr. James G. Huse, Jr., Inspector General, Social Security Administration
Mr. Richard M. Stana, Director, Administration of Justice Issues, United States General Accounting Office
Mr. Edmund Mierzwinski, Consumer Program Director, State Public Interest Research Groups
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Prepared Statement of the Honorable Sheila Jackson Lee, a Representative in Congress From the State of Texas, and Ranking Member, Subcommittee on Immigration, Border Security, and Claims
Material Submitted for the Hearing Record
Letter to Ms. Jackson Lee from Mr. Huse, Inspector General, Social Security Administration
Prepared Statement of the Honorable Zoe Lofgren with attached testimony from Linda Foley, Executive Director, Identify Theft Resource Center
RISK TO HOMELAND SECURITY FROM IDENTITY FRAUD AND IDENTITY THEFT
House of Representatives,
Subcommittee on Immigration,
Border Security, and Claims,
Committee on the Judiciary,
The Subcommittees met jointly, pursuant to notice, at 4 p.m., in Room 2141, Rayburn House Office Building, Hon. George W. Gekas [Chairman of the Subcommittee on Crime, Terrorism, and Homeland Security] presiding.
Mr. GEKAS. The hour of 4 o'clock having arrived, this special joint hearing will come to order.
The joint hearing is, of course, composed of the two Subcommittees in the Judiciary Committee which have oversight capacity on a variety of mutual issues but on this one in particular. It is composed, of course, of the Subcommittee on Immigration, Border Security, and Claims and the Subcommittee on Crime, Terrorism, and Homeland Security, the Chairman of which is Lamar Smith of Texas, who joins us and who helps us constitute the hearing quorum for the purpose of this hearing.
As the other Members appear in an order which the staff will maintain, we will recognize them as the need arises, but we plan to forge ahead with the hearing and will accord all the Members the right to insert statements in the record and to otherand we will otherwise accommodate them as they appear.
The series of problems that have led to this hearing, of course, has to do with identity fraud, and that takestakes characterization from many different sources, but the one that most disturbs us is the identity fraud that's identified with Social Security identification. And we know, for instance, that our distinguished formerI don't even know what to call him anymorePaul McNulty. I was remarking to him at the start that I think this is his eighth title since I've known him. But we welcome him. But he is the one who has outlined some of the problems in the airports, which we will discuss, having to do with this very same subject.
So we will be inclined to worry with you on the existence of the problems and to work through whatever recommendations that we can fashion together to try to limit the damage that has been done and will still be done if we do not take complete hold of the entire situation.
So we will begin the questioning of the witnesses after we accord the time to the gentleman from Texas, Mr. Smith, for an opening statement.
Mr. SMITH. Thank you, Mr. Chairman, and like you, I look forward to this joint hearing on identify fraud in all different variations.
Before I make any formal remarks, also like the Chairman, I'd like to single out Paul McNulty, who I consider to be a personal friend and who served as general counsel of the Crime Subcommittee before he went on to other green pastures. So, Paul, without slighting the rest of the witnesses who are here, I'm looking forward to hearing your testimony as well.
I'd also like to mention Roger Estes. Roger Estes is a police detective in Arlington County who went to great lengths to bring to our attention the problems with identity theft and identify fraud that we're talking about today. Mr. Estes, we are pleased to have you in the audience as well, and thank you for taking the initiative and alerting us to so many of the problems involved.
Mr. Chairman, since last September, it has become even more apparent how crucial it is to have accurate information regarding an individual's identity. Even without the threat of terrorism, this would be a serious issue. Identity theft and fraud cost businesses and individuals time, money, and sometimes their lives.
There are three documents frequently used to establish false identities that must be made more secure. We can do a great deal to protect our homeland security if we tighten up the laws governing issuing of driver's licenses, Social Security cards, and birth certificates.
Many of us were shocked to hear how easy it was for members of al-Qaeda to obtain driver's licenses in three different States that allowed them onto U.S. airlines on September 11. Problems identity fraud are not unique to these States. Each State has different standards for driver's licenses. Some even allow illegal aliens to obtain driver's licenses.
In addition, each State has different laws regarding what documents may be used to prove identity or residency to obtain a driver's license. The problem is not only with individuals obtaining false driver's licenses. Identification procedures are full of loopholes that make it easy for criminals to take advantage of the system.
Many of the September 11 terrorists also obtained fraudulent Social Security cards or numbers through theft of legitimate Social Security numbers of others or through the use of counterfeit documents. While it has become increasingly obvious in the past few years that identity theft can cause financial damage, it is now becoming apparent that it can cause damage of a much more serious nature.
Individuals can obtain fraudulent Social Security cards by inventing a number, stealing an existing Social Security card, buying a counterfeit card, obtaining counterfeit documents such as passports, birth certificates, or INS papers, or by fraudulently obtaining a valid replacement Social Security card.
The Social Security Administration is responsible for preventing some of this fraud, but weaknesses in the system make it difficult to detect in all cases.
In 1996, Congress ordered the Social Security Administration to develop a proposal for a Social Security card to provide individuals with proof of citizenship or proof of legal resident status that would be harder to counterfeit and harder to alter. Several different types of cards were developed in response to this request, but no action has been taken to implement the use of these new cards. And I know we have a witness who will be talking about that problem a little bit more.
Much of the fraud in both the Social Security system and driver's licensing systems is related to fraudulent birth certificates. Because these records are kept in many places by local registrars and there is no national standard for these documents, it is easy to create counterfeit birth certificates or alter legitimate certificates as well.
We look forward to hearing suggestions from our witnesses today on how Congress can better protect our citizens and how we can better address these problems.
Thank you, Mr. Chairman.
Mr. GEKAS. We thank the gentleman, and we acknowledge for the record the presence of the gentleman from Virginia, Mr. Scott, and we accord to him at this moment the right to make an opening statement.
Mr. SCOTT. Thank you, Mr. Chairman. The problem of identity theft has grown rapidly with the growth of automation and now is entrenched as a front-line issue in the war on terrorism. Nearly all of the September 11 hijackers obtained false documentation that allowed them to base themselves here in the United States while plotting the terrorist attacks. However, the war on terror has only added a second tier to an already serious problem with consumer-related identity theft. The threat posed by identity theft to homeland security as well as the dangerous economic and personal effects of consumer-related identity theft require immediate attention from the Government, law enforcement agencies, and the credit industry.
According to several sources, in May of 2000, there are two major forms of identity theft. True name fraud is when a perpetrator uses a consumer's personal information, often in the form of a Social Security card, to open new accounts in the consumer's name. Of the victims who responded to the survey, 76 percent were victims of this sort of fraud, with an average number of six new accounts being opened per victim.
Other types of identity theft include Social Security fraud, the use of a false Social Security number in tandem with a false or stolen identity, and so-called bust-out schemes where perpetrators use credit card terminals obtained by a shell or front business, can make charges to fraudulently obtain credit cards.
Identity theft victimizes between 500,000 and 700,000 victims each year, and all indications are that this number is rising. In March 2002, a GAO study reported a 40-percent increase in identity thefts reported to Social Security during a 7-month period in 2002 and over the same period in 2000. This documented increase does not takeeven take into account the fact that many individuals are not even aware that they have been victimized until months after the fact and that some choose not to report such incidences to law enforcement agencies or identity theft hotlines.
Many States have begun to tackle these pressing problems. In Virginia, the Attorney General has created a task force to address economic crimeelectronic crimes, including identity theft. The Federal Government needs to be ready to assist these types of efforts in any possible way. Tighter administration of Social Security cards and other Federal IDs are one effort to address identity theft, and we must develop these kinds of efforts to help drive the burgeoning market in illegal information.
I look forward to the testimony of our witnesses on how we can better address the growing problem of identity theft, and I'd like to particularly welcome the U.S. Attorney from my district, Paul McNulty, to testify before us today.
Mr. GEKAS. We thank the gentleman.
We'll proceed with introductions of the witnesses. Our first witness is, as aforesaid, Paul J. McNulty, the United States Attorney for the Eastern District of Virginia. Mr. McNulty has had more than 20 years of experience in Federal and State Government, most of which has involved law enforcement and criminal justice policy. Mr. McNulty's experience also includes over 12 years in the United States Congress where he was chief counsel and director of legislative operations for the majority leader of the U.S. House of Representatives, and for 8 years he served with the House Subcommittee on Crime, first as minority counsel and later as the chief counsel.
During those years he was a principal draftsman of many Federal anti-terrorism, drug-control, firearms, and anti-fraud statutes. Mr. McNulty is Chairman of the Washington/Baltimore High Intensity Drug Trafficking Area Task Force and is Vice Chairman of the Attorney General Ashcroft's Advisory Committee.
Next to him at the witness table is James G. Huse, Jr. He is the Inspector General of the Social Security Administration. Prior to his Social Security appointment, Mr. Huse was a special agent in the United States Secret Service for 25 years, rising to the position of assistant director. During his Secret Service career, he was also assigned as the liaison officer to the Department of Justice and to protective duties at the White House and many Presidential election campaigns. In 1995, he received a special award from the Secretary of the Treasury for his work as the Secret Service official in charge of the White House Security Review.
Next to him is, well known to Members of this Committee, Richard M. Stana, the Director for Justice Issues at the U.S. General Accounting Office. He has testified on behalf of the GAO before the Immigration Subcommittee and before the Judiciary Committee as a whole many times over the years. During his 26-year career with the GAO, he has directed reviews on a wide variety of complex military and domestic issues in headquarters, field, and overseas offices. Most recently, he has directed GAO's work relating to law enforcement, drug control, immigration, corrections, court administration, and election systems.
They are joined as in the final seat, the fourth witness, Edward Mierzwinski, the Consumer Program Director, State Public Interest Research Groups. He has been a consumer advocate with U.S. PIRG, the national lobbying office for State PRGs, since January 1989. These are non-profit, non-partisan public interest advocacy organizations with offices around the country. Ed Mierzwinski has authored numerous reports on consumer, privacy, credit card, credit reporting, and other bank and financial issues. He is also often quoted in the national press and has appeared on shows including ABC's ''Nightline,'' CNN's ''Crossfire,'' NBC's ''Today,'' and NPR's ''Talk of the Nation.'' From 1993 through 1995, he was a member of the Federal Reserve Board of Governors Consumer Advisory Council.
We will begin with the testimony of the witnesses after we accord the lady from Texas, Ms. Lee, an opportunity for an opening statement.
Ms. JACKSON LEE. Mr. Chairman, thank you very much, and I do thank you and the Chairman of the Subcommittee on Crime, Terrorism, and Homeland Security for holding this hearing, and I acknowledge the Ranking Member of the Crime Subcommittee.
This is a very important combined hearing inasmuch as it relates to the jurisdiction of both of our Committees, the Crime Subcommittee and the Immigration and Claims Committee. You would wonder, as you review September 11, how much of the ability of the terrorists to enter into this country had a lot to do with identity fraud and theft and how much prospectively we can expect creative individuals who wish to do evil that will be taking advantage of the flexibility and the freedom of this Nation in terms of identity fraud and theft.
Already identity fraud and theft is an enormous burden on our economy as it relates to our own citizens. In my own community, I have had a number of constituents who have been drastically impacted, negatively impacted, losing large sums of resources, because someone has taken advantage of their particular identity, and, I might say, their good name. And so the expertise that is before us this afternoon is key.
One of the issues that we confront, those of us who are here in the United States Congress, is that we will spend a lot of time in hearings dealing with practicalities. We are the practitioners, and my delay was because I was in a Science Committee hearing on cyber terrorism and how we can enhance science and technology to protect us against terrorism.
Well, we need the thinkers as well to be able to help us design the legislation that will be helpful in this new climate. And so I would hope that as we listen to the witnesses, what we will find is a way to balance the freedom of this country, the first amendment, the protection of the Constitution, the ability to protect without isolating or discriminating against particular groups, the ability to recognize names, if you will, as not names equaling terrorism, but as they are intent on committing crimes, that these names do not signal to us that one group versus another is a terrorist group. But we'll be able to discern the actual facts and be able to present these facts so that legislation can be written.
I look forward to listening to the witnesses and, Messrs. Chairmen, I would ask that the entirety of my statement be submitted into the record as we proceed. And I thank you.
Mr. GEKAS. Without objection, the statement will be entered into the record.
[The prepared statement of Ms. Jackson Lee follows:]
PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON LEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Good Afternoon Mr. Chairman. On September 11, the United States experienced the worst attack on its soil since World War II. An estimated 3000 people were killed in an attack on the World Trade Center in New York City. In the weeks following the attack, the U.S. government initiated a nationwide investigation into the reasons behind the failure of U.S. police and intelligence agencies to uncover the plot to destroy the Trade Center. In Washington Post stories earlier this year it was revealed that some of the September 11, 2001, hijackers had used identity theft and fraud to obtain false social security numbers and other identification documents to facilitate training and preparation for the September 11, attacks.
First, let me emphasize that I, like you, condemn fraud and its negative impact. None of us would approve of the fraudulent use of identification cards or any other documentation. People who fraudulently use identification documents can and should be punished. This is being done now. An alien at our border who has engaged in document fraud is inadmissible under section 212(a)(6)(C) of the INA. If the alien is in the United States already, he or she is deportable for document fraud under section 237(a)(3)(C) of the INA. In addition, it is unlawful for any person to forge, counterfeit, alter or falsely make any document for immigration related purposes.
Efforts at stopping terrorism beg the question at which point is it best to stop the terrorist. Clearly, the best point to stop terrorists is prior to their entry into the country, before they have access to our social security administration, departments of motor vehicles and other infrastructure critical to secure identification documents. During testimony before the House Committee on Small Business, last week, Immigration and Naturalization Service (INS) Commissioner James Ziglar pointed out that ''18 of the 19 hijackers entered the United States on visitors visas.'' He further explained that ''[t]hey made concerted efforts to do so, it is logical to assume, because that made them less likely to come to the attention of federal authorities.'' This glaring fact underscores the difficulties faced by agencies in preventing terrorists from obtaining fraudulent identification. It is worth noting that many of those that assisted the hijackers did so without knowledge of their September 11, plans.
Effective measures will be difficult to achieve in any event. The integrity of any verification systemeven a computer-based ''paperless'' onehinges on the security of the documents which underlie it, and such ''breeder'' documents are not secure. The birth certificate is a ''breeder'' document in that it can be used to obtain an identity document such as a U.S. passport, driver's license, military I.D. or social security card.
However, if these issues are going to be examined, we want them to be examined in a balanced fashion. We need to decide just how far we are willing to go in dealing with this problem. For instance, birth and death records are certain to be used, and we need to examine just what resources we need to dedicated to revamping these record-keeping systems. We must deal with issues of efficiency and resources in a complimentary fashion as opposed to pitting these issues against one another. The same is true of revising SSA and INS databases. Are we willing to bear the costs of developing and maintaining such gigantic data bases?
However, if these issues are going to be examined, we want them to be examined in a fair and equitable way. The fight against counterfeit documents and fraud should not become a fight against personal privacy that leads to a national ID card. I do not want a national ID card to be demanded of Americans every time they engage in what should be routine activity that can be conducted anonymously and without government intervention.
Technology has played a vital role in advancing freedom around the world, but it also has laid new temptations at the doorstep of government. Once the technology and a database are in place for a system such as a national worker registry, alternative uses for the registry will arise. This temptation can occur every time a new ''national crisis'' emerges: to help fight the war on drugs, to control the spread of disease, or to combat the War on Terrorism.
Congress also must take care to avoid steps that would increase rather than diminish immigration-related discrimination that has already become a feature of our employment system. In response to employer sanctions, many employers have screened out all ''foreign-looking'' or ''accented'' job applicants; have adopted illegal ''citizens-only'' hiring policies. They have selectively applied verification procedures only to ''suspect'' employees and demanded documents when hiring foreign-sounding employees when compared to other employees.
We also have to be mindful of states' rights. We should not become so aggressive in this area that states are turned into mere tools of the federal government in connection with the identity documents they issue.
Finally, Mr. Chairman, I hope that we can work cooperatively, and in the true spirit of bipartisanship to eliminate identity frand and theft and make the necessary changes in the law that must be made. However, I would like to say for the record that although there is ample and substantial evidence of the existence of identity fraud and theft, this hearing should in no way be used as a vehicle to discourage talented men and women from different countries from coming to the United States to study, to exchange creative thought and ideas, or to discourage businesses from temporarily moving their employees to contribute to our economy and our way of life. We should discourage identity theft and fraud, but not discourage fair and equal opportunity either. Thank-you Mr. Chairman.
Mr. GEKAS. Which brings to mind the general practice that we will accept the written statements of the witnesses for the purposes of inclusion in the record, and then accord each witness 5 minutes or somostly 5 minutes, less soto review the contents of the written statement. We'll begin with Mr. McNulty and the 5 minutes that will be the general rule.
STATEMENT OF PAUL J. McNULTY, UNITED STATES ATTORNEY, EASTERN DISTRICT OF VIRGINIA
Mr. MCNULTY. Thank you very much, Mr. Chairman. I'm delighted to be back with you in this room. It holds so many memories for me; as you mentioned, 8 years I spent with this prestigious Committee. And this Committee actually in my time here formed an outstanding foundation for me as I now serve as U.S. Attorney in the Eastern District of Virginia, enforcing the laws that are drafted by this Committee, and understanding those laws is a very beneficial thing. So I am very happy to be back here now and seeing old friends again.
In the weeks before September 11, nearly a year ago today, Victor Lopez-Flores and Herbert Villalobos were sitting out front of the Dollar Store in Arlington, Virginia, across the street from the DMV, the Department of Motor Vehicles, Virginia. This is a place where they hung out a lot. The reason why they hung out there was because of the location of the DMV across the street. You see, Victor and Herbert were in the business of helping people acquire false, fraudulent, driver's licenses or ID cards from the Department of Motor Vehicles.
Well, 1 day last August, as they were sitting in front of the Dollar Store, a van pulled up. It had out-of-State plates, New York, New JerseyI can't remember now exactly what they wereand three men got out of the van, three Middle Eastern men, and they approached Victor. They knew that they were coming to him for a particular reason. And they asked him to help them to do what Victor was there to do, and that is to acquire Virginia identification cards.
They talked to Victor and to Herbert for a little while, and they haggled over the price, and they agreed to pay $100 per person for the identification card.
So Victor and Herbert said, Get back in your van and follow us. And Victor and Herbert drove off in their car, and they drove down the street to a notary and a law office. And Victor walked into this law office, and he knew exactly what he was doing, and he had been in there many times before. And he took these three people, these three individuals who he did not know, he took them to this notary, Ms. Galicia, and she handed them two forms. One was an identification document. The other was a residency certificate.
The men signed the identification document, and Ms. Galicia notarized it and got the signature of a lawyer there in the office.
Then she took the residency form, and she handed it to Victor and then another one to Herbert, and they signed that form, and it was notarized, and they indicated that they knew that these three gentlemen were Virginia residents. They certified that they were Virginia residents.
And then they got back in their cars and they drove back to the DMV, and with those two forms, that identification document and that residency certificate, they dropped them off in front of the DMV. The three men walked into the DMV. They were already instructed as to what to do when they got in there, but Victor and Herbert were in the business of taking many people into the DMV to show them how to make their waytheir way through the lines and so forth and to fill out the application inside. Those three men went in and got Virginia identification documents.
A few weeks later, those three men were on Flight 77, and they were the alleged hijackers of that plane that flew into the Pentagon and killed 189 people, the worst violent crime in the history of Virginia, and part of the tragedy and attack of September 11.
So those three men were part of actually seven out of the 19 hijackers who acquired false Virginia identification cards. And they were onethere were many others who were accomplices or associates of one kind or another who have now been convicted in the Eastern District of Virginia, along with Victor Lopez Flores and Herbert Villalobos, and Ms. Galicia for this fraudulent ID scam.
Why was this so important? Well, we don't know for sure, but what we think was going on was that, in order to get the tickets at the counter, they needed to show proof of identity. And what better proof at Dulles International Airport than a Virginia identification card or a Virginia driver's license. That card was an essential tool in the process of committing those horrid crimes.
And this is a problem that we have seen in Virginia in an enormousto an enormous extent. It is the equivalent, that is, acquiring this false identification, it's the equivalent to a criminal acquiring a gun. False or stolen IDs have become a tool of the trade.
We prosecuted a case involving the Virginia driver's licenses and identification cards that was a scheme that included tens of thousands of false Virginia identification cards and driver's licenses being provided, mostly to illegal immigrants. That case, the case of Jennie Wrenn, which was prosecuted in February of last year, was a scheme involving drivers and middlemen that would pick individuals up all up and down the East Coast and for a fee of $500 to $1,000, bring them to Virginia and then come into Ms. Wrenn's operation, a real estate business, a front business, and pay a very small fee of $45 for those same documents I just described in the case of the hijackers. And there were many other people in the same business as Ms. Wrenn, which led to, again, tens of thousands of false IDs being acquired in Virginia. That's the story of the Virginia driver's license in a nutshell.
We have also an extensive problem with the false Social Security numbers, and the extent of that fraud covers our airport problem and credit card fraud and so forth. And I know in the interest of time, I don't want to repeat my testimony, but let me just say with regard to the airport initiative, we looked at 28,000 people who had secured badges, that is, badges that gave them access to almost any spot in the airport. We looked at 28,000 people who had that security badge in five major airports in eastern Virginia. And of those individuals, we identified 75 who had used a false Social Security number to gain their security badge. Those Social Security numbers can either be a made-up number or a stolen number. And, again, taking a false Social Security number is the foundation for credit card theft and other crimes, all of which we've prosecuted in the district.
Am Ihas my time expired? Thank you, Mr. Chairman. I'd be happy to talk in more detail about how we're addressing that in the Eastern District.
Mr. GEKAS. Yes, we'll give you an opportunity to amplify during the question and answer session.
[The prepared statement of Mr. McNulty follows:]
PREPARED STATEMENT OF PAUL J. MCNULTY
Messrs. Chairmen and Members of the Subcommittees: As the United States Attorney for the Eastern District of Virginia, I am privileged to serve the public and to lead a talented staff in a district on the front lines of the war against terrorism. It is also my privilege to appear before you today to discuss the substantial problem of false and stolen identities. This is an extremely important topic, and I commend you for holding this hearing.
Attorney General Ashcroft and the Department of Justice consider identity theft to be a serious problem that requires national attention from our prosecutors. On May 2nd, the Attorney General announced a nationwide sweep of identity theft cases, in which 73 federal criminal prosecutions were brought against 135 individuals in 24 districts. In addition, to strengthen current federal identity theft legislation, the Attorney General announced that the Department would seek legislation to enhance criminal penalties in identity theft-related cases. S. 2541, introduced with bipartisan support, would not only establish a new provision for aggravated identity theft but would also expand the reach of the current statute.
In the nine months since I became the United States Attorney, I have seen how the problem of false and stolen identities permeates almost every aspect of federal law enforcement in the Eastern District of Virginia. We have prosecuted individuals who steal the identities of others or who create false identities to defraud banks, credit card companies, other businesses, and government agencies. Collectively, these people have caused hundreds of millions of dollars in losses and ruined the credit histories of hundreds of hard-working, honest Americans. Unfortunately, terrorists, criminals, and illegal aliens turn to Virginia with alarming frequency to establish a false or fictitious identity.
FALSE OR FICTITIOUS VIRGINIA DRIVER'S LICENSES
Seven of the September 11th hijackers(see footnote 1)none of whom actually lived in the Commonwealthhad obtained Virginia driver's licenses by submitting false proof of Virginia residency.(see footnote 2) One of the seven, Ziad Jarrah, was involved in the failed attempt to fly Flight 93 into a target here in the Washington, D.C., area; two were aboard the airplanes that crashed into the World Trade Center; and four were aboard Flight 77 when it was flown into the Pentagon.
Virginia has always required both proof of identity and proof of Virginia residency to obtain a Virginia driver's license. There is a long list of documents that can be used to establish identity and residency. The feature of the law that the terrorists exploited allowed them to establish Virginia residency by submitting a notarized affidavit of another Virginia resident. For example, two of the September 11th hijackers paid $100 to an illegal immigrantwho had himself fraudulently obtained his Virginia driver's licenseto execute the residency affidavit for the hijackers before a notary public. With this notarized affidavit, the hijackers had sufficient ''proof'' of Virginia residency to obtain Virginia driver's licenses. After the connection with the September 11 hijackers was discovered, the Virginia Department of Motor Vehicles moved quickly to change its procedures. As of September 21st, the notarized forms were taken off the list of acceptable documents, and the Virginia General Assembly has ratified that decision by amending the relevant state statute effective this July 1st.(see footnote 3)
TRAFFICKING IN FALSE OR FICTITIOUS IDENTITIES
Terrorists are not the only people using false and stolen identities to undermine our security and our economy. There is a substantial cottage industry of manufacturers and traffickers in false identity documents and stolen credit cards. You need not walk more than a few blocks from this hearing room to meet someone who will sell you a fake social security number for about $80. If you go online, you may even be able to obtain Social Security numbers from various websites for little or no money. Stolen credit cards and even stolen identities may also be purchased for the right price. Once you have a false identity, or someone else's identity, and a credit card number tied to that false or stolen identity, you can wreak havocfor a short time you can buy anything you want, travel wherever you want, and do almost anything you desire, knowing that you'll never have to pay, and that someone else will be stuck with the bill. Or, if your goals are more deadly and you have more patience, you can quietly build a life under your assumed identity in anticipation of a future terrorist act.
Our Office's prosecution of a Virginia notary public named Jennifer Wrenn illustrates how criminals traffic in false or fictitious Virginia driver's licenses. Ms. Wrenn owned and operated two offices in Falls Church and Manassas Park, Virginia, from which she ostensibly conducted the activities of her real estate business, Jenni Wrenn Realty. An investigation by the Virginia DMV, the INS, and the IRS revealed, however, that the true work at both offices was the sale of fraudulent forms(see footnote 4) to immigrants seeking to obtain Virginia driver's licenses and identification cards. Immigrants were coming to Ms. Wrenn through a network of paid drivers and middlemen with whom Ms. Wrenn worked. For a fee of between $500 and $1,000, these drivers and middlemen would bring immigrants from New Jersey, Connecticut, New York, and other states throughout the country to Ms. Wrenn's offices. Once there, Ms. Wrenn and her staff would complete fraudulent forms for the immigrants for a fee of $45. These fraudulent forms bore all the necessary signatures and affirmations, and falsely stated that the applicants were residents of Virginia. At the height of her business, Ms. Wrenn was providing fraudulent forms to over a thousand immigrants a month.
The Wrenn case demonstrates how pervasive this type of fraud can be. Jenni Wrenn was but one of several notaries or attorneys who were selling fraudulent forms to illegal aliens from other states. Indeed, prior to the attacks of September 11, 2001, thousands of illegal aliens from all over the United States were coming to Virginia each month to obtain fraudulent licenses or identification cards.
Ms. Wrenn was arrested in February 2001, and subsequently convicted at trial of seven counts of conspiracy, identification document fraud (18 U.S.C. §1028), encouraging illegal immigration, and money laundering. In addition, the government arrested and prosecuted a dozen other individuals who worked with her or for her on charges of identification document fraud. These individuals included a lawyer, notaries, drivers, and other middlemen.
SOCIAL SECURITY NUMBER FRAUD
Our Office's prosecution of Ousmane Sow and Aboubakar Doumbia for social security fraud illustrates how easily social security cards are obtained by fraud and how widespread the abuse is. Sow and Doumbia were caught at Reagan National Airport in transit from New York to Miami. They were traveling on tickets paid for with stolen credit cards and were found to be carrying a dozen foreign passports and two dozen stolen immigration forms. Both men were charged with immigration fraud and pled guilty prior to trial. Interestingly, both had fraudulent Virginia identification cards even though they lived in New York.
One of the two men agreed to cooperate with the government and revealed the purpose of their trip to Miami. He informed investigators that he and his accomplice were part of a West African criminal syndicate (he used the term ''crew'') based in New York City. This syndicate specialized in the fraudulent procurement of social security cards and, to a lesser extent, the fraudulent procurement of Virginia driver's licenses and identification cards. According to the cooperating defendant, members of the syndicate repeatedly traveled from New York to major cities in the United States on tickets paid for with stolen credit cards. The purpose of the trips was to apply for social security cards by fraud at the Social Security Administration offices in each city. At each office, the members of the syndicate would apply for a card using a passport and an INS form.(see footnote 5) The members of the syndicate altered the passports by substituting their own photographs so that they could apply in person for a social security card in the name of one of the syndicate's clients (to whom the passport actually belonged). They further placed doctored INS forms in the client's passport to make it appear that they, the applicants, were lawfully in the United States and had the right to work. In fact, their clients were illegal immigrants in New York and New Jersey who paid the syndicate between $700 and $1,500 for a social security card. According to the cooperating defendant, members of the syndicate had traveled to all of the major cities in the United States, often more than once, and obtained well over a thousand fraudulent social security cards.
The use of false or fictitious social security numbers appears to be widespread. Our office recently completed an airport security initiative that involved the review of over 28,000 workers at the major commercial airports within the Eastern District of Virginia.(see footnote 6) The review revealed that seventy-five (75) airport workers used false or fictitious social security account numbers to obtain security badges(see footnote 7) that afforded them unescorted access into the most sensitive areas of our airports. Many of these airport workers also used the same false or fictitious social security number to obtain Virginia driver's licenses, fill out immigration forms, or apply for credit cards. Without a fraudulent social security number, none of the 75 airport employees could have obtained a security badge.
FALSE SOCIAL SECURITY NUMBER USED WITH A FALSE OR STOLEN IDENTITY
Criminals will also use both a false social security number and a false or stolen identity. For example, Rahila Aamir and Malik Raza, who were recently convicted of mortgage fraud in the Eastern District of Virginia, submitted loan applications to mortgage lenders under a false social security number and under the false name of ''Mohammed Nasir'' to gain approval for two loans, each worth approximately $200,000. There is, however, no evidence that the Mohammad Nasir who signed the loan documents exists. The defendants obtained the false social security number by stealing it from an individual who lives in another part of the country. The defendants also appropriated the employer identification numbers of local businesses to fill out false W2 forms that they used to prove to the lender what turned out to be nonexistent income. When the defendants defaulted on their loans, the lenders were not able to hold the defendants accountable for the losses since the defendants used false identification to obtain their loans.
We have also seen the use of false identities in so-called ''bust-out'' schemes. In these schemes, the criminals use credit card terminals obtained by a shell or ''front'' business to apply charges to fraudulently obtained credit card numbers or accounts opened in false names or the names of innocent victims. The criminals run the cards or numbers through the terminals but do not provide any goods or services. The credit card company credits the account of the front business because they do not know that the goods and services have not been provided to the card holder(see footnote 8) or that the card holder is not a real person. Before the transaction can be reversed, the funds are moved out of the front business's account.
It is important to note that the credit card ''bust out'' scheme involves defendants who have stolen social security numbers to create false identities. Using these false identities, the defendants obtain credit cards which they use to commit the bust-out schemes, as described above. Once they bust out a card, they obtain another social security number and false credit card, and start the whole process over.
In January of this year, I created one of the largest cybercrime units in the country dedicated to combating electronic crimes such as identity theft. Additionally, our Office has prosecuted several individuals for stealing the identifying information of others and using it to commit fraud. In several cases, the defendants stole individuals' checks and other information, including bank statements, from their mailboxes. For example, our Office prosecuted Edwin Ijaseun, who counterfeited stolen checks and used the individuals' addresses, dates of birth, and Social Security numbers obtained from the stolen documents to create false driver's licenses in the victims' names, but with the defendants' photographs. The false driver's licenses enabled the defendants to take the counterfeit checks to various branches of the account holders' banks and to successfully cash the checks.
In other cases, the defendants stole identifying information from the places where they worked. For example, our Office prosecuted Robert Magnuson, who had a temporary job that gave him access to the computer system containing the other employees' personal information. He used that information to apply for many credit cards. Once he obtained the credit cards, he then used the cards to withdraw cash from ATM machines. We have been investigating other individuals who have similarly obtained credit cards using stolen identities and used the cards to make purchases over the Internet. Frequently, these defendants have the merchandise shipped to commercial mailboxes opened in the names of the individuals whose identity they have stolen.
In most of these cases, the banks and the merchants have usually suffered the ultimate financial losses. The victims who had their identities stolen, however, have had to work for days, weeks, and sometimes months to obtain reversals of the charges, change their accounts, and restore their credit histories.
In prior generations, identity theft was not the problem that it is today. Simply put, people in the community knew each other. And if you were not well known in the communityor if you were known by your neighbors not to pay your debtsyou had to use cash. If you were unfortunate enough to be in a strange town without money, you had to hope for a wire transfer from somewhere like Western Union. Not so today. We can go anywhere and buy anything, paying by credit, check, or debit. Like the well known credit card commercial used to say: ''It's everywhere you want to be.''
Mr. Chairmen, thank you for the opportunity to address this hearing on these important issues. I would be pleased to answer any questions you might have.
Mr. GEKAS. We turn to Mr. Huse.
STATEMENT OF JAMES G. HUSE, JR., INSPECTOR GENERAL, SOCIAL SECURITY ADMINISTRATION
Mr. HUSE. Good afternoon, Chairman Gekas, Chairman Smith, Ms. Jackson Lee, Mr. Scott. Let me first thank you for the invitation to be here today. This is a vitally important matter and a complex one, but I will begin my testimony with a simple declarative sentence: The Social Security number is our national identifier. Nine months ago, that statement was challenged by many. Today, it is an accepted fact.
Today's hearing focuses on the integrity of the Social Security number with respect to those who arrive at our borders as visitors. You should be aware that this is only one portion, albeit a critical one, of our efforts to protect the SSN's integrity.
While the Office of Inspector General is unable at this time to state unequivocally that any of the September 11 terrorists were enumerated by SSA itself, the investigation into the events of that day and the homeland security efforts aimed at preventing future attacks have revealed the importance of the SSN to any attempt at assimilation into American society.
It is now clear that the SSN is our national identifier, and protecting the integrity of that identifier is as important to our homeland security as any Border Patrol or airport screening.
We have issued several audit reports over the past 3 years, each identifying weaknesses in the enumeration process, the process by which SSA issues SSNs. The most important of these vulnerabilities was SSA's procedures for verifying documents submitted with SSN applications. We have recommended on several occasions that SSA verify with the Immigration and Naturalization Service the authenticity of immigration documents submitted by non-citizens seeking to obtain an SSN.
Although there was a time that SSA opposed that recommendation, this is certainly no longer the case. Commissioner Barnhart recognizes how critical it is to keep SSNs out of the hands of those who may seek to harm us and efforts to provide for INS authentication of immigration documents are accelerating. So, too, are plans for the Enumeration at Entry Program by which non-citizens entitled to SSNs will be processed at the time of their entry into the United States.
In the interim, the Commissioner announced earlier this year that SSA would no longer issue SSNs to non-citizens solely for the purpose of obtaining driver's licenses. And, more recently, she has announced that, beginning July 1st in selected cities and this fall nationwide, SSA will cease the issuance of SSNs to non-citizens if their immigration records have not been verified with the INS.
This will likely result in delays that would previously have been thought unacceptable by SSA, but I applaud the Commissioner's courage in making this stand.
Preliminary results of a study prepared by my office suggests that as many as 100,000 of the 1.2 million original SSNs issued to non-citizens during calendar year 2000 were based on invalid immigration documents that went undetected by SSA. We believe, and Commissioner Barnhart agrees, that this 8-percent error rate is unacceptable and that more must be done.
If the Federal Government is to meet its responsibility with respect to the SSN's role in the homeland security rubric, it will require the same type of interagency cooperation that President Bush spoke of in his address to the Nation several weeks ago. Besides the needed cooperation of SSA and the INS, it will also require the coordinated interactivity of Federal, State, and local government agencies, each ensuring the authenticity of the identification documentation presented to apply for an SSN.
The operations in which our office has participated in some 18 airports across the country over the past several months are but one way in which these efforts continue. Working with joint terrorism task forces and other Federal agencies under the aegis of Offices of the United States Attorney, we have worked to ensure that no airport employee who has misrepresented his or her SSN and identity has access to secure areas of the Nation's airports. A total of 432 people have been arrested to date and, more importantly, have been denied access to the areas which represent a significant terrorism vulnerability. Similar operations are in the planning stages at other sensitive facilities around the country.
We appreciate your interest in these issues and look forward to working with you to enhance the safety of all Americans. Thank you, and I'll be happy to answer any questions.
[The prepared statement of Mr. Huse follows:]
PREPARED STATEMENT OF JAMES G. HUSE, JR.
Good afternoon, Chairman Gekas, Chairman Smith, Ms. Jackson Lee, Mr. Scott. Let me first thank you for the invitation to be here today. This is a vitally important matter, and a complex one, but I will begin my testimony with a simple, declarative sentence: The Social Security number (SSN) is our national identifier. Nine months ago, that statement was challenged by many. Today, it is an accepted fact.
Today's hearing focuses on the integrity of the SSN with respect to those who arrive at our borders as visitors. You should be aware that this is only one portionalbeit a critical oneof our efforts to protect the SSN's integrity. In calendar year 2000, the Social Security Administration (SSA) issued approximately 1.2 million SSNs to non-citizens, but issued over 5.5 million SSNs in all. While SSNs issued to non-citizens thus represent only about 20 percent of the total, the volume is significant.
MAINTAINING SSN INTEGRITY AT OUR BORDERS
We may never know with absolute certainty how many of the 19 hijackers of September 11th used improperly obtained SSNs, or how they obtained them. Following the September 11th attacks, the Office of the Inspector General (OIG) immediately received from the Federal Bureau of Investigation (FBI) the names and other personal identifiers (as they then knew them) of the 19 terrorist hijackers who died in these attacks. Those names and identifiers were matched against SSA's indices. We associated SSNs with 12 of the 19 names. Of the SSNs associated with these 12 names, 5 appeared to be counterfeit (SSNs that were never issued by SSA). In addition, 1 was associated with a child, leaving 6 names associated with SSNs that were issued by SSA. Further, 4 of these 6 names were associated with multiple SSNs. At this juncture, we cannot assert whether any of the 6 subject names associated with these SSNs are, in fact, September 11th terrorists.
It is important to understand that our investigative efforts may ultimately determine that certain of these six individuals possessed legitimate (or well-crafted counterfeit) documents to legitimately obtain an SSN. These documents may then have been cleared for entry to the United States by the vetting processes of both the Department of State, and the Department of Justice's (DOJ) Immigration and Naturalization Service (INS), thereby facilitating the assignment of an SSN under the procedures in place at that time. In view of this, and other imperatives following the terrorist incidents, the SSA established an Enumeration Working Group to develop and recommend to the Commissioner, both internal and external process changes that will result in strengthening the integrity of the issuance of SSNs. Many of these changes have been made and others are pending implementation in the near term. My office has been a committed partner with SSA in all the activities of that workgroup.
We have long been aware that failure to protect the integrity of the SSN has enormous financial consequences for the government, the people, and the business community. We now know that the burden that the enumeration process carries can have far graver consequences than previously imagined and as such, SSA can no longer afford to operate from a ''business as usual'' perspective. Whatever the cost, whatever the sacrifice, we must protect the number that has become our national identifier; the number that is the key to social, legal, and financial assimilation in this country.
We recognize that SSA alone cannot resolve the monumental issues surrounding homeland security. Efforts to make our Nation safer will involve new or expanded initiatives by almost every segment of our population, including State and local governments, private industry, non-governmental organizations, and citizens. However, we also recognize that, in endeavoring to protect our homeland, no government system or policy should be ignored. As such, SSA, as a Federal agency and public steward, must continue its efforts to strengthen its systems and processes to minimize the use of SSNs for illegal purposes. We believe that SSN integrity is a link in our homeland security that must be strengthened and sustained.
This is a relatively new issue for the American people, but it is an old issue for us. Two years ago, in May 1999, we issued another Management Advisory Report entitled Using Social Security Numbers to Commit Fraud (A089942002), in which we described significant vulnerabilities in SSA's enumeration process. The most important of these vulnerabilities was SSA's procedures for verifying documents submitted with SSN applications. In September 2000, we issued yet another report, Procedures for Verifying Evidentiary Documents Submitted with Original Social Security Number Applications, in which we identified similar weaknesses. While each of these reports dealt with across-the-board weaknesses, rather than weaknesses associated only with enumeration of non-citizens, each report did address the non-citizen issue at length.
In both of these reports, as in last month's report, we recommended that SSA independently verify birth and immigration records submitted in support of SSN applications. Additionally, we recommended full and expedited implementation of a joint Enumeration at Entry program in which the Agency would issue SSNs to non-citizens upon their entry into the United States based on information obtained from INS and the Department of State.
At the time the 1999 and 2000 reports were issued, SSA disagreed with our recommendation to independently verify birth and immigration records. The Agency stated that delaying the receipt of SSNs for thousands of non-citizens, most of whom were legitimately entitled to a number, was not acceptable. Rather, they preferred to work with the INS on improving existing systems until the recommended Enumeration at Entry program could be implemented.
Unfortunately, until September 11th, SSA had limited success encouraging the INS to move quickly on either of these planned initiatives, as the projects did not appear to be as high a priority to INS as they were to SSA. For example, in August 1999, SSA's Commissioner wrote to the Commissioner of INS regarding SSA's concerns with the current verification process and SSA's hope that the two Agencies could expeditiously move to implement the Enumeration at Entry program. Although some staff-level meetings continued between representatives of the two agencies, SSA never received a formal response to the letter. As such, SSA requested assistance from the Office of Management and Budget (OMB) to move the initiatives along. In response, OMB convened a meeting between the two agencies. Still 2 years after that, little progress was made, although SSA does report that in the months since September 11th, negotiations with INS are proceeding more smoothly and at a faster pace.
Commissioner Barnhart has indicated her intention to begin holding non-citizens' applications for new SSNs until their evidentiary documents can be verified with the INS. I applaud her decision, and her resolve. While SSA is justifiably proud of its reputation for timely service, Commissioner Barnhart's decision to refine this commitment to include a balance for both enumeration integrity and the security of our Nation's borders is a sound one.
Our own work illustrates just how wise a decision this is. In a recent study, preliminary results indicate that 8 percent (over 100,000) of the 1.2 million SSNs assigned to non-citizens during Calendar Year 2000 were based on invalid immigration documents, which current SSA processes did not detect. We have no way of determining how many SSNs have been improperly assigned to non-citizens throughout history. However, we believeas does Commissioner Barnhartthat in the interest of homeland security, an 8 percent error rate, 1 out of every 12 SSN cards, is unacceptable and further action is required.
The following examples from our study are representative of how non-citizens improperly obtained SSNs by presenting invalid documents:
SSA assigned SSNs to two individuals (both age 28) purporting to have been born in India. These individuals provided immigration documents improperly showing them as work-authorized; however, INS had no record of the two individuals.
SSA assigned an SSN to a 27-year-old male purporting to have been born in Japan. He presented a work-authorized immigration document to SSA, although INS never authorized him to work. Specifically, he presented an INS document indicating he was an intra-company transferee and, therefore, eligible for a work-authorized SSN. However, INS reported to us that he was actually the spouse of an intra-company transferee and, therefore, he was not eligible for a work-authorized SSN.
SSA assigned an SSN to a 56-year-old female purporting to have been born in Mexico. She presented a work-authorized document. However, INS had not authorized her to remain in the country. She originally entered the country with an ''H2B'' classification (temporary worker performing services of labor unavailable in the United States). She applied for an SSN on December 20, 2000, with INS documents indicating her H2B status. Therefore, SSA assigned the individual an SSN. Nevertheless, INS confirmed that her authorization to remain in the United States expired December 1, 2000, and INS found no indication that she applied for an extension. Accordingly, the document she presented to the SSA field office when applying for an SSN was already invalid.
SSNS, IMMIGRANTS, EMPLOYERS, AND THE EARNINGS SUSPENSE FILE
One of the first steps in obtaining employment and realizing the goals of many U.S. immigrants is obtaining an SSN. Most immigrantsabout 75 percentcome to the United States legally, many to join close family members. However, INS estimated the undocumented immigrant population reached about 5 million in 1996, not including the 3 million who were given amnesty under the Immigration Reform and Control Act of 1986. Additionally, the INS estimates the number of undocumented immigrants continues to grow by about 275,000 individuals each year.
To improperly acquire an SSN, undocumented immigrants may either apply for a ''legitimate'' SSN using false evidentiary documents (as in the examples given above, or by using counterfeit passports or other falsified foreign documents) or they may create or purchase a counterfeit Social Security card. Additionally, if an undocumented immigrant is not required to show a Social Security card (which is very often the case), he or she may simply invent a nine-digit number. This SSN may be one the Agency has already assigned to another individual (stolen SSN) or one never assigned (fake SSN).
SSA statistics show three industries (agriculture, food and beverage, and services) account for almost one-half of all wage items in SSA's Earnings Suspense File (ESF). The ESF is the Agency's record of annual wage reports submitted by employers for which employee names and SSNs fail to match SSA's records. Of these industries, agriculture is the largest contributor, representing about 17 percent of all ESF items. In fact, in one study of 20 agriculture employers, we determined that 6 of every 10 wage reports submitted by these employers had incorrect names or SSNs. From 1996 through 1998, these 20 employers submitted over 150,000 wage items for which the employee's name and/or SSN did not match SSA records, representing almost $250 million in suspended wages over the 3-year period.
Because SSA has no legal authority to levy fines and penalties against employers or employees who submit incorrect SSN information on wage reports, the Agency relies upon other Federal agencies to assist in combating SSN misuse. Specifically, as provided by law, SSA must rely on the Internal Revenue Service (IRS) to enforce penalties for inaccurate wage reporting and upon the INS to enforce immigration laws. Unfortunately, the IRS has been reluctant to apply penalties and SSA and the INS have had limited collaboration on the issue.
We believe applying penalties would have a ripple effect on employers who consistently submit wage reports for employees whose names and SSNs do not match SSA's records. Although SSA is primarily interested in penalizing the most egregious employers, IRS staff expressed concern with the application of even these penalties. IRS senior staff members believe they and SSA would have a difficult time determining whether an employer exercised appropriate diligence in obtaining the necessary information from employees. SSA representatives, however, believe they could provide the IRS with sufficient evidence to show an employer knew or should have known its employees' SSNs were incorrect.
Despite the IRS' concerns, the two Agencies held discussions to explore the enforcement of an existing penalty provision ($50 per incorrect wage report) for employers who repeatedly submit erroneous name and/or SSN information. To implement the penalty, SSA and the IRS agreed they must (1) jointly define the circumstances for applying penalties; (2) identify information needed from SSA for the IRS to support applying penalties; and (3) develop the proposed data flow and procedures to be followed.
In Calendar Year 2000, based on this agreement, SSA provided a list of 100 of the most egregious employers to the IRS. These employers represented the employers with the largest number of name/SSN match failures in consecutive years. The IRS expressed interest in the listing but, to date, has not assessed penalties.
Success of SSA's coordination with the INS regarding non-citizens' misuse of SSNs to obtain employment has also been minimal. In a previous audit report, we recommended that SSA (1) collaborate with INS on this issue and (2) reevaluate its application of existing disclosure laws or seek legislative authority to remove barriers that would allow SSA to share with the INS information regarding employers who chronically submitted incorrect wage reports. SSA disagreed with our recommendations and stated that its interpretation of the privacy and disclosure issues is accurately applied and continues to provide appropriate disclosure guidance within existing authority.
The intent of our recommendations was to suggest that the Agency look for avenues under current law and regulations first before seeking legislative authority. We acknowledge SSA's efforts to combat SSN misuse and reduce the ESF's growth. However, given the magnitude of SSN misuse by unauthorized non-citizens, we continue to believe SSA should take preemptive and preventive measures to ensure the SSN's integrity. We continue to believe that the sharing of such information in certain situations would stem the growth of SSN misuse for employment purposes.
SSA assigns ''non-work'' SSNs for limited purposes to non-citizens who do not have authorization from INS to work while they are in the United States. As of August 1997, SSA had issued approximately 7 million non-work SSNs. Since that time, the Agency has reduced the number of circumstances for which it will issue non-work SSNs. Although SSA has issued another 360,000 non-work SSNs since 1997, the number has been steadily declining in almost every year. For example, the number of non-work numbers issued dropped from approximately 128,000 in 1998 to 70,000 in 2001. Additionally, in March 2002, SSA notified the Nation's governors that it would no longer issue non-work SSNs for the purpose of getting a driver's license. As a result, the number of non-work SSNs issued in 2002 may be lower than 30,000.
We applaud SSA's efforts to minimize the number of non-work SSNs it assigns. Our audit work indicates that, despite the ''not valid for employment'' terminology that appears on every non-work SSN card, individuals frequently use these SSNs for just that purpose. For example, in Tax Year 2000, approximately 600,000 individuals with non-work SSNs used the numbers to work, earning over $21 billion. Because SSA does not routinely learn of changes in a person's work authorization, not all earnings reported under a non-work SSN are attributable to non-authorized work. Under current guidelines, SSA will pay Old-Age, Survivors and Disability Insurance benefits based on the earnings obtained under non-work SSNs, as long as the number holders meet all benefit eligibility requirements. We disagree with this practice and have recommended that SSA seek legislation allowing the Agency to deny benefits to individuals who use non-work SSNs for employment purposes. SSA has elected not to seek such legislation.
Suspended Wages and Notification of the Public
SSA annually sends out between 7 and 8 million letters to employees and employers regarding the submission of wages where the SSN and associated name cannot be matched to SSA's records. Although these submissions may relate to the misuse of an assigned SSN, SSA does not notify the actual SSN holder. However, providing timely notifications may be difficult due to internal attempts to resolve the problems, while notifying the public may create unnecessary alarm.
The very fact that a reported wage item is in the ESF means SSA does not know the correct identity of the worker. For example, SSA has noted that about 55 percent of the items in the ESF have (1) no name, (2) no name and no SSN, or (3) an unissued SSN. The remainder of the items in the ESF generally relates to a mismatch between the name and SSN. Under a policy of notifying people whose SSNs are being falsely used, SSA could only take action on the missing or unissued SSNs since no specific member of the public is impacted by these wage items. However, the remaining wage items with a name and SSN mismatch would require further review by SSA.
SSA has a number of ongoing processes to obtain the correct name and SSN associated with the wages, such as correspondence with employees and employers, as well as manual and automated edits. These processes can take at least a year to complete, and often longer. However, through these processes, SSA is able to reinstate many of these wage items to the rightful owners' earnings records when, at first glance, it could have appeared to be the misuse of another individual's SSN. Sending a notice to the real owner of the SSN prior to these processes may be premature and unduly alarm the public.
Finally, both OIG and SSA reviews of the suspended wages in the ESF and the associated industries lead us to believe that illegal work, rather than identity theft, may be the primary cause of suspended wages. Many of the items in the ESF related to the agricultural industry, which hires transient employees who may or may not have work authorizations from the INS. These workers may create an SSN for the sole purpose of obtaining employment. In such cases, while these workers are providing fraudulent information to their employer, notifying the real owner of the SSN that their number is being falsely used may create the impression of identity theft when in fact, the number was randomly chosen for the purpose of employment.
Improving the integrity of the enumeration process is critical, but of course, it is prospective relief. Millions of SSNs have already been issued to non-citizens, many of them based upon fraudulent documentation, and more will be issued while SSA and the INS continue seeking improvements. Therefore, we continue our efforts on the investigative side to ensure that where the improper acquisition of an SSN by a non-citizen creates a possible homeland security risk, we are doing all we can to intervene.
The operations in which our office has participated in some 18 airports across the country over the past several months are but one way in which these efforts continue. Working with Joint Terrorism Task Forces and other Federal agencies under the aegis of Offices of United States Attorney, we have worked to ensure that no airport employee who has misrepresented his or her SSN and identity has access to secure areas of the Nation's airports. A total of 432 people have been arrested to date, and more importantly, have been denied access to the areas, which represent a significant terrorism vulnerability. Similar operations are in the planning stages at other sensitive facilities around the country.
As it became apparent in the aftermath of September 11th that the SSN would be an important element in the investigation of the attacks, our office worked not only with other investigative entities, but with DOJ to educate prosecutors on the acquisition, use, and misuse of SSNs by potential terrorists. A memorandum was distributed to United States Attorneys nationwide, explaining the use of 42 U.S.C. §408(b)(7), Misuse of an SSN, as a charge that could be used to indict, arrest, detain, and where appropriate, deport suspected associates of the hijackers or others with links to terrorism. Because a terrorist, to be effective, must first be assimilated into American society, and because an SSN is a critical tool in the assimilation, it became apparent that the acquisition of an SSN was indispensable.
Lofti Raissi, for example, was long thought to be an associate of some of the September 11th hijackers, having trained with some of them at flight school in Arizona. When he was being held in London, investigation revealed that while in the U.S., he had been using the SSN of a deceased New Jersey woman.
Sofiane Lamaiche, another suspected associate of some of the September 11th terrorists, and a one-time roommate of Lofti Raissi, was smuggled into the United States on an Algerian ship through the port of Philadelphia, and within five days, made his way to Phoenix and purchased a new identity, including an SSN. He was tried by an OIG attorney working as a Special Assistant U.S. Attorney in Arizona and convicted of multiple counts, including misuse of an SSN.
Finally, Redouane Dahmani, another suspected associate smuggled into the U.S., purchased a new identity, including an SSN. He then filed a false asylum application under his own identity (using Raissi as an affiant and interpreter), using the INS documents that resulted to obtain a ''legitimate'' SSN from SSA. He was charged at the Federal and State levels and is awaiting trial.
As the efforts of Federal law enforcement agents and prosecutors continue into the investigation of September 11th and the homeland security agenda, it becomes more and more apparent that those connected with terrorism will at some point obtain an SSN. They may buy it, they may create it, or they may obtain it from SSA directly through the use of falsified immigration records. But to operate in the United States, they need the number, and no additional time can be lost in taking those steps necessary to ensure that those numbers do not come from SSA.
In addition to large-scale operations such as those at the Nation's airports, and individual cases of those suspected of an association with terrorism, our efforts continue in other areas. We continue to meet with other Federal officials to ensure that we are doing all that restrictive privacy laws permit to assist DOJ and others to use SSN information in the homeland security context. We are in constant contact with this and other committees of both houses of Congress to provide expertise and assistance in the analysis of data and creation of legislation aimed at protecting the SSN and preventing it from being used improperly. We have attorneys either working as Federal prosecutors or with them to enforce the Social Security Act's felony provisions. We continue our audit work, reviewing SSA's enumeration process and making recommendations for much-needed improvements. And we stand ready to do more. We appreciate your interest in these issues, and look forward to working with you to enhance the safety of all Americans.
Mr. GEKAS. We thank you, Mr. Huse, and we turn to the next witness. Mr. Stana?
STATEMENT OF RICHARD M. STANA, DIRECTOR, ADMINISTRATION OF JUSTICE ISSUES, UNITED STATES GENERAL ACCOUNTING OFFICE
Mr. STANA. Thank you, Chairman Gekas, Chairman Smith, Ms. Jackson Lee, Mr. Scott, and Members of the Subcommittees. I'm pleased to be here today to discuss the prevalence of identity fraud and its links to aliens' illegal activities. Generally, identity fraud encompasses a broad range of illegal activities based on fraudulent use of identifying information of a real person or a fictitious person. A pervasive type of identity fraud is identity theft, which involves stealing personal identifying information from someone like you or me, such as a Social Security number, a date of birth, or a mother's maiden name, and then using the information to create false identity documents, to fraudulently establish credit and run up debt, or to take over existing financial accounts. Other types of identify fraud involve fraudulent documents used by aliens to enter the country or illegally obtain employment and other benefits, and in some cases to facilitate a range of criminal activities, including terrorism.
My prepared statement discusses these and other topics. In my oral statement, I'd like to briefly make three main points.
First, although identity theft numbers are not easily captured and sometimes reflect different assumptions, the statistics we compiled show that the prevalence and cost of identity theft continue to rise and that the probability of getting caught remains low. Data from the three national credit bureaus, the FTC's identity theft data clearinghouse, and the Social Security Administration's IG fraud hotline show that the number of people reporting actual or suspected identity theft is increasing dramatically. Recent statistics on investigations and arrests by leading law enforcement agenciesthe Secret Service, the SSA IG, the IRS, the FBI, and the Postal Inspection Servicealso show an increasing trend in criminal activity. Further, the cost to the financial services industry in terms of documented bank fraud and payment card fraud exceeds $1.8 billion from domestic operations alone.
Since 1998, the Congress and most States have enacted laws that criminalize identity theft. The passage of Federal and State identity theft legislation indicates that this type of crime has been widely recognized as a serious problem across the Nation.
My second point is that the use of fraudulent documents by aliens is extensive. With nearly 200 countries using unique passports, official stamps, seals, and visas, the potential for immigration document fraud is great. In addition, more than 8,000 State or local offices issue birth certificates, driver's licenses, and other documents aliens can use to establish residency or identity. INS inspectors frequently encounter aliens who present fraudulent identity and/or various authorization documents in order to attempt illegal entry into the United States.
About half of the over 114,000 documents intercepted by INS inspectors last year were border crossing cards and alien registration cards, commonly called ''green cards.'' Moreover, significant numbers of aliens unauthorized to work in the United States have used fraudulent documents to circumvent the employment verification process. Most of the fraudulent documents used were INS documents and Social Security cards. Some aliens have attempted to use fraudulent documents to illegally obtain other immigration benefits, such as naturalization or adjustment of status.
My third point is that identity theft or use of fraudulent documents often is an essential component of criminal activities, ranging from bank and credit card fraud to drug trafficking and international terrorism. For instance, INS has reported that although most aliens are smuggled into the country to pursue employment opportunities, some are smuggled as a part of criminal or terrorist enterprises. INS believes that as border enforcement activities increase, organized crime groups will increasingly use smugglers and fraudulent documents to facilitate illegal entry of individuals to engage in criminal activities.
The events of September 11 have underscored the urgency of effectively authenticating the identity of individuals. Terrorists have used and have been in possession of numerous false identification documents. For instance, conspirators involved in the 1993 World Trade Center bombing and the 1999 attempted LAX bombing were in possession of false identification documents. Terrorists' financing methods have been known to use various cash-smuggling and bank fraud activities that have been aided by identity theft.
Such instances raise other security questions related to identity fraud. For example, when an alien's identity documents are checked against a watch list at the border, can we be sure the individual is who he presents himself to be? When an individual presents identity documents for employment in sensitive occupations or areas, can we be sure the individual is who he presents himself to be?
Let me close by saying that most instances of aliens' using fraudulent identity documents appear to be related to entering the country and obtaining employment or other benefits. However, recent events dramatically illustrate that law enforcement officials need to be increasingly vigilant to other security vulnerabilities presented by identity fraud.
This concludes my oral statement. I'd be happy to address any questions the Members of the Subcommittee may have.
[The prepared statement of Mr. Stana follows:]
PREPARED STATEMENT OF RICHARD M. STANA
Mr. GEKAS. We thank you, Mr. Stana, and we turn to Mr. Edmund Mierzwinski.
STATEMENT OF EDMUND MIERZWINSKI, CONSUMER PROGRAM DIRECTOR, STATE PUBLIC INTEREST RESEARCH GROUPS
Mr. MIERZWINSKI. Thank you, Mr. Chairman. I'm Ed Mierzwinski. I'm with the national office of the State Public Interest Research Groups. We're consumer environmental advocacy organizationsnonprofit, nonpartisanactive around the country.
We have been looking at the problem of identity theft for as long as anybody. The State PIRGs put out our first report on the problem consumers face with identity theft in 1996, and since then we've put out two subsequent reports on identity theft.
As the previous witnesses have documented, it's very difficult to get a handle on the costs of identity theft and the magnitude of identity theft in the country. And our estimates, based on talking to all leading experts and based on looking at all available data, are that as many as half a million Americans a year are victims of identity theft. The Federal Trade Commission is now tracking identity theft as a result of the 1998 legislation, and it is part of several intergovernmental task forces. The Federal Trade Commission now posts on its Web site annualized statistics broken down by city, and by State in some instances, on the growth of identity theft.
The big problem that consumers have had with identity theftand this isof course, what I'm referring to first here is financial identity theft, the theft of documents to obtain credit in my nameis, of course, that for many, many years the financial industry denied that it was a problem, they continue to deny that it is a problem, and they also continue to deny that consumers are the victim. Because as most of you know, if your credit card is stolen, you're only liable for the first $50.
Well, our report that we summarize extensively in my testimony documents that in fact the out-of-pocket costs to consumers, the loss of face, the loss of dignity, the hundreds of hours on the telephone, the thousands of dollars in litigation costs trying to regain their good name are serious costs to society. And it's high time, in our view, that the Congress imposes strict restrictions on creditors and credit bureaus who use sloppy practices to give somebody credit.
If I want to obtain a copy of my credit report, I need to provide, in certain circumstances, a Xerox copy of my utility bill, a Xerox copy of my driver's license, the name of mymy mothermy mother's maiden name, excuse memy current address, my recentmost recent addresses for the last 5 years. And even then, the credit bureau gives me trouble getting a copy of my credit report.
If you apply for credit in my name and you know my Social Security number, you'll get credit. That's all you need, this sloppy Social Security number. No offenseI don't mean to disparage the agency. I'm referring to the sloppy use of the Social Security number in private enterprise and the easy availability of the Social Security number on the Internet makes it easy for these identity thieves.
So our first recommendation would be to impose greater duties on creditors and credit bureaus to do a better job of determining the authenticity of applicants for credit.
Second, get the Social Security number out of general circulation. Make it a crime to publicly display it. Mr. Shaw has some very strong legislation on limiting uses of the Social Security number and preventing coercion of a consumer's Social Security number to obto do business with him.
And third, make it easier for consumers to sue credit bureaus. And there are two bills before the Committee that would extend the statute of limitations for an identity theft victim to sue credit bureaus, following a bad Supreme Court decision in November that limited that right to only 2 years after the crime.
On the important matter of terrorism and identity theft that the Committee is deliberating on with a number of hearings, I simply want to say that inin our view, some of the solutions that have been proposed as solutions to the terrorism problems are not solutions to the identity theft problem.
First of all, national identity cards will not solve the identity theft problem. I don't need a driver's license, I don't need a card to get credit in your name. All I need to know is your Social Security number.
Second, the more high-tech the card, it'll cost more than $100, as they may be paying today, but you'll have a lot of false-positive cards out there.
Second, imposing restrictions on the ability of immigrants to obtain driver's licenses won't solve the identity theft problem. And as the National Immigration Law Reform Institute and the American Civil Liberties Union and the National Council of La Raza have pointed out, immigrants without driver's license will simply fuel a market for illegal identity documents or they'll drive without licenses, increasing insurance costs for everyone else.
And finally, I would point out that in the view of many experts, biometrics is not a solution to identity theft. Facial recognition and fingerprint identification systems don't adequately do the job.
My written testimony goes into a number of details on these and other matters. Thank you very much.
[The prepared statement of Mr. Mierzwinski follows:]
PREPARED STATEMENT OF EDMUND MIERZWINSKI
Chairmen Smith and Gekas, Representatives Scott and Jackson Lee, members of the subcommittees: Thank you for the opportunity to present the views of the U.S. Public Interest Research Group(see footnote 9) on solving the problem of identity theft.
As you know, the problem of identity theft has been growing rapidly throughout the 1990s. The state PIRGs released our first report on the problem in 1996. At the time, it was difficult to quantify the magnitude of the problem, since creditors and credit bureaus compiled data in different ways and the disparate government agencies investigating the crimes did not have the resources to work together. Nevertheless, in response to numerous indicators that identity theft was epidemic, several states,(see footnote 10) and then, in 1998, the Congress, criminalized identity theft. The 1998 federal identity theft act(see footnote 11) also required the Federal Trade Commission to develop an identity theft clearinghouse, both to assist consumers and to coordinate inter-governmentally.
Since March 2000, the FTC has begun to release detailed data on the impact of identity theft that dovetail with the findings of our reports.(see footnote 12) Identity theft experts now estimate that as many as 500,000 or more Americans have their identity stolen each year.(see footnote 13) Increasingly, it appears that identities are being stolen to be used not only for financial gain, but to use in commission of other criminal acts.(see footnote 14)
Unfortunately, the data show that criminalization has not significantly slowed the identity theft crime wave. In our view, greater effort must be paid to reining in the practices of creditors and credit bureaus that lead to or abet identity theft.
We would like to make the following key points:
First, identity theft is a fast growing crime and criminalization is only part of the solution. Identity theft criminalization does not appear to have slowed the growth of identity theft. Creditors (banks, mortgage companies, department stores, etc) and credit bureaus (Experian, Equifax and Trans Union) must improve both their credit granting practicesto reduce the incidence of identity theftand their treatment of identity theft victimsto make it easier for these victims to clear their good names and re-enter the financial world. Legislation is necessary to coerce these recalcitrant firms, which generally consider a ''few'' mistakes and a few lawsuit settlements the cost of doing business while they ignore the real costs, both tangible and intangible, to victims. Unless banks, department stores and credit bureaus are forced by law to help prevent identity theft, they will continue in their sloppy credit-granting practices, they will continue to dismiss the problem of identity theft with their public relations campaigns(see footnote 15) and they will continue to reject the massive impact identity theft has on its consumer victims.
Second, misuse, over-use and easy access to Social Security Numbers helps drive the identity theft epidemic. Fundamentally, this nation needs to wean the private sector of its over-reliance on Social Security Numbers (SSN) as unique identifiers and database keys. Creditors issue credit based on a match between an applicant's SSN and a credit bureau SSN, with no additional verification in many cases that the applicant is actually the consumer whose credit bureau file is accessed.
In addition to emphasizing these two main points on identity theft, we would also like to make the following brief comments regarding certain other policy proposals that have been mentioned as solving identity theft:
First, national identity cards are no solution to the identity theft problem and may make it harder for identity theft victims to clear their names, since a thief with a good identity document in your name can continue to wreck your name. To obtain a drivers's license, typically a person presents a birth certificate and maybe an SSN (both can be bought or forged). All the card does is certify that the name and SSN are for the same name. That name is the name claimed by the person standing in front of a clerk. It verifies that is who they say they arenot who they really are. Many criminals have false IDs, in the name of another person. National ID cards would presumably be more high-tech, but could still be forged. Again, in addition to their other flaws, national ID cards would not stop identity theft.
Second, imposing restrictions on the ability of immigrants to obtain drivers' licenses won't solve the identity theft problem. If anything, preventing immigrants from obtaining drivers' licenses means only that they will drive without insurance and their need for identity documents will help fuel the market for more false or illegal identity documents.(see footnote 16)
Third, biometrics is no panacea to the identity theft problem. Fingerprint readers have reportedly been spoofed by a researcher using gelatin, the primary ingredient in Gummy Bears.(see footnote 17) The American Civil Liberties Union (ACLU)'s critique of facial recognition systems includes links to a Department of Defense report finding flaws in facial identity systems.(see footnote 18) In recognition of these limitations, the Enhanced Border Security and Visa Entry Reform Act of 2001, S. 1749, requires (Section 102(c)2)) that an independent agency, the National Institute on Standards and Technology (NIST), verify that biometric proposals actually work.
While we are sensitive to the critical need for federal and state governments to take action to respond to and prevent future outbreaks of terrorism, we do not believe that national ID and driver's license policy solutions proposed as a result of 9/11 will help stop identity theft.(see footnote 19)
ANALYSIS OF THE PROBLEM OF IDENTITY THEFT:
Identity theft is a fast growing crime: In May 2000, CALPIRG and the Privacy Rights Clearinghouse released a joint survey of identity theft victims. This testimony summarizes the findings of that survey of victims. Less than half of the respondents felt that their cases had been fully resolved, and those with unsolved cases have been dealing with the problem for an average of four years. Victims estimated that they spent an average of 175 hours and $808 in additional out-of-pocket costs to fix the problems stemming from identity theft.
Types of Identity Theft: Experts divide financial identity theft into two main categories. ''True name'' fraud occurs when someone uses pieces of a consumer's personal identifying information, usually a Social Security number (SSN), to open new accounts in his or her name. Thieves can obtain this information in a variety of ways, from going through a consumer's garbage looking for financial receipts with account numbers and SSNs, to obtaining SSNs in the workplace, to hacking into computer Internet sites, or buying SSNs online.
''Account takeover'' occurs when thieves gain access to a person's existing accounts and make fraudulent charges. Regardless of the types of fraud committed or the amount of money taken fraudulently, victims indicate that stress, emotional trauma, time lost, and damaged credit reputationnot the financial aspect of the fraudare the most difficult problems they face. One victim from Nevada explained to us, ''this is an extremely excruciating and violating experience, and clearly the most difficult obstacle I have ever dealt with.''
Increasingly, thieves are also committing other crimes using the names generated from identity fraud. In the PIRG/PRC survey, thieves committed various other types of fraud with the respondents' information, including renting apartments, establishing phone service, obtaining employment, failing to pay taxes, and subscribing to online porn sites. In 15% of the cases, the thief actually committed a crime and provided the victim's information when he or she was arrested. A growing problem for victims is that thieves who have rented apartments or purchased homes using fraudulent identities are filing for bankruptcy in the victim's name, with the intention of seeking a mandatory stay against eviction or foreclosure. The false public record bankruptcies are difficult for victims to remove.
Results of the PIRG/Privacy Rights Clearinghouse Survey of Identity Theft Victims
The California Public Interest Research Group and the Privacy Rights Clearinghouse have been helping victims of identity theft for years through advocacy, free guides, hotlines, and monthly support group meetings. We have talked to thousands of victims over the phone, through letters and electronic mail, and in person, hearing new, unique and horrifying experiences every day. But so far there have been little in-depth data collected on the specific problems that victims face or on the specific gaps in law enforcement efforts and credit industry practices that make cleaning up a stolen identity such a time-consuming and seemingly impossible task.
In the spring of 2000, CALPIRG and Privacy Rights Clearinghouse sent surveys to victims who had recently contact our offices, and published a report based on the findings, entitled ''Nowhere To Turn: Victims Speak Out on Identity Theft.''(see footnote 20) The report followed up on CALPIRG's groundbreaking identity theft reports(see footnote 21) released in 1996 and 1997, and on the pioneering work of the Privacy Rights Clearinghouse in assisting victims and drawing attention to their plight. Both organizations have also worked with victims to find ways that they can help themselves, because until the Federal Trade Commission established its clearinghouse, there was no government agency that made identity theft solutions its priority.(see footnote 22)
The data pinpoint the failure of law enforcement, government, and the credit industry to address the root causes of identity theft. By not changing their procedures, these stakeholders have both helped perpetuate identity theft and have made it difficult for victims to resolve their cases expeditiously. Although each identity theft case is different, we have been able to identify patterns and trends in the victims' responses. The survey data also verify that the stories in the news on identity theft are not extreme cases in which an unlucky victim has had an unusually bad experience. As one victim from California stated, ''It was as terrible as all the books and articles say it is.''
Forty-five percent (45%) of the victims consider their cases to be solved; and it took them an average of nearly two years, or 23 months, to resolve them. Victims (55%) in the survey whose cases were open, or unsolved, reported that their cases have already been open an average of 44 months, or almost 4 years.
Three-fourths, or 76%, of respondents were victims of ''true name fraud.'' Victims reported that thieves opened an average of six new fraudulent accounts; the number ranged from 1 to 30 new accounts.
The average total fraudulent charges made on the new and existing accounts of those surveyed was $18,000, with reported charges ranging from $250 up to $200,000. The most common amount of fraudulent charges reported was $6,000.
Victims spent an average of 175 hours actively trying to resolve the problems caused by their identity theft. Seven respondents estimated that they spent between 500 and 1500 hours on the problem.
Victims reported spending between $30 and $2,000 on costs related to their identity theft, not including lawyers' fees. The average loss was $808, but most victims estimated spending around $100 in out-of-pocket costs.
Victims most frequently reported discovering their identity theft in two ways: denial of either credit or a loan due to a negative credit report caused by the fraudulent accounts (30%) and contact by a creditor or debt collection agency demanding payment (29%).
Victims surveyed reported learning about the theft an average of 14 months after it occurred, and in one case it took 10 years to find out.
In one-third (32%) of the cases, victims had no idea how the identity theft had happened. Forty-four percent (44%) of all the victims had an idea how it could have happened, but did not know who the thief was. But in 17% of the cases, someone the victim kneweither a relative, business associate, or other acquaintancestole his or her identity.
Victims reported that all of the credit bureaus were difficult to reach, but the hardest one to get in touch with, and the one about which most negative comments were made, was Equifax. Over one-third of the respondents reported not being able to speak with a ''live'' representative at Equifax or Experian despite numerous attempts. Less than two-thirds felt that the credit bureaus had been effective in removing the fraudulent accounts or placing a fraud alert on their reports. Despite the placement of a fraud alert on a victim's credit report, almost half (46%) of the respondents' financial fraud recurred on each credit report.(see footnote 23)
All but one of the respondents contacted the police about their cases, and 76% of those felt that the police were unhelpful. Law enforcement agents issued a police report less than three-fourths of the time, and assigned a detective to the victims' cases less than half of the time. Despite the high rate of dissatisfaction with law enforcement assistance, 21% of the victims reported that their identity thieves had been arrested, often on unrelated charges.
Thirty-nine percent (39%) of the victims reported contacting the postal inspector about their cases, and only 28% (7 out of 25) of those respondents found the post office helpful. Only four of the respondents reported that the postal inspector placed a statement of fraud on their name and address.
Forty-five percent (45%) of the respondents reported that their cases involved their drivers' licenses. For example, the license had been stolen and used as identification, or the thief had obtained a license with his or her picture but containing the victim's information. Fifty-six percent (56%) of the respondents contacted the Department of Motor Vehicles, and only 35% of those found the DMV helpful.
Forty-nine percent (49%) of the respondents contacted an attorney to help solve their cases. Forty-four percent (44%) of those people found their attorney to be somewhat helpful. Many consumers contacted attorneys at public interest law firms and received advice for free. Attorneys' fees ranged from $800 to $40,000.
Respondents reported that the most common problem stemming from their identity theft was lost time (78% of consumers identified this problem). Forty-two percent (42%) of consumers reported long-term negative impacts on their credit reports, and 36% reported having been denied credit or a loan due to the fraud. Twelve percent (12%) of the respondents noted as a related problem that there was a criminal investigation of them or a warrant issued for their arrest due to the identity theft.
SOLUTIONS TO IDENTITY THEFT:
PIRG's key recommendations to prevent identity theft are the following: (1) Require credit bureaus to provide free credit reports annually on request, as six states already do (Colorado, Georgia, Massachusetts, Maryland, New Jersey, Vermont). (2) Provide victims, as well as other consumers, with the right to block access to their credit reports. (3) Require matching of at least four points of identity, such as exact name and exact address, date of birth, account number and former address, instead of only on Social Security number between credit reports and credit applications. (4) Improve address-change verification. (5) Close the ''credit header'' loophole that allows Social Security numbers to be sold on the information marketplace, including over the Internet. (6) Take Social Security Numbers out of general circulation. (7) Make it easier to sue credit bureaus and creditors.
Require a free credit report annually: Credit bureaus should provide a free report annually on request to detect identity theft early and generally improve the accuracy and transparency of credit reporting. Six states (Colorado, Georgia, Massachusetts, Maryland, New Jersey, Vermont) grant consumers the right to a free credit report annually on request from each of the Big Three credit bureausEquifax, Experian and Trans Union. Colorado's law laudably also requires an annual notice from the Big Three national credit bureaus (also known as credit reporting agencies, or CRAs) to all credit-active consumers describing their rights under the law, including their right to a free report annually on request. Georgia allows consumers to obtain two free reports per year.
Require Blocking, Matching and Address Verification:
Improve Change Of Address Notification: Incredibly, identity thieves often steal mail, including pre-approved credit applications, and then apply for credit at a new address. Alternatively, they apply in department stores for ''instant credit'' in the victim's name, but at a different address. Creditors routinely grant this credit to the thief. Consumers will benefit from the new address change notification provisions of the Hooley bill.
Require Fraud Alert Flags and Blocking: Past victims often complain to our organizations that the so-called fraud alert flags used by the credit reporting agencies (credit bureaus) are either ineffective, ignored, or not sent to report requesters. The Hooley bill and Senate proposals would make such notification a requirement, even if the CRA were providing information for the establishment of a credit score. Currently, no requirement in law requires that either credit score models or credit decision makers relying on credit reports take the presence of fraud flags into account. Importantly, the Hooley provision would prevent the issuance of credit on any account with a fraud flag unless the creditor confirms the identity of the consumer and the particular consumer has actually authorized the issuance of credit. Essentially, this fraud flag provision implements in a very effective way one of our most important recommendations: it empowers consumers to control access to their credit reports. We call that ''the right to block.'' Although the credit reporting industry is generally subject to strong information practice rules (relative to other industries that maintain databases on consumers) credit reports can generally be obtained without consumer consent. All a requester needs is a ''permissible purpose.'' The Hooley fraud flag provision gives victims a strong right to block, or control access to their reports. The provision is highly appropriate, since victims often become repeat victims.
Close the ''credit header loophole:'' When it obtained a consent decree with one credit bureau, TRW (now Experian), in 1994 that properly prohibited target marketing from credit reports, the FTC made a serious mistake. It defined certain sensitive personal demographic information contained in credit reports (name, address, phone number, previous address, date of birth, Social Security Number) as exempt from the definition of credit report. Under this loophole, the credit bureaus developed a lucrative traffic in ''credit headers,'' which included the demographic information found in a credit report that is not associated with a specific credit trade line or public record. The fly-by-night information broker websites that sell Social Security Numbers to identity thieves and stalkers have generally obtained the Social Security Numbers from credit header data.
Two recent court actions helped to protect privacy. First, in March 2000, in an order against Trans Union,(see footnote 24) the FTC narrowed the definition of credit header. It removed dates of birth from credit headers, since age is a determinant of creditworthiness. It stated that since credit scoring and other credit decisions use age, then age information could only be sold by credit bureaus as part of a full credit report. Generally, the use of credit reports is subject to numerous restrictions to protect privacy and avoid misuse. The use of credit headers is not.
Recently, the Supreme Court denied Trans Union's petition to review the DC Circuit's April 2001 decision in Trans Union vs. FTC, upholding that 2000 FTC order holding that the FCRA banned the use of credit reports for marketing purposes. That order also removed dates of birth from credit headers.
Although the industry continues a series of unsuccessful appeals, also in April 2001, a court upheld the final Gramm-Leach-Bliley financial privacy rules issued in 2000 by the FTC and 5 other federal financial agencies, which defined Social Security Numbers as non-public personal information. That decision was upheld on summary judgment on 30 April 01 by U.S. District Court Judge Ellen Huvelle.
The result of the district court's strong ruling, which we expect to be continue to be upheld, is that credit bureaus cannot share credit header information (including Social Security Numbers) obtained from financial institutions, since the financial institutions have failed to provide consumers with notice of this information sharing practice and the right to opt-out of nonaffiliated third party sharing, as required by the Gramm-Leach-Bliley regulations. However, if banks and other financial institutions modify their defective privacy notices to describe this sharing, the protection will then only apply to consumers who exercise their right to opt-out. Banks have generally not disclosed their sale and sharing of SSNs, for fear this would increase the opt-out rate, which they have intentionally kept low by confusing consumers with poorly written opt-out notices.
While this is a very strong, pro-privacy decision, we believe that it still makes sense for the Congress to enact legislation closing the credit header loophole by statute. Even if Gramm-Leach-Bliley continues to be upheld, ultimately, consumers would have to exercise their modest opt-out rights to gain protections they should have by law.
The Shaw credit header ban proposal in HR 2036 eliminates the need for consumers to deal with the opt-out nonsense financial companies require of them to protect the privacy. It identifies all sensitive personal information in a credit report (everything except name and address) as part of the credit report. So, Social Security Numbers or other non-public information could only be sold or shared with parties that have a permissible purpose to obtain a credit report. This is a strong and important provision to prevent identity theft.
Take The Social Security Number out of Circulation: Closing the credit header loophole will reduce access to Social Security Numbers. It will not shut the door completely on their use. Military IDs, insurance and Medicare IDs, college IDs and drivers' licenses often routinely display Social Security Numbers. Businesses use the SSN as their database key for the same reason Mallory climbed Everest: ''Because it is there.'' Of course, they have less justification than Mallory did. He was an explorer, creditors and credit bureaus are merely lazy and sloppy. Unless legislation such as the Shaw proposal is enacted, SSNs will continue to be easily available and routinely abused by identity thieves. In addition to its credit header provision, is anti-coercion provision and limits on public display of SSNs will make it harder for identity thieves to obtain the key to a consumer's financial life.
Make It Easier To Sue Credit Bureaus and Creditors: In November, 2001, the Supreme Court raised the bar for identity theft victims, by shortening the FCRA's statute of limitations to sue credit bureaus to only two years after an error is made. The law also unduly restricts a consumer's right to sue creditors that make mistakes, restricting most enforcement to agencies.
The primary purpose of our testimony is to address proposals that would stop identity theft and help victims.
If enacted, the bi-partisan Identity Theft Prevention Act of 2001, HR 3053, as introduced by Rep Hooley, would take several important steps to slow the rise of identity crimes, including imposing new address change requirements on creditors, establishing statutory fraud alert requirements on credit bureaus and allowing consumers to obtain free credit reports on request annually to audit their reports for errors.
The bi-partisan Social Security Number Privacy and Identity Theft Prevention Act of 2001, HR 2036, introduced by Reps. Shaw, Matsui and others would impose new restrictions on the use and public display of Social Security Numbers. Social Security Numbers are the key used by identity thieves to open your financial lives. The bill includes a strict anti-coercion clause giving consumers the right to say no to most businesses demanding their Social Security Numbers. It would also completely close the door on the so-called ''credit header'' loophole used by credit bureaus to sell Social Security Numbers outside the strict regulations of the Fair Credit Reporting Act(see footnote 25) (FCRA). The loophole has been significantly narrowed by recent federal court decisions.(see footnote 26)
In November 2001, the Supreme Court, in TRW vs. Andrews,(see footnote 27) limited the rights of victims of both identity theft and other credit bureau mistakes. It held that victims had only two years from the date of an error by a credit bureau, not two years from the consumer's discovery of the error, to bring a lawsuit against a credit bureau. Bi-partisan legislation, HR 3368, introduced by Reps. Schakowsky and Bachus would reinstate the previous rule of two years from date of discovery of the error by the consumer. Similarly, a bill introduced by Rep. Terry, HR 3387, would extend the statute of limitations to three years following discovery. Both these bills have been referred to both the Judiciary and Financial Services Committees.
According to the FTC, in 2001 at least 16% of identity theft victims did not even know about the crime for over two years. A similar pattern exists for victims of credit bureau errors. This month, Rep. Gary Ackerman, a member of House Financial Services Committee, pointed out during a markup that he will pay thousands of dollars in excess interest on a mortgage due to failing to qualify for a low-interest loan as the result of a 3-year old error on his credit report. Therefore, it is important that the final legislation protect all victims of credit bureau errors, not only identity theft victims.(see footnote 28)
We appreciate the opportunity to provide the committee with our views on the human impact of the crime of identity theft and the need to impose greater duties on creditors and credit bureaus to stop it from happening. In our view, proposals to strengthen identification documents and require the use of biometric identifiers will not solve the identity theft problem. We look forward to working with the committee on legislation to address the issues raised in the hearing today.
Mr. GEKAS. The gentleman from California, Mr. Issa, is present, as is the gentleman from North Carolina, Mr. Coble; the gentleman from Virginia, Mr. Goodlatte; the gentleman from California, Mr. Gallegly. And I did spot the lady from Pennsylvania for a moment, the ladyMs. Hart.
And now comes the time to subject our witnesses to a bit of cross-examination. It is likely that the floor will call the Members for a series of votes
Mr. ISSA. They said there'd be no more votes.
Mr. GEKAS. No more votes? Oh, thank you for the information. Is that certain or uncertain? Are we going to debate that now? Are we going to
Well, we'll subject you to some cross-examination.
Also, Mr. Chabot was here at partfor part of the hearing.
The chair yields itself 5 minutes for a round of questions.
The first question I'd like to ask is to Mr. Stana. Of the ways in which false identity has been successfully used by people who wish to take advantage of us, is there any evidence of false identification to get voter's rights, voter's cards?
Mr. STANA. We haven't looked at that specifically. I've read allegations to that effect, but we have no work that specifically addressed that question.
Mr. GEKAS. Is there anyone studying that at all, do you know?
Mr. STANA. Not at the GAO.
Mr. GEKAS. Well, we might bring it to your attention because after motor-voter, many of us have found instances that resulted in non-citizens gaining the right to vote. And of course everyone who is a non-citizen who votes cancels out one of our votes, who have the legitimate right to do so. And that's a separate problem, but
Mr. STANA. Yeh, when we spoke with voter registration officials throughout the country in connection with our elections report, we did find that that was a problem that they had said they experienced, but we don't have work on the shelf that directly addresses that issue.
Mr. GEKAS. Yes, Mr. Huse, thethe startling scenario of our terrorists who hadhad obtained legitimate Social Security cards, and they got them directly from Social Security Administration, we understand, yet when they were issued these cards they were either tourists or students. Howhow could that have happened? How does that occur?
Mr. HUSE. First of all, Mr. Chairman, to be exact, wewe have isolated six of the 19 terrorists that possibly obtained Social Security cards legitimately, but that still is under investigation. It's still not unequivocallyunequivocally established that they did. We do know that all 19 used Social Security numbers. Now, whether they got them with counterfeit documents or whatwhat have you.
But to answer your secpart of yourthe second part of your question, non-work Social Security numbers were issued in this country for various reasonssome so that people could obtain driver's licenses, a very common practice. Many of the States required that a Social Security number be a precursor identifier to a driver's license application.
That, by the way, has been discontinued as a practice. But prior to September 11, it was a practice.
And other reasons that a non-work number would be issued would be to establish identification atfor students at universities for loan applications.
And lastly, some of these non-citizens wouldwould obtain work SSNs so that they could work atat the schools they attended. So there was a variety of loopholes there.
Mr. GEKAS. You mean if they applied for it at work, even if they were non-citizens, thethe Social Security Administration would issue it nonetheless?
Mr. HUSE. Well, theytheytherethere werethere were several exceptions wherewhere non-citizens could get
Mr. GEKAS. Yes
Mr. HUSE [continuing]. A number.
Mr. GEKAS [continuing]. And they are?
Mr. HUSE. Driver's licenses, student identification issues. And I believe those are the only reasons, and if work was authorized for them in the third
Mr. GEKAS. Like?
Mr. GEKAS. Like work visas? Workdirect
Mr. HUSE. Yes.
Mr. GEKAS [continuing]. Work visas, you're talking about.
Mr. HUSE. Correct. But they would be allowed to work while they were here on a schoolon aon a student visa.
Mr. GEKAS. Is that consistent with what Mr. Stana has found?
Mr. STANA. Generally, yes. I would point out one thing, though, that a number of people at the table here have mentioned, and that's the way individuals work to get driver's licenses and other official documents illegally through official agencies. There are other ways to get these documents that I know are used by aliens. I had occasion to visit the Secret Service office in Dallas not long ago, where a person who had been working there for 1 week made me, with a digital camera and publicly available hardware and software, made me a Nebraska driver's license and a Marine Midland Bank credit card.
Andso you don't need to use a Social Security number or even fill out an application to get these documents. And that should be a cause for great concern.
Mr. MCNULTY. Mr. Chairman
Mr. GEKAS. I was just going to turnthe two fellows that were lingering out in front of what you described, Paul, does that have something to do with that?
Mr. MCNULTY. Well, no, I was going to say that we prosecuted a case where the INS forms that you were discussing a moment ago, which authorize work, those forms were stolen and fraudulently filled out, and those were used by a syndicate that was in the business of providing falseproviding Social Security numbers to people that didn't have a right to them. By using those forms, they traveled around the country, went into Social Security offices, and got numbers for people who paid for that service.
Mr. GEKAS. The time of the chair has expired. We will turn to the gentleman from Texas, Mr. Smithafter Mrs. Lee, the lady from Texas, who is the Ranking minority Member on the Border Security Subcommittee.
Ms. JACKSON LEE. Thank you, Mr. Chairman. Let me congratulate Mr. McNulty for his new position and the work that he has done, and pose the first question to him on the grounds that I believe the combination of these two Committees has more or less a focus.
And let me view it from my perspective. And that is that as we proceed toward July 12th, as we focus now on the creation of the homeland security department, as we realize that we must begin looking at practical implementation of solutions, I would hope or believe from my perspective that this is now looking at ways to not only alleviate identity fraud and theft, but really focused on how that impacts the security of the nation.
And let me give a slight bias. I recognize and value that this has happened around the country. In fact, the FAA regulations now, that if you have a past record you can't be around secure areas. And those happen to be our citizens. The down side of that, of course, is if someone fails to acknowledge that they had a felony because they're trying to live a new life. They get themselves in trouble, and what we have is a person with a lost job in a community like my own. That's a separate issue.
But I'm really focusing on these individuals that might be part of a terrorist cell or network who are there in secure areas. Any instruction out of the work that you did on the task force for us, and can we solve the problem with existing laws, as you have done seemingly with this sweep that you did?
Mr. MCNULTY. Thank you. The law we used primarily was 18 U.S.C. 1001, which is the
Ms. JACKSON LEE. Lying on the forms.
Mr. MCNULTY. Right. And false information on a Federal form. I think that probably the most significant weakness has been identified by the attorney general in the proposal to increase the penalties for the general false identity statute, which is 18 U.S.C. 1028. And the problem with that statute is that the penalties essentially don't have any effect whatsoever. They are essentially lumped in with the underlying fraud that's occurring, and so there's no incentive whatsoever to prosecute someone for the identity card possession in combination with the false form that's been filled out.
If there was increased penalty, such asI think it's S. 2541 that's been introduced in the other bodyif there was an increased penalty, where there would be an additional penalty as an aggravating factor for the possession of the false identification, in combination with the fraudulent act, I think you would see probably even more prosecutions for this.
Having said that, I mean, I think we're able to use 1001 very effectively. And as those airport cases proved, that act of lying about who you are was prosecuted.
Ms. JACKSON LEE. You wouldbecause you wound uprounded up a number of individuals and prosecuted, I assume, those individuals that youand some of them were illegal aliens. Did you discover any of them with an attempt to perpetrate any terroristic acts?
Mr. MCNULTY. We had no evidence that anyone in our various airports that we did arrest and charge was engaged in some terrorist activity. We had 119 indictments between Dulles and Reagan National. And in those cases, the vast majority were either criminal history records that were not disclosed, or false Social Security numbers. We had a handful of fugitives and a relatively, actually, small number of illegal immigrants who were actually charged for immigration fraud.
Ms. JACKSON LEE. And basically they were attempting to have a job and to work and to make an income, as opposed to
Ms. JACKSON LEE. Mr. Chairman, I just saw the light green. Is it broken? Because it didn't goit didn't go to the yellow light in between. Let me just do this, if I can. If I can get an additionalI ask you now for an additional 1 minute. It did not go to the yellow
Mr. GEKAS. Yes.
Ms. JACKSON LEE. Thank you very much, Mr. Chairman. Let me just quickly say to Mr. Stana and Mr. Huse, if I can ask you this question very quickly. Because I do want to get on record my concern, and at this point opposition to a national identification card.
Before September 11, and as you looked at this program globally, did youwas the idea of terrorism a big issue in this identity fraud, or was it a question of an illegal immigrant using the Social Security cards and others? I mean, what was the big issue on this false identification? For both Mr. Huse and Mr. Stana. Thank you very much.
Mr. HUSE. I'll take a quick run first. We've actually been involved for the past 3 years, through a series of 14 audit reports, with our extreme concernand this is before September 11about the integrity of the Social Security number and its misuse. A newspaper reporter put it best a few weeks ago in one of his editorials. We conscriptedthe American people conscripted the Social Security number to uses way beyond what it was ever intended. And because that's happened, it's put the Social Security Administration and the SSN in a very different place. And that's what we were concerned with, not the terrorism aspects. After September 11, it took on even a different, more focused concern.
Ms. JACKSON LEE. Absolutely. We thank you for that. Mr. Stana, your research investigation.
Mr. STANA. I would say before September 11, most instances of identity theft or identity fraud involved individuals like you and me, people who had lost money, they'd lost time off of their job to try to unwind the situation. As far as fraudulent documents used by aliens to obtain employment, that's been an issue for a long time. And we can debate that in greater detail another time.
I will say, though, that with the rise of alien smuggling, the issue of using fraudulent documents to bring illegal aliens or legally admissible aliens into the country as a part of a criminal enterprise has heightened. And I think that concern was beginning to heighten before September 11. Obviously, since September 11, it has grown even more.
Ms. JACKSON LEE. Thank you very much. Thank you, Mr. Chairman. I see the issues that we need to address. Thank you very much.
Mr. GEKAS. The time of the gentlelady has expired. We turn to the gentleman from Texas, Mr. Smith, for a round of questioning.
Mr. SMITH. Thank you, Mr. Chairman. Mr. McNulty, let me direct my first question to you. In your former testimony, you mentioned that this year you had created a cyber crime unit in Eastern Virginia, particularly to try to combat identity theft. The Subcommittee on Crime, Terrorism and Homeland Security has actually held more hearingsthreeon that particular subject than any other. And I was wondering if you could briefly discuss how bad you think the problem is and what Congress should do about it.
Mr. MCNULTY. Well, it's a major priority for the department and certainly in the Eastern District of Virginia, where we have such a large presence of high-tech companies. You think about thejust the presence of the Internet backbone in Northern Virginia alone. It was an important thing to do.
So what I did was establish a cyber crime section in the office, of six lawyers who are full-time prosecutors. And one of the important things about doing that is when you have prosecutors who are dedicated to a particular area, they spend their time working with law enforcement agencies to develop cases. Because in a sense, it's kind of entrepreneurial. You're focused on that area of crime, and you're working to build cases.
And the range of cases you can do in cyber crime is enormouseverything from, on the one hand, cyber terrorism and doing things like hacking and disrupting the Internet in various waysto cyber frauds, where the very things we're talking about today are perpetrated by the use of a computer.
Mr. SMITH. Thank you. That answers my question. Mr. Huse, in your testimony, both written and oral, you mentioned that 8 percent of non-citizens who had requested Social Security numbers submitted fraudulent documents. My question is what has the Social Security Administration done since September 11 to correct that massive problem?
Mr. HUSE. Since September 11, they recognized the problem, and that's a very important step right there. And starting on July 1st in selected cities and then going nationwide in the fall, the Commissioner will establish what she calls enumeration centers.
Mr. SMITH. Well, you're moving toward a solution, then?
Mr. HUSE. Yes, we are.
Mr. SMITH. Okay. I thought you were very direct and candid in your written testimony, that the INS and the IRS, two other agencies, have really failed to protect American lives in not taking actions that they should have. Would you agree with thatmy assessment of your testimony?
Mr. HUSE. I think I'd probably state it a little bit more diplomatically, but I think you have a disconnect between three branches of the Government that, certainly in the past, just caused some of this problem to occur.
Mr. SMITH. One other quick question for you and for Mr. McNulty. How important and how effective do you think biometric identifiers would be if we were to incorporate them into, say, Social Security or other types of identification?
Mr. MCNULTY. Go ahead.
Mr. HUSE. I think
Mr. SMITH. Real briefly, because I want to move on.
Mr. HUSE. I'm very wary of the national identifiernational identity card.
Mr. SMITH. I'm simply talking about making Social Security cards more tamper-proof by using a fingerprint or something like that.
Mr. HUSE. I thinkand that's probably why I'm rather reticent. I think we did do this study that Congress asked us to do and reported back, and had a range of options for a stronger Social Security card, starting with, on the low end, different minor enhancements, all the way to biometrics. Those will cost a lot of money, and I don't know that they'll really solve much of this problem.
Mr. SMITH. Okay. Mr. McNulty?
Mr. MCNULTY. We need to know that people are who they say they are, but I don't know enough about this subject to have an educated
Mr. SMITH. Fair enough. Mr. Chairman, I have a minute left, and I'm going to yield it to the gentleman from California, Mr. Gallegly.
Mr. GALLEGLY. I thank the gentleman for yielding.
Mr. Mierzwinski, did I understand you correctly that you do advocate giving driver's licenses to illegal aliens?
Mr. MIERZWINSKI. I didn't say that. I said that the Congress ought not to look at restrictions on driver's licenses to aliens, whether legal or illegal, as a solution to the identity theft problem. I believe that it will simply result in more drivers seeking fraudulent identity and more drivers without insurance.
Mr. GALLEGLY. Do you advocate the issuing of driver's licenses to illegal immigrants?
Mr. MIERZWINSKI. I don't have a position on that.
Mr. GALLEGLY. But they are illegal, so would you advocate any benefits to those that are here illegally, other than their constitutional rights?
Mr. MIERZWINSKI. I would refer, as I did in my testimony, to the work of the National Council of La Raza and the American Civil Liberties Union and the Immigration Rights Forum, that have done some major work on this. I'm not prepared to comment on that.
Mr. GALLEGLY. I appreciate the gentleman'shis comments. I just find it a little perplexing that we would give benefits to people that are illegally here to help perpetuate them being illegally here. I yield back.
Mr. MIERZWINSKI. Very brieflyI'm not trying to dodge the question, sir. Our organization simply does not have a position on that specific issue.
Mr. GEKAS. The time of the gentleman has expired. Although there are votes pending on the floor, we still have 15 minutes to appear thereon. I will take the prerogative of the gavel to recognize the gentleman from Virginia, Mr. Scott, for a round of questioning. And then after his questioning, we will recess until 5:20.
Mr. Scott is recognized.
Mr. SCOTT. Thank you, Mr. Chairman.
Mr. McNulty, you indicated that you had found certain people with false identifications. Did you follow through to seeto evaluate ifhow many, if any, posed a serious threat? I mean, there's a difference between cheating to get an ID to get a job and cheating to getfraudulently getting an ID to blow up buildings and kill people. Did you do an assessment as to who these people were and what kind of threat they posed?
Mr. MCNULTY. There was nothing done in the course of the effort to try to do additional investigative work on the individuals. We just recognized the vulnerability of individuals in that situation who could be extorted or could be pressured or coerced to providing some assistance to someone who might have an activitydangerous activity in mind.
Mr. SCOTT. So the fact that they had a fraudulent ID made them susceptible
Mr. MCNULTY. Possibly.
Mr. SCOTT. Mr. Mierzwinski, you indicated that biometrics with I.Ds was not awasn't a good idea. Could you explain what your position there is?
The second part of the problem is, if I get a good
Mr. SCOTT. But by ''spoofed,'' you mean they got a subsequent ID and used that kind of messed up fingerprint to
Mr. MIERZWINSKI. Right.
Mr. SCOTT [continuing]. Mask the IDthe fact that they were in fact someone else who was also in the data bank?
Mr. MIERZWINSKI. Right. And if youif you get your fingerprint on an identity card with my name on it, you've got ID that proves you're me, with your fingerprint on it, that you can use to be me. You've essentially created a super-identity document. The biometrics makes your proof that you're me even better. There are some significant problems out there.
Mr. SCOTT. Mr. Huse, what do you need to get a Social Security number, what identification? How do you validate yourself to get a Social Security number?
Mr. HUSE. As a citizen of the United States, you need, you know, of course, proof of birth in this country. And most Social Security numbers are given at birth in this country today, and it's a relatively error-free process. For a non-citizen, of course, you need to prove your place of birth and birth certification with documents that come from
Mr. SCOTT. You have prove that you have a document that shows that somebody was born in North Carolina on a certain date.
Mr. HUSE. Correct.
Mr. SCOTT. How do you know it's you?
Mr. HUSE. How does Social Security know the
Mr. SCOTT. How do you know it's the person? You have a person who comes in with a birth certificate. How do you know it's the person?
Mr. HUSE. Well, toif you're an adult, I mean for adults, Social Security has to verify the authenticity of that document before the number is issued. And it does that.
Mr. SCOTT. Well, I guess my follow-up question
Mr. SCOTT. The follow-up question would be how does anything we do today make it more likely that the person who has a Social Security number is actually who he says he is?
Mr. HUSE. That's why I suggested in my testimony, sir, that there really needs to be more interactivity at all levels of government to ensure, in real time, that these documents or these bona fides are valid at the time they're presented.
Mr. SCOTT. How many people are getting false IDs showing they're somebody else, and how many are just trying to get a Social Security card in their own name?
Mr. HUSE. I mean, there'sI don't know the answer to your question. I'm sure there are people who do that, but we don't havewe don't know what we don't know there, if I
Mr. SCOTT. Okay. Well, let me get in one more question. Mr. Mierzwinski, can you tell me what suing the credit bureaus would do?
Mr. MIERZWINSKI. Well, I think the credit bureaus need to match credit card applications to credit reports on four or five items, rather than simply on the Social Security number. That's the big problem. If I get your Social Security number off the Internet, I can get credit in your name very easily. They need to match on my previous address, they need to use some out-of-wallet identifier, something an ID thief wouldn't know, and they need to use several identifiers in concert together, rather than only the SSN.
Mr. SCOTT. This is a credit bureau?
Mr. MIERZWINSKI. Well, the credit card companies and the credit bureaus need to work together on this. The credit bureaus need to
Mr. SCOTT. But if they don't do that and give somebody credit in my name and I am inconvenienced and my checking account is raided, they would be financially liable for those losses?
Mr. MIERZWINSKI. Well, the bank would be financially liable for those losses in most cases. The banks typically eat this as a cost of doing business. They think the cost of doing business is less than the cost to society of the half a million victims who've had their lives ruined, and that's the reason the banks haven't upgraded their systems. They're not financially liable enough.
Mr. SCOTT. Mr. Chairman, I'd like unanimous consent that these documents be put in the record.
Mr. GEKAS. Without objection. And the time of the gentleman has expired. The chair revises its estimate as to when the Committee shall return. We now stand in recess until 5:35.
We must under the rules await the presence of two Members, one besides the Chair, in order to proceed. But what I wanted to do was to keep my own record running onstarting on time whenever and wherever possible. So you have to bear the brunt of that, and you have your choice. I can recite sonnets from Shakespeare or sing ''Amazing Grace,'' whichever you wish me to accomplish.
Keep the decision to yourself, and we will await the arrival of another Member.
Mr. GEKAS. The time of the recess has expired. Let the record indicate that the gentleman from Mr. Scott along with the Chair constitute the required hearing quorum, and so we shall proceed to quit. [Laughter.]
Mr. GEKAS. I do have one question that I wish to pose. Then I'll let the gentleman from Virginia, if he wishes to pose another question, and we'll wind it up that way, pending the arrival of some other Member.
One question, Mr. Huse, that leaps out at us from your testimony, where on page 3 you state that, ''Our own work illustrates how wise a decision this is,'' that is, to beef up the integrity of the system. ''In a recent study, preliminary results indicate that 8 percent (over 100,000) of the 1.2 million [Social Security numbers] assigned to non-citizens during calendar year 2000 were based on invalid immigration documents, which current SSA processes did not detect.''
That's a lot of people running around without proper documentation. Whatare we doing anything about that? That's the general question. What is the Social Security Administration doing to minimize that?
Mr. HUSE. I previously mentioned some of that, Mr. Chairman.
Mr. GEKAS. Yes, you did.
Mr. HUSE. And it's a longit's a long story, but theour audit work told us that we had a problem here several years ago, that this isn't new information that happened just afterbecause of September 11. We had previously established that there needed to be a much closer connection between the authentication of documents provided by Immigration and Naturalization Service and our processing of SSNs for non-citizens.
In the last Administration, you know, there were a succession of letters sent to INS by the Commissioner of Social Security, and clearly this problem was known.
Since September 11, however, immediately following those horrific events, the Acting Social Security Commissioner at the time, Larry Massanari, established an enumeration task force to fix some of these things. And those are some of the results I alluded to in my testimony.
But they are being addressed now. There are new procedures in place, and there is a commitment now under the aegis of Homeland Security, under that impetus, for the Immigration and Naturalization Service and SSA to work much closer together to close theseclose this gap. I mean, I can be more specific as to what those things are, but
Mr. GEKAS. When you said that the Social Security Administrator or Acting Social Security Administrator wrote several letters to the INS
Mr. HUSE. That was the previous Commissioner.
Mr. GEKAS. I understand.
Mr. HUSE. Right.
Mr. GEKAS. What prompted his sending the letters? Did he have something on his desk that showed
Mr. HUSE. Audit work that we had done that showed that we were continuing to enumerate non-citizens without proper verification of the documents concerned. That was established by our work.
Mr. GEKAS. The Chair now reneges on his first promise to go to Mr. Scott because Mr. Flake appeared, and he has not yet had a chance to ask any questions. So the gentleman from Arizona is recognized for 5 minutes.
Mr. FLAKE. I thank the Chair. I thank the Chair for holding this hearing.
The panel may know that I have a bill that would require States to issue driver's licenses that expire no later than a persona temporary resident's visa. Right now we have a situation in most States where someone can come to the country on a 6-month visa or a 2-year visa or some kind of student visa and actually go in and get a driver's license for up to, in some States, 44 years if they happen to be 16 years old. That was the practice in my State of Arizona. We have since changed, and I believe seven States now will not issue a license for a period longer than the visa.
Mr. Mierzwinski, you mentioned that any restrictions or anytrying to define who's legal and who is not and the issues of the licenses would simply raise the cost of insurance premiums? Is that your contention?
Mr. MIERZWINSKI. Well, two things, Congressman. And, first of all, my organization hasn't taken a formal position on your legislation. My knowledge on identity theft is the reason I am a witness here. But I have looked at a number of the suggested solutions to theto some of the problems facing the country, and national ID cards and restrictions of driver's licenses I don't think will solve the problem of identity theft. The problem with restricting driver's licenses I think is clear. It will fuel a market for more fraudulent documents, perhaps even more high-tech fraudulent documents, and, in addition, it may increase drivers' premiums as more people choose to drive without driver's licenses.
Those are some serious issues that I urge you to weigh with your legislation.
Mr. FLAKE. Before I do, can I ask you, is there empirical evidence, is there anything to quantify how manyif having a license actually encourages you to buy insurance? Has there been any study on the topic that you can cite?
Mr. MIERZWINSKI. I don't have that study with me, but I will certainly look into it and get back to your staff.
Mr. FLAKE. Okay. But you're not aware of any study that shows a correlation between having a license for an illegal and actually purchasing insurance?
Mr. MIERZWINSKI. Schoser does not show, but I am in contact with a number of experts on insurance, and I'd be happy to get back to you.
Mr. FLAKE. But you're not aware at this point?
Mr. MIERZWINSKI. Not at this time.
Mr. FLAKE. So any suggestion that it would increase premiums is pure speculation at this point.
Mr. MIERZWINSKI. Well, I've seen itI've seen it suggested by a number of groups, and it seemed to make sense to me.
Mr. FLAKE. Okay. That's good. Mr. Stana, have you taken a position on the legislation?
Mr. STANA. Well, I think that there isn't one answer to this question. I think what you're proposing would
Mr. FLAKE. I understand that. I just wondered
Mr. STANA [continuing]. Certainly help, if it were coupled with some sort of a verification process, a two-stage process that would entail not only a visual inspection but also some sort of inspection that keys back to a database to verify that this individual's visa has expired or driver's license has expired. If you don't do that, just flashing a driver's license or other form of identification could further identity theft not prevent it.
Mr. FLAKE. Good point. Mr. Huse?
Mr. HUSE. I'm going to answer your question obliquely becauseI think it's a good idea. We did audit work several years ago, or maybe even less than several years ago, that involved the Stateone of your nearby Western States, the State of Utah, where we found that a significant numberand I don't have the number exactly, but I'll be glad to expand that answer in a written response to youof non-citizens were going into Utah because they could get a driver's license there, a driver's license that had no limits. And that was being used for purposes way beyond operating a motor vehicle on Utah's roads.
Mr. FLAKE. Yes, well, that'sthe point of the legislation is that if there is a de facto form of national ID at this point, it's a driver's license.
Mr. HUSE. It's the link betweenI think the driver's license andthe combination of the driver's license and the Social Security number together makes the national ID. I think that's a fair statement.
Mr. FLAKE. Thank you, Mr. Huse.
Mr. McNulty, in the last 30 seconds I have?
Mr. MCNULTY. I'm here on the Department of Justice ticket, so I don't have a position.
Mr. MCNULTY. Well, I don't think we have a position on the issue yet.
Mr. FLAKE. I thank the Chair.
Mr. GEKAS. The time of the gentleman has expired.
It is the intention of the Chair to recognize the gentleman from Virginia, Mr. Scott, for a follow-up question, to be followed by recognition of the lady from Texas, who will act as the clean-up hitter for another follow-up question or two.
The gentleman from Virginia is recognized.
Mr. SCOTT. Thank you, Mr. Chairman.
Mr. McNulty, when a credit card is stolen, the bank will just cut off the credit and do the loss. Is there any attempt to let the credit run to see if you can catch the person?
Mr. MCNULTY. That's a very interesting question. We were talking about that during the break. I'm not familiar
Mr. SCOTT. Okay. Let me follow up. I had that situation where somebody got a card, and they were buying gasoline with it, several times, and that was all they were charging on the card. It seems to me something like that, you have the potential of actually catching somebody.
Mr. MCNULTY. Well, two thoughts. First, there arethere are stories about cards continuing to run, and it's a little confusing as to why that is the case. It should be and most people would expect that it would be cut off immediately and it wouldn't be used again. But you do hear that.
Now, why, I'm not sureit's not clear, and that leads me to my second point, which is that I think there needs to be more enforcement in this area, and it appears as though, from a business perspective, they view this as just a cost of doing business and are not too interested in the enforcement side, at least in terms of bringing cases to law enforcement.
So if that's what they're doing, I'm not sure I see the fruit of that activity.
Mr. SCOTT. Well, when I said let it run, I meant as a sting possibility. Some of the
Mr. MCNULTY. Yes, I hear you.
Mr. SCOTT. Because all of them are preauthorized, so when the number gets in, you know, you could have an alert. Perhaps that may be something webecause it's so expensive to try to do that and the return may not be there that we might want to fund such an operation and think along those lines.
But let me ask one other question to Mr. Huse. For non-citizens trying to get a Social Security card, you have a lot of rigmarole to go through. Is the potential of actually catching somebody using this Social Security number for violent criminal purposes worth all the aggravation you're going to put people through who are trying to get a card legally?
Mr. HUSE. I believe it is. I believe it is, sir.
Mr. SCOTT. And how much would it cost in terms of your administration and people's aggravation to actually tighten it up so that you would know that the person before you is who he is and he's not trying to use it illegally?
Mr. HUSE. Well, I think the Social Security Administration has some idea that by increasing the stewardship side of the focus here so that there is more real-time verification of these documents, which may cause some time delay, that we'll be able to close this loophole. I think the record following September 11 dictates that this be done.
Mr. SCOTT. Does anybody else want to comment?
Mr. STANA. No, I would just say that I think having some form of verification is essential. I think just having a visual verification, whether you're talking about a Social Security card, you're talking about a driver's license, or a border crossing card, isn't sufficient. It's easier to cross the borders in the United States than it is to get in the GAO building, and I'm not so sure that's what should be.
Mr. SCOTT. Well, I mean, the original documents you need, like a birth certificate, how do you get a birth certificate verified?
Mr. STANA. Well, you raise a good point. In your questioning before the break, you asked how do you know that the person who's presenting the birth certificate is really the person who should be presenting that document. And you're raising a good point, and I personally believe that once biometric technology matures, it may afford opportunities to clarify identity than is currently the case.
Mr. HUSE. When a foreign visitor comes to this country, both the State Department and the Immigration and Naturalization Service have a piece in establishing that individual's bona fides and issuing certificate documentation, and that's what Social Security gets. It's that certificate documentation from INS that says it's okay to enumerate this person.
In the ideal, this should be done at the time of entry, and that's really where we're going to go. But that requires perhaps some strengthening of databases and systems that need to be invested in from what we have today. Today we're willing to make the sacrifice to slow things down a little bit to get this done because of the security implications. But in the ideal, it should be done at the time of entry.
Mr. STANA. If I might add briefly, that information that is given to INS and INS uses to create the identity is only going to be as good as the host country systems. Okay? So you're running into a whole other problem.
Mr. GEKAS. The time of the gentleman has expired.
We turn to the lady from Texas.
Ms. JACKSON LEE. Thank you very much, Mr. Chairman. I always thought I could be a great baseball player and now here I am.
Let me try to summarize from my perspectiveand certainly not represent the view of my colleagues, but I do believe that the thrust of this hearing is to really narrow in the injury that may be done by these false documents and those who would do harm to this country, though I am very concerned of the abuse of the Social Security card because what I know it to be from growing up, it is to say that you are who you are. It's the card that has now become part of my identity to the extent that I could not find that paper card if my life depended on me. But when you ask me for my Social Security number, I do know it, and it has been used through colleges and your transcripts and for any manner ofand I would like us not to have to move away from that. I think it has been very effective. Obviously, it is also used to establish a benefit and that you're the person to get the benefit.
But I would say to you that we need toeven with its broken system, we need to look at the State Department and INS relationship on the visas because that is what happened with the terrorists. They came in on either tourist and/or student visas. They received them from their country of origin, and they received them through presenting some sort of documentation. If there has to be any harsh procedures, we've got to wake up and invest in the technology and data sharing that gets them at that point. And we can do no less for this country.
So we need to begin to look at that, and even ifbecause I have individuals, my constituency, who want to reunite family members, and they've got a mother-in-law who is as innocent as the day is long, but at the visa point, she's being stalled for a variety of reasons. I would like that not to happen. I'd like us to have procedures that can really ferret out the bad guys, and that's technology and documenting who they are, and when I say documenting, looking at fingerprints, how many times they've come in the country, and I think we can do that.
But getting back to the Social Security card, if we can fix that, then explain to me, Mr. Huseand I must compliment you for what you all have tried to do and proposals, but it looks to me as if you have not yet done some of the things that have been recommended. So I'd like you to comment on obtaining the independent verification from agencies like the INS and State Department when these individuals present you this documentation here in the United States and say, yeah, I'm okay, give me an SSN, give me a number. How do we do that better? How do wewhat are you doing? Why haven't you moved into getting that documentation? What do we need? More investment in technology?
Let me just finish. Also, the training of our field office employees who I know are inundated and frustrated, that was one of the issues that we dealt with in the Social Security offices, again, in my community. Frustration, denials keeps you from doing this kind of unique work. I think you need to train people separately from the general run-of-the-mill crowd that comes in and needs their disability because I don't want those people to be cut off from disability or standing in line and confused with others if you're dealing with individuals who do not have citizenship documentation, isolating them, not for the color of their skin or the language they speak, but because they're not a citizen, and have people who are professional.
I'd appreciate it if you would respond to those inquiries, and I guess last is to, like this one, expand the agency's data-matching activities and other Federal, State, and local government entities. And it looks as if you have not yet done that. We've got to do that kind of work, I think, before we can begin to indict ourselves as to the fact that we can't get the job done.
I yield to the distinguished witness.
Mr. HUSE. Thank you. I'm going to take the last part of your question first, and there is significant work to do for us to look at the matching and privacy implications of doing better in sharing data with all of the entities concerned, and that's underway. That's complex and may require some legislative activity on the part of the Congress. That'swe're in a dialogue now with all concerned, to include the Justice Department
Ms. JACKSON LEE. And it's internally underway? Is that what you're saying? You're looking at that now?
Mr. HUSE. It is underway, that effort.
Ms. JACKSON LEE. All right.
Mr. HUSE. That effort has been joined.
Mr. HUSE. The second part of your question
Ms. JACKSON LEE. Training your employees.
Mr. HUSE. We recognizeactually, Commissioner Barnhart has recognized and has ordered the establishment of and on July 1st we'll start the first of these enumeration centers where we'll take Social Security professionals, INS professionals, members from my staff, and other law enforcement involved, and create a center where enumeration will occur outside of the Social Security field office, which really isn't the place for it in the first place, with all of the new requirements that are called for.
That will be started in several cities on July 1st, and then in the fall it will increase to, I think, 14 other locations around the United States, and eventually it is hoped that will become the way we accomplish this until something better can be done to bring everybody through data sharing and so forth to a better place.
Ms. JACKSON LEE. And you answered the last question, which is the confirmation of the evidentiary documents, and you're going toI assume this last comment
Mr. HUSE. It will be done right in one place, which we think is a really effective way to bring everybody to one room where this will be done.
Mr. HUSE. In real time, right at one place.
Ms. JACKSON LEE. I thank the gentleman.
Mr. GEKAS. The time of the lady has expired.
The time has come for us to dismiss the witnesses with gratitude and to tell them that by their presence here they also submit to written interrogatories on the part of the Members. So we expect that there will be some of that.
Again, we thank you. This meeting stands adjourned.
[Whereupon, at 6 p.m., the Subcommittee was adjourned.]
A P P E N D I X
Material Submitted for the Hearing Record
PREPARED STATEMENT OF THE HONORABLE ZOE LOFGREN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Chairman. I regret that another previously scheduled commitment prevent me from remaining for the entire hearing. I appreciate the opportunity to review the thoughts of our witnesses before Attorney General Ashcroft and Homeland Security Director Tom Ridge testify before the Judiciary Committee this week.
There is no question that identity fraud and theft pose serious problems to US national security. While opportunities for identity theft have grown with the Internet, technology is ultimately also the answer.
I have long believed that the only real solution to identity theft and fraud lies with new developments in technology, and that the way to keep America secure is to ensure that our law enforcement and border protection agencies have the personnel and resources to quickly access and constantly update their technological resources.
For example, a social security card with a chip containing scanable bio-data is more secure than the piece of paper that my social security card is printed on. Iris scan technology is more secure than the current practice of fingerprinting. While developing and updating technology is an expensive proposition, a secure America is priceless.
On a more basic level, our law enforcement agencies must begin tracking identity theft and fraud. Since identity theft and fraudulent documents can be part of a larger serious crime or scheme, it makes sense to do more than compile statistics on these offenses.
I thank the witnesses for their testimony.
(Footnote 1 return)
The seven were Hani Hanjour, Khalid Almihdhar, Majed Moqed, Salem Alhazmi, Abdulaziz Alomari, Ahmed Alghamdi, and Ziad Jarrah. It is suspected, but not known, that these seven hijackers used their Virginia identification cards or licenses to board the flights they later hijacked.
(Footnote 2 return)
Since September 11, 2001, this Office has prosecuted four individuals who helped the hijackers complete fraudulent forms and submit them to the Virginia Department of Motor Vehicles (''DMV''). All four were charged with and pled guilty to identification document fraud, in violation of 18 U.S.C. §1028. In addition, this Office has used 18 U.S.C. §1028 to prosecute several people who came to our attention through the 9/11 investigation, either due to their contacts with the hijackers or because of their presence near Dulles airport on September 11th with flight manuals. We also prosecuted two men who ran a checkpoint at the Pentagon in a tow truck in February of this year. In each of these cases, the defendant submitted false information to the Virginia DMV to obtain a Virginia identification card or license for himself or another by fraud.
(Footnote 3 return)
This change is a step in the right direction and has had an impact. Nonetheless, I think it is too soon to tell if this change is sufficient to prevent the abuse of the system that occurred before September 11th. Prior to this change, many illegal immigrants and ineligible drivers from other states traveled to Virginia to obtain Virginia licenses and identification cards by fraud.
(Footnote 4 return)
In order to obtain a Virginia identification card or driver's license, an applicant must provide the DMV with proof of identity and Virginia residence. Only Virginia residents may obtain a Virginia driver's license or identification card. Prior to September 22, 2001, an applicant lacking documentary proof of identity and Virginia residence could submit sworn statements of identity and residence in lieu of documentary proof. In particular, an applicant lacking proof of identity could submit an identity affidavit (DMV Form DL6), and an applicant lacking proof of Virginia residence could submit a residency certification (DMV Form DL51). In theory, the identity affidavit had to be reviewed and signed by a Virginia lawyer, and the residency certification had to be signed by a Virginia resident who swore to the applicant's Virginia residence. In practice, both forms were subject to widespread fraud and abuse. Indeed, the forms were used primarily by illegal immigrants and ineligible drivers from other states to obtain Virginia licenses and identification cards by fraud.
(Footnote 5 return)
The form used was an INS form I94, which is a record of authorized entry.
(Footnote 6 return)
Ronald Reagan Washington National (5,000), Dulles International (15,000), Richmond International (4,862), Norfolk International (3,386) and Newport News/Williamsburg (199).
(Footnote 7 return)
The badges are security identification display area or ''SIDA'' badges.
(Footnote 8 return)
Card holders who participate in bust-out schemes normally refuse to pay the credit card companies for the bogus purchases. Oftentimes, the card holders will file for bankruptcy to absolve themselves from having to pay their accumulated debt. On their bankruptcy applications, the card holders typically make false statements by lying about the reasons for accumulating such debt, and/or even their true identities.
(Footnote 9 return)
U.S. Public Interest Research Group (U.S. PIRG) is a nonprofit non-partisan public interest advocacy group that serves as the national office for state PIRGs around the country. <http://www.uspirg.org>
(Footnote 10 return)
See chart ''STATE IDENTITY THEFT LAWS'' [from New York Senate Majority Task Force On Privacy, March 2000, <http://www.senate.state.ny.us/Docs/nyspriv00.pdf>] Arizona Ariz. Rev. Stat. Sect. 132708, Arkansas Ark. Code Ann. Sect. 537227, California Cal. Penal code Sect. 530.5, Connecticut 1999 Conn. Acts 99, Georgia Ga. Code Ann. Sect. 121, Idaho Idaho Code Sect. 283126, Illinois 720 ILCS 5/16/G, Iowa Iowa Code Sect. 715A8, Kansas Kan. State Ann. Sect. 214108, Maryland Md. Ann. Code art. 27 sect. 231, Massachusetts Mass. Gen. Laws ch. 266 Sect.37B, Mississippi Miss. Code Ann. Sect. 971985, Missouri Mo. Rev. State Sect. Sect. 570.223, New Jersey N.J. State Ann. Sect. 2C:2117, North Dakota N.D.C.C. Sect. 12.12311, Ohio Ohio Rev. Code Ann. 2913, Oklahoma Okla. Stat. Tit. 21, Sect. 1533.1, Tennessee Tenn. Code Ann. Sect. 3914150, Texas Tex. Penal Code Sect. 3251, Washington Wash. Rev. Code Sect. 9.35, West Virginia W. Va. Code Sect. 61354, Wisconsin Wis. Stat. Sect. 943.201 Source: ID Theft: When Bad Things Happen To Your Good Name. FTC, February 2000.
(Footnote 11 return)
Identity Theft Assumption and Deterrence Act of 1998, PL 105318 (10/30/98), criminalized identity theft and established the Federal Trade Commission as a national identity theft clearinghouse. It was based on HR 4151 (Shadegg-R-AZ) and S. 512 (Kyl-R-AZ). The law is found in the U.S. Code at 18 USC 1028.
(Footnote 12 return)
See http://www.ftc.gov/bcp/workshops/idtheft/trends-update2001.pdf ''Identity Theft Complaint Data January-December 2001 and http://www.consumer.gov/sentinel/images/charts/idtheft01.pdf ''Identity Theft Victim Complaint Data January-December 2001'' for the most up-to-date published FTC data.
(Footnote 13 return)
Personal communication, Beth Givens, Director Privacy Rights Clearinghouse. See http://www.privacyrights.org, 23 June 2002, who estimates 500.000 identity theft victims each year based on her analysis of data provided to government agencies by credit bureaus. These numbers are buttressed by recent FTC data that the commission receives about 80,000 complaints each year. Our estimate is that only 510% of victims complain to the government. For details of all available estimates, see report and testimony by U.S. General Accounting Office, GAO02424T (testimony) and GAO02363 (report) ''Identity Theft: Prevalence and Cost Appear To Be Growing.'' March 2002
(Footnote 14 return)
According to A PIRG/Privacy Rights Clearinghouse survey of identity theft victims, ''In 15% of the cases, the thief actually committed a crime and provided the victim's information when he or she was arrested.,'' See Nowhere To Turn,'' May 2000, CALPIRG/Privacy Rights Clearinghouse. <http://www.privacyrights.org/ar/idtheft2000.htm> or <http://calpirg.org/CA.asp?id2=3683&id3=CA&>
(Footnote 15 return)
See, for example, the recent opinion piece by Oscar Marquis in the American Banker, 17 May 2002, claiming that estimates of identity theft over-state the problem. Marquis was until recently the long-time general counsel for the Trans Union credit bureau. He has recently joined Hunton and Williams, a law and lobbying firm that is one of numerous financial-industry affiliated organizations that are publishing ''reports'' and other polemics in opposition to strict privacy protection laws. See, for a rebuttal to these industry-funded materials, ''Privacy, Consumers, and Costs,'' March 2002, by Robert Gellman. Available at http://www.epic.org/reports/dmfprivacy.html
(Footnote 16 return)
There are numerous other problems such a ban on obtaining drivers licenses would create, which are not directly the subject of this hearing. For example, the number of uninsured drivers would increase dramatically, raising rates for all drivers. For a more detailed treatment of the issue, see Michele L. Waslin, Safe Roads, Safe Communities: Immigrants and State Driver's License Requirements, National Council of La Raza (NCLR) Issue Brief No. 6, May 2002, available at http://www.nclr.org/policy/briefs/driverslicenseissuebrief6.pdf.
(Footnote 17 return)
See ''Fun With Fingerprint Readers,'' summarizing work by Japanese cryptographer Tsuomu Matsumoto, web-posted at http://www.counterpane.com/crypto-gram-0205.html by Bruce Schneier, editor, Crypto-Gram Newsletter, 15 May 2002.
(Footnote 18 return)
(Footnote 19 return)
We encourage the committee to review the work of the ACLU and National Council of La Raza, among others, in its determination of whether these proposals would help stop terrorism.
(Footnote 20 return)
The full report, ''Nowhere To Turn,'' by CALPIRG and the Privacy Rights Clearinghouse, May 2000, is available at <http://www.pirg.org/calpirg/consumer/privacy/idtheft2000/>
(Footnote 21 return)
''Theft of Identity: The Consumer X-Files'', CALPIRG and US PIRG, 1996 and ''Theft of Identity II: Return to the Consumer X-Files'', CALPIRG and US PIRG, 1997. See <http://www.pirg.org/reports/consumer/xfiles/index.htm>
(Footnote 22 return)
In 1999 the Federal Trade Commission established a clearinghouse to assist victims of identity theft and document their cases in a database. This endeavor is a result of a new federal law, ''The Identity Theft and Assumption Deterrence Act of 1998'' (18 USC 1028), implemented in 1999. The FTC maintains a toll-free telephone number for victims, 877IDTHEFT, as well as a web site, www.consumer.gov/idtheft.
(Footnote 23 return)
When a ''fraud alert'' is placed on a victim's credit file, the credit bureau reports to credit issuers that the subject of the report is a victim of fraud. The creditor is supposed to contact the victim at the phone number provided in the fraud alert in order to determine if it is an imposter or the rightful individual applying for credit. Obviously, if the credit bureau does not adequately report the presence of an alert, which often happens when only a credit score is reported, or if the credit grantor fails to detect the fraud alert, which is a common experience of victims, the imposter is able to obtain additional lines of credit in the victim's name. Consumer and identity theft experts believe that one way that credit bureaus under-state the magnitude of the identity theft problem is by only calculating the results of consumers who place a 7-year or ''permanent'' fraud flag on their credit reports. Most consumers are quite unaware that there is even an option to insert a permanent fraud flag and are not routinely offered the chance when they call the credit bureaus and ''speak'' to their ''voice-mail-jail'' computer response systems.
(Footnote 24 return)
See <http://www.ftc.gov/opa/2000/03/transunion.htm> for the press release accompanying the order of 10 February 2000, released on 1 March 00. ''The Commission also found that although demographic information such as name, address, mother's maiden name and social security number did not meet the definition of a consumer report, age information bears on a consumer's credit capacity and is used in credit eligibility decisions and therefore does constitute a consumer report.''
(Footnote 25 return)
15 USC 1681 et seq.
(Footnote 26 return)
We discuss this further below in the section on credit headers and cite the cases, including the Supreme Court's decision this month to deny a credit bureau's petition seeking review of the DC Circuit's 2001 decision in Trans Union vs. FTC, upholding the FCRA's constitutionality.
(Footnote 27 return)
See TRW vs. Andrews, 13 Nov 2002, No. 001045, http://a257.g.akamaitech.net/7/257/2422/13nov20011040/www.supremecourtus.gov/opinions/01pdf/001045.pdf See the amicus brief of U.S. PIRG and other consumer groups, filed in support of identity theft victim Adelaide Andrews, at http://www.pirg.org/consumer/andrews6.htm
(Footnote 28 return)
The Senate Judiciary Committee has marked up S. 1742 (Cantwell) which corrects the Supreme Court decision in TRW vs. Andrews, but only for identity theft victims, not all consumers who are victims of credit bureau errors. Any final legislation enacted by the Congress must fix the discovery rule for all consumers, as Rep. Ackerman is not alone. See ''Mistakes Do Happen: Credit Bureau Errors Mean Consumers Lose'' A 1998 PIRG report on credit bureau errors at http://www.pirg.org/reports/consumer/mistakes/index.htm
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