COMMITTEE ON WAYS AND MEANS BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois E. CLAY SHAW, Jr., Florida NANCY L. JOHNSON, Connecticut AMO HOUGHTON, New York WALLY HERGER, California JIM MCCRERY, Louisiana DAVE CAMP, Michigan JIM RAMSTAD, Minnesota JIM NUSSLE, Iowa SAM JOHNSON, Texas JENNIFER DUNN, Washington MAC COLLINS, Georgia ROB PORTMAN, Ohio PHIL ENGLISH, Pennsylvania WES WATKINS, Oklahoma J. D. HAYWORTH, Arizona JERRY WELLER, Illinois KENNY C. HULSHOF, Missouri SCOTT MCINNIS, Colorado RON LEWIS, Kentucky MARK FOLEY, Florida KEVIN BRADY, Texas PAUL RYAN, Wisconsin	CHARLES B. RANGEL, New York FORTNEY PETE STARK, California ROBERT T. MATSUI, California WILLIAM J. COYNE, Pennsylvania SANDER M. LEVIN, Michigan BENJAMIN L. CARDIN, Maryland JIM MCDERMOTT, Washington GERALD D. KLECZKA, Wisconsin JOHN LEWIS, Georgia RICHARD E. NEAL, Massachusetts MICHAEL R. MCNULTY, New York WILLIAM J. JEFFERSON, Louisiana JOHN S. TANNER, Tennessee XAVIER BECERRA, California KAREN L. THURMAN, Florida LLOYD DOGGETT, Texas EARL POMEROY, North Dakota
Allison Giles, Chief of Staff Janice Mays, Minority Chief Counsel  SUBCOMMITTEE ON SOCIAL SECURITY E. CLAY SHAW, JR., Florida, Chairman
SAM JOHNSON, Texas MAC COLLINS, Georgia J.D. HAYWORTH, Arizona KENNY C. HULSHOF, Missouri RON LEWIS, Kentucky KEVIN BRADY, Texas PAUL RYAN, Wisconsin	ROBERT T. MATSUI, California LLOYD DOGGETT, Texas BENJAMIN L. CARDIN, Maryland EARL POMEROY, North Dakota XAVIER BECERRA, California

 

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 RIC KELLER, Florida 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
Perry H. Apelbaum, Minority Chief 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

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined.

Advisory of September 12, 2002, announcing the hearing

Social Security Administration, Hon. James B. Lockhart III, Deputy Commissioner

U.S. Department of State, Charisse M. Phillips, Director, Office of Fraud Prevention Programs, Bureau of Consular Affairs

U.S. Secret Service, Robert Bond, Deputy Special Agent in Charge, Financial Crimes Division

Federal Bureau of Investigation, Grant D. Ashley, Assistant Director, Criminal Investigative Division

Social Security Administration, Hon. James G. Huse, Jr., Inspector General

Stylecraft Interiors Inc., Matthew James Reindl

Electronic Privacy Information Center, Chris Jay Hoofnagle

Social Security Advisory Board, Hon. Hal Daub, statement

Thursday, September 19, 2002

House of Representatives,
Committee on Ways and Means,
Subcommittee on Social Security,
and
Committee on the Judiciary,
Subcommittee on Immigration, Border Security, and Claims,
Washington, DC.

The Subcommittees met, pursuant to notice, at 1:05 p.m., in room 1100 Longworth House Office Building, Hon. E. Clay Shaw, Jr., and Hon. George W. Gekas (Chairmen of the Subcommittees) presiding.

[The advisory announcing the hearing follows:]

Chairman SHAW. Thank you for being here. Mr. Gekas and I have sat in these chairs before at a joint meeting, and he just reminded me how well he did the last time we were here in cross-examining a certain witness and sort of nailed his hide to the barn door. When the newspaper--

Chairman GEKAS. The New York Times.

Chairman SHAW. When the New York Times wrote about it, they said how Clay Shaw tore this witness apart.

[Laughter.]

Chairman GEKAS. This time I sat in front of the right nameplate.

Chairman SHAW. Okay, today our Subcommittees will join together to examine efforts to preserve the integrity of Social Security numbers and how we can better prevent terrorists and identity thieves from using these numbers to abet their heinous activities.

I welcome my friend, Chairman Gekas. We were partners against crime on Judiciary a number of years ago, before I came to this Subcommittee.

I welcome Ms. Jackson Lee and all of the Members of the Judiciary Committee on the Immigration, Border Security, and Claims Subcommittee to the Committee on Ways and Means.

I appreciate the opportunity to work with you as we look for ways to ensure the security of individuals and the security of our Nation.

Although created solely for the purpose of tracking workers' Social Security earnings, our culture is hooked on Social Security numbers. Business and governments use the numbers as primary identifiers of individuals. Even the most trivial transactions, such as renting a video, require us to hand over our nine-digit ID before services can be rendered.

The Social Security number has become so woven into the fabric of American society that it has become the key that unlocks the door to an individual's identity for any unscrupulous individual who gains access to it. If someone such as a criminal or a terrorist unlocks the door, at their fingertips are all of the essential elements needed to carry out whatever dastardly act they can conceive.

Worse, as each day passes, we learn more about the degree to which terrorists use stolen identities and false Social Security numbers to establish cover employment, drivers' licenses, and credit cards, all enabling them to live within our borders and plan their crime against Americans.

No longer is Social Security number fraud simply a tool of common criminals. Sadly, it is now a tool of terrorists.

As we will hear today from our witnesses from the U.S. Department of State, the Federal Bureau of Investigation (FBI), U.S. Secret Service, and the Social Security Administration's Inspector General (IG), there is no limit to the creativity of the reprehensible acts perpetrated by criminals and terrorists.

Our Nation and this Congress has forced our attention on America's first line of defense since the attacks of September 11; the war on terrorism and protecting our borders. Next, we must enact increased privacy protections for Social Security numbers and more powerful tools for law enforcement.

To that end, I along with several of my Committee on Ways and Means colleagues introduced H.R. 2036, the Social Security Number Privacy and Identity Theft Prevention Act of 2001. It is a vital component of our country's response to terrorism.

The Social Security Administration serves as the front line of defense in ensuring the integrity of Social Security numbers, a responsibility it takes very seriously. It is responsible for accurately assigning Social Security numbers as well as ensuring the wages earned and the Social Security benefits claimed on that number are only those of the holder.

As we will soon hear, since September 11, the agency has implemented a number of initiatives to help prevent identity theft. Yet, we will also hear there is more to do, particularly with regard to interagency cooperation. A solo approach by Federal agencies is not acceptable, as President Bush recognizes through his proposal to create a U.S. Department of Homeland Security.

Our Nation has been forever changed by the horrible attacks on our country. No longer can we sit idly by and not protect ourselves from domestic and foreign terrorists. Also, long before these attacks, individuals were fighting more personal battles with identity thefts.

We must implement changes that will prevent and deter future attacks on our national security and our personal financial security.

I look forward to hearing from each of our witnesses and thank them in advance for sharing with us their experience and their recommendation.

I now yield to my Co-Chair at this hearing, Mr. Gekas of Pennsylvania.

[The opening statement of Chairman Shaw follows:]

Chairman GEKAS. I thank the Chairman. I begin by asking unanimous consent that the written statement that I have prepared to be my opening statement be received in the record.

Chairman SHAW. Without objection.

[The opening statement of Chairman Gekas follows:]

Chairman GEKAS. Hearing no objection from my colleagues, I will proceed to underline and endorse the concepts enunciated by the gentleman from Florida, Mr. Shaw, the Chairman, on the importance of the hearing and on the subject matter itself.

Perhaps the most ironic outcome of Social Security fraud and identity theft is that this great social program, one of the greatest ever attempted by any society in the history of the world, is also a potential and actual vehicle for terrorists who threaten our Nation and actually attack our Nation.

That is reason enough to convene such a meeting and to determine, once and for all, what we as legislators can do to prevent this kind of result that threatens the very lives of the people who are Social Security recipients and Social Security contributors across the land.

If that weren't enough to put us on guard on what has been happening to our Social Security number system, then we have to consider as well the attack on the system that identity fraud perpetrates with respect to diminution of the funding and the assets of the Social Security program. For everyone who falsely secures a Social Security number and starts to receive benefits, the pot of available funding is diminished by that much, to the detriment of the current recipients and future recipients, not to mention the budgetary problems facing the Nation every single year, vis-à-vis the health of the Social Security fund and all that it touches in our society.

So, when we begin to listen to the witnesses here, we will have an eye and ear pinned to what it means in the day of the terrorist and what it means in the day of watchfulness on the health of the Social Security fund, what it means to try to prevent identity fraud and Social Security fraud in all its aspects.

I thank the Chair, and I yield back the balance of my time.

Chairman SHAW. Mr. Becerra, do you have an opening statement?

Mr. BECERRA. Thank you, Mr. Chairman.

First, let me say to the Chairman of the Subcommittee on Social Security of the Committee on Ways and Means, thank you very much for the several hearings that you have held on this issue of the Social Security number identity fraud and the importance to not just the people who will be recipients of Social Security but to all Americans who depend on such an important program, and, of course, to our government, which must dispense and implement this valuable program that has existed for over 75 years.

To our Co-Chair who is here today, Mr. Gekas, it is a pleasure to again have an opportunity to sit with him on a panel, as I did before when I served on the Committee on the Judiciary. I am pleased to join with my colleague, the Ranking Member of the Subcommittee on Immigration and Claims, Ms. Sheila Jackson Lee as well.

With all our colleagues that are here, I am looking forward to a hearing that will help us gain better insight on how we protect not just the Social Security number but Americans from identity fraud, how we protect them against invasions of that security that they had grown accustomed to. Now that we have seen what happened after September 11 and the fact that the 19 terrorists used Social Security numbers to help them obtain that fraudulent identity, it is important for us to try to move forward to see how we can secure not just our freedom and our privacy, but also the security of this country.

So, I am very much looking forward to the hearing, building upon what has been done through the Chairman's and the Members' good work on the Subcommittee on Social Security, and hoping that the testimony enlightens us on how to move forward and move forward quickly.

So, I thank you, Mr. Chairman. I yield back the balance of my time.

Chairman SHAW. Thank you, Mr. Becerra. Ms. Jackson Lee?

Ms. JACKSON LEE. Thank you very much, Mr. Chairman, and might I add my appreciation to Chairman Shaw and as well Chairman Gekas for having a hearing that gives example to government working at its best, Committees with their respective jurisdictions coming together. I'm pleased, of course, to join with the fellow Ranking Member of the Committee on Ways and Means and a former colleague on the Committee on the Judiciary, Xavier Becerra, and I think this very important issue.

It is good to see the Inspector General will be here. You testified earlier on some matters that we have before the Committee on the Judiciary, and I believe you gave great insight.

It is, of course, natural and important that we take leadership on the issues of Social Security fraud, theft, and issues that would impact negatively on the identity and the security of this Nation. Serving on the Subcommittee on Immigration and Claims, of course, I have to add my additional concern in words that I reflect most often; as we look to secure the Nation, we must also realize that we are a Nation of immigrants, a Nation of laws, even after September 11 and the unfortunate and tragic and horrific event that occurred, where so many of the terrorists and the perpetrators came in on legal visas that we still do not equate terrorism to immigration.

So I would hope, as look to this question, you will also have as a backdrop the fact that the recently passed immigration reform bill did not include a national identity card. We thought that that was not the direction to go, but it certainly is a direction to go with Mr. Shaw's concern about Social Security card fraud and identity fraud.

I hope that we will be cognizant of the technology that may put together a national Social Security card and the abuses that could occur. I also hope that we will avoid steps in this hearing and any legislation that would increase rather than diminish immigration-related discrimination that has already become a problem with the use of Social Security numbers by some employers.

So, we have our job cut out for us. I believe the American people will challenge us to do the right thing together, to provide enhanced security, but at the same time balance and respect the laws of this land, and certainly the civil rights and civil liberties of the people of this land.

With that, Mr. Chairman, I would ask that my entire statement be put into the record.

Chairman SHAW. Without objection, and without objection, any statement that any of the Members of this joint Committee hearing would like to put into the record will be made part of the record.

[The opening statement of Ms. Jackson Lee follows:]

Chairman SHAW. Now it is my pleasure to recognize the Honorable James B. Lockhart III, who is the Deputy Commissioner of Social Security. I believe this may be the first time you have appeared before the Social Security Subcommittee.

Mr. LOCKHART. Yes, Mr. Chairman.

Chairman SHAW. It is my privilege to welcome you.

Please proceed as you see fit. We have your full statement which, without objection, will be made a part of the record, as will the full statements of all the witnesses this afternoon. So, you may summarize or proceed as you see fit, Mr. Lockhart.

Mr. LOCKHART. Chairman Shaw, Chairman Gekas, and Members of the Subcommittees, thank you for asking me here today to discuss our work to preserve the integrity of the Social Security number and to prevent its misuse.

Commissioner Barnhart and I have made protecting the Social Security number a major stewardship priority. We have made many important enhancements and are reviewing other improvements.

We all know that Social Security number misuse can lead directly to identity theft with serious personal and economic consequences. On September 11, we also learned that it can have more far-reaching consequences, as the terrorists used made-up Social Security numbers.

As you know, the original purpose of the Social Security number was solely for tracking the earnings of people who worked in jobs covered by Social Security. Ever since, the use of the Social Security number has mushroomed as a way to identify people in records systems. It has become the identifying number for Federal and many other employee systems, taxpayers, noncitizens authorized to work in this country, beneficiaries of Federal- and State-funded programs, and some drivers' licenses.

By 1974, Congress became concerned about the widespread use of the Social Security number and passed the Privacy Act. It provides that except when required by Federal law, no government agency could withhold benefits from a person simply because of a refusal to give his or her Social Security number. Federal law does not restrict Social Security number use by private businesses or organizations.

As you can see, the Social Security number has become the personal identifier through a buildup over time. Unfortunately, it also has become the identifier of choice for criminals, including terrorists.

After September 11, the Social Security Administration formed a high-level response team to better prevent those with criminal intent from using Social Security numbers. We have put a new training emphasis on what we call enumeration for the 1.5 million noncitizens that we give numbers to every year.

On March 1, we stopped assigning Social Security numbers to noncitizens for the purpose of applying for a drivers' license. Noncitizens can now only get a Social Security number if they are authorized to work or if they need it for public assistance.

On June 1, we began verifying birth records of U.S.-born citizens older than age 1 who apply for a Social Security number, and we are piloting an online system that lets employers verify the names and Social Security numbers of newly-hired employees. That should help to strengthen our present verification systems.

We are also leading the government-wide e-VITAL project to improve the death master file and electronic birth records verification systems.

We are implementing a range of new initiatives with the Immigration and Naturalization Service (INS) and the State Department, which will be consistent with the requirements of the Privacy Act. We now verify all INS documents with that agency.

By the end of the year, under the Enumeration at Entry Project, we will assign directly Social Security numbers to newly-arrived immigrants based on the information the State Department and INS collect as they authorize noncitizen entry into the country.

We are also taking major steps to improve the accuracy of the 250 million annual wage reports that we receive, as they are critical for correctly calculating benefits. Despite improving our matching routines, almost 10 million of those 250 million wage reports a year are placed in the suspense file because the name and the Social Security number do not match. We have been writing letters to employees, asking them to correct the information. Over the last several years, we have greatly increased the no-match letters to employers.

Let me say that we appreciate the Subcommittee's effort to strengthen Social Security number privacy and prevent identity theft. The provisions in H.R. 2036 which strengthen the penalties and enforcement for Social Security number misuse would help in our efforts to locate and eliminate abuses.

Adding civil monetary penalties as proposed to existing criminal penalties for Social Security number misuse would provide another level of deterrence. We believe it would strengthen our ability to deal with cases of misuse that are not criminally prosecuted by the U.S. Department of Justice.

In closing, I would like to emphasize that the Social Security Administration is committed to doing all that it can to protect the integrity of the Social Security number by strengthening our enumeration and misuse detection capabilities. Commissioner Barnhart and I look forward to continuing to work with you on this vital national issue. I would be happy to answer any questions.

[The prepared statement of Mr. Lockhart follows:]

Chairman SHAW. Mr. Lockhart, if someone comes into this country, perhaps on a student visa or whatever, opens a bank account, the bank will require that person to supply their Social Security number. This is needed for the reporting of interest and things of that nature that account might be subject to.

Is there any indicator on the Social Security number as to the status of that particular person? Is there any indication on the Social Security card as to the status of that particular person? Now, this is not on a work visa.

Mr. LOCKHART. Yes. First of all, if a student comes into the country with a J-1 or F-1 visa, and is not authorized to work, we will not give him a Social Security card. So, that's the first step. They have to be authorized to work to get a Social Security number.

Let's assume that the university tells us that they are authorized to work, and we get a letter from the university to that effect, and we do the verification with the INS about the visa, we would then give them a Social Security number. The Social Security number itself has nothing special on it, but the card would say that the employer should check the INS documents in that case.

Chairman SHAW. If the person who the card is issued to then decides to go to work and supplies that identification number to the employer without showing him that card, what happens at that particular time, assuming then that the person takes the job and the Federal Insurance Contributions Act (FICA) wages are paid into the Social Security Administration?

Mr. LOCKHART. Again, assuming that he or she got the card legitimately, there is no problem. That is what is supposed to happen, that they will pay the FICA taxes in, and assuming we have verified the documents with the INS, the card was given legitimately. The employer still is supposed to look at the documents to make sure that they are legitimate.

Chairman SHAW. I understand the employer would be liable for other penalties for not properly checking the resident status or exactly why that person happens to be in the country, whether they be a citizen or a noncitizen.

Mr. LOCKHART. Now, in the circumstances that you posed at the beginning, if they were not authorized to work, if we did not give them a Social Security number, in theory, they can go to the U.S. Department of the Treasury and get a taxpayer number. That is a 900 series. It looks like a Social Security number, but that is a separate series and is not part of the Social Security system.

Mr. JOHNSON. Would the gentleman yield?

Chairman SHAW. I am a little confused here. I will be glad to yield in just a moment, but I am a little confused here because the person who you issued the Social Security number to may not be authorized to work or may not be here on an actual work visa. Is that not correct?

Mr. LOCKHART. Under our new procedure, that should not happen. As of September 1, we are verifying all documents with the INS, and they are telling us that the document is good before we give the Social Security number out.

Unfortunately, I think in the past, before the new procedure, there was a procedure at Social Security, where, if someone had been in the country only 30 days, our field office looked at the documents, put them under black lights and checked them to see if they were real. If they were a really good forgery, they might have been faked or something, and they could have possibly gotten a Social Security number on documents that were counterfeit.

Chairman SHAW. The gentleman from Texas?

Mr. JOHNSON. Thank you, Mr. Chairman.

I would like to follow up on that because just in Dallas, Texas, this month, they caught a bunch of illegals in an 18-wheeler, some of which died. You are aware of that case, I am sure.

My question is, there were 26 of them that were released on the spot in the United States and told they could get a Social Security number from you and go to work. Now, how do you account for that kind of thing?

Mr. LOCKHART. I am not actually aware of who made that statement.

Mr. JOHNSON. The lady who runs the district office for the Immigration and Naturalization Service there in Dallas. They let them go for 2 months, and she told me that they would get Social Security numbers and be given work permits. Three of them were allowed to go, one to Chicago and two to New York City, from Dallas.

Mr. LOCKHART. Well, under our present procedures, they would have had to have a document from the INS saying that it was valid for them to work. If the INS had given that document to them, yes, if you bring in a valid document--

Mr. JOHNSON. You give them a Social Security number just on the basis of the Immigration and Naturalization Service letting an illegal have a work document temporarily? Do you put any time limit on the Social Security number? How do you know they are not all terrorists?

Mr. LOCKHART. Again, our job is to give a Social Security number when we have valid documents from the Immigration and Naturalization Service. We get the documents, we look at them, we check them, we go into the INS system, we check it against the INS system. If it is not in the INS system, then we send a paper request to the INS to get them to verify that there is a real document that authorizes them to work.

It is not the Social Security Administration's job to decide whether they are authorized to work. It is our job to give them a number once they are authorized to work, so that they will pay taxes into the Social Security fund and to the Internal Revenue Service (IRS).

Chairman SHAW. Reclaiming my time, there are situations where someone can get a nonworking Social Security number. Now, that Social Security number, can an employer or anybody look at that number and say, "Hey, that's a nonworking Social Security number"? That is my question.

Mr. LOCKHART. Yes, there are circumstances. Historically, there were more circumstances. As of March this year, we are only giving them to people who are not working that are required by some benefit system--I think we will give about 20,000 or 30,000 out a year from now on. Previously, we did it for a driver's license, but those cards themselves say "not eligible for work." There is no special number, and we are looking at a special number. It is one of the things we are looking at.

Chairman SHAW. That is what I wanted to get at. I think that when we do issue a nonwork Social Security number, it ought to have something on it, a letter, a prefix, or something, that would identify it as "this is not for purposes of work."

Mr. LOCKHART. We are looking at a special series, just like, as I mentioned, the Treasury Department has the 900 series. We are looking, potentially, at a special series for anybody that doesn't have a permanent right to work in this country.

Chairman SHAW. Do you know if you can do that without legislation from us? I believe you can.

Mr. LOCKHART. I believe we can. Yes, sir.

Chairman SHAW. If you need legislation, come back, and we will work on it. Mr. Gekas?

Chairman GEKAS. Yes, I thank the Chair.

Mr. Lockhart, pursuing some of the questions that emerged from the statements and questions that were posed by the gentleman from Texas, Mr. Johnson, you said that after September 11, you undertook several initiatives to pin down the ability to grant Social Security numbers to only those who deserved them. The questions posed by Mr. Johnson implicate the Immigration and Naturalization Service in the wholesale admission of people first into the country and then to allow them to seek and gain Social Security numbers. Were there any recommendations made by the Social Security Inspector General in his recent report with respect to this problem, the reliance of Social Security on INS in its processing of prospective new numbers?

Mr. LOCKHART. Well, the Inspector General has recommended, I think for several years, to do what we just implemented. One of the points I would like to make is that both Commissioner Barnhart and I came in after September 11, and we looked at all these things, and we saw that there were holes in our system, and we want to correct them. We have corrected a lot, but we have more room to go. We are very concerned about this issue, and we will work on it.

The key recommendation that the Inspector General had made is that we verify every document with the INS. Every document that authorizes someone to work, we first go into the computer system. If it is not in their computer system, then we actually send a copy of the document to the INS and ask them to verify it.

So, that is our procedure, and we are following it now. It may, in some cases, slow up persons getting a Social Security number, but we think it is well worth it.

Chairman GEKAS. Do you hold up issuance of the number until submissions are made to you by the INS so that you are perfectly--

Mr. LOCKHART. Under our new procedure that we began implementing about 3 months ago and finished September 1, that is correct. We do not issue a Social Security number if the documents have not been verified by the INS.

Chairman GEKAS. Speaking of the recommendations of the Inspector General, were they before September 11 or after, or both?

Mr. LOCKHART. As I remember, they were both.

Chairman GEKAS. Do you have a scorecard on the recommendations made and where you are in implementing or attempting to implement those recommendations?

Mr. LOCKHART. Yes, Mr. Chairman, we do have a scorecard. We have been working very diligently. This task force that I mentioned in my testimony has a whole series of initiatives. We have implemented a lot of the major ones, but we are looking at other ones. For instance, the one that Chairman Shaw mentioned about a special series of numbers for nonpermanent Social Security cards.

So, we are working very diligently through this list. As I said, both Commissioner Barnhart and myself are really extremely serious about making sure that only people who are authorized to work, only people who should get Social Security numbers, are getting them in this country.

Chairman GEKAS. I would like, personally, and perhaps the other Members would also benefit from it, if we could actually produce such a scorecard, that is, to list the recommendations on the left and then give us completed or implemented or about to be implemented or on the way, some kind of indication as to what the recommendations were and what progress has been made in implementing those recommendations. I would be interested in that kind of graph.

Mr. LOCKHART. We certainly will be happy to provide that for the record, Mr. Chairman. I think as you talk to our Inspector General when he comes up in the next panel, I think he will tell you that we are making extremely good progress on this issue.

Chairman GEKAS. Well, you will have time to do it right before he takes the stand.

[Laughter.]

Mr. LOCKHART. Well, I have some versions of it here, but--

Chairman GEKAS. You can start the conversation now. I yield back the balance of my time.

Chairman SHAW. Thank you, Mr. Gekas. Mr. Becerra?

Mr. BECERRA. Thank you, Mr. Chairman.

Thank you for you testimony, Mr. Lockhart. I appreciate it.

Let me make sure, before I ask the particular questions that I have, I want to make sure that I understand something correctly. There are some 600,000 Social Security numbers that come to your attention that are based on nonwork-authorization Social Security numbers, correct?

Mr. LOCKHART. Yes, let me explain it. We have, really, three major categories of Social Security cards.

One is, you are authorized to work. You are either a citizen and you got it at birth, you have been authorized to work, or you have been permanently allowed in the country. The second one is that you are authorized to work with INS documentation, and the third one is that you are not authorized to work. We used to give those out because many State driver's license departments required them, and we have given out, unfortunately, many millions of those.

Every year, as we get the wage earnings reports in, those 250 million that I mentioned in my testimony, we get about half a million wages on nonwork Social Security numbers. Now, that doesn't mean that they are not authorized to work because they may not have come in to us again to get their Social Security card updated.

Mr. BECERRA. That was going to be my point, because I am familiar, being from California, that there are a lot of folks who start with a nonwork Social Security number but then ultimately obtain the authorization to work. Then, for whatever reasons, either they or the employer, somehow the information doesn't get to the Social Security Administration immediately. So, until that information gets to you, they are categorized as nonwork-authorized Social Security numbers.

Mr. LOCKHART. That is correct.

Mr. BECERRA. Okay. Let me get back to the whole issue, because it is becoming clear, now that Social Security has been able to give us more and more information, that you are trying to clean up these files, which for years have been building up and up in terms of the number of cases where we haven't been able to identify all the pertinent information for an individual.

My understanding is you obtain, on a yearly basis, claims or numbers or information on cases for about 250 million Social Security numbers.

Mr. LOCKHART. What we receive are wage reports from employers. Oftentimes, people change jobs, so there are actually less people working than the number of wage reports.

Mr. BECERRA. The information I have is that there are some 250 million wage reports on an annual basis, representing about 150 million workers. When you run those through your checks, at the onset, there is about a 1 in 10 nonmatch for those wage reports, incorrect name, some information doesn't correspond. It doesn't mean that it is not a valid Social Security number. It just means that, of those 250 million, 1 in every 10 or so came up with some red flag.

Mr. LOCKHART. Right. It didn't match.

Mr. BECERRA. It didn't match. You are then able to reduce that to about 2 or 3 percent, versus about 10 percent, correct?

Mr. LOCKHART. Well, 3 percent yes.

Mr. BECERRA. Three percent, and that is your suspense file?

Mr. LOCKHART. Exactly.

Mr. BECERRA. Within that suspense file, my understanding is that you have a caseload of about--is it 250 million of these?

Mr. LOCKHART. Yes. We have, in the suspense file--

Mr. BECERRA. About 237 million.

Mr. LOCKHART. Yes, 237 million. Exactly.

Mr. BECERRA. So, 237 million. In tax year 2000, you received some 9.6 million more of these wage reports that went into the suspense file. Give me a sense of what it takes to close a case on one of these files. What does it take to do the final check, to determine if there was just an error or if we have to do some further checks?

Mr. LOCKHART. We have computer teams that catch about two-thirds, as you mentioned, of the mistakes. It can be typos. Someone's maiden name hadn't been changed in our records. Some Hispanic names get transposed. They are having that problem right now at the California Department of Motor Vehicles. I was out there a week or so ago, and there is a lot of activity there.

So, our routines catch some of that. So, as we have done for many years, we then send out to the employees whose wage report we are getting, a letter telling him we are having a problem with mismatching. We send close to 10 million of these letters out a year, and we have been doing it for years, and about 1 million-plus, we don't have a good address for the employee, so we actually send it just to the employer. We ask them to come to the Social Security office and straighten it out, submit a form called a W-2C for correction.

Mr. BECERRA. What is the resource requirement for you to do that along with administering all the retirement benefits, dealing with survivors' benefits, disability claims? What is the separate resource requirement to deal with the suspense file?

Mr. LOCKHART. I don't really know the number, to tell you the truth. The initial piece of it is pretty computerized, and so, the cost is reasonable, but when they start coming in with the information, then it takes up a lot of field office time.

It is an important thing to do because what we are trying to do is correct the record so that when people are disabled, when people are retiring, that we have the right amount of money and we give them the proper benefits. We think it is an important function of the agency.

Mr. BECERRA. My time has expired, so I will close and say that perhaps, Mr. Chairman, we can try to follow up and try to get a sense of what it takes for the Social Security Administration to really do the job of getting through that suspense file, because as Mr. Lockhart just mentioned, that is important work.

Thank you, Mr. Lockhart. Thank you, Mr. Chairman.

Chairman SHAW. Ms. Jackson Lee?

Ms. JACKSON LEE. Thank you very much, Mr. Chairman.

Mr. Lockhart, thank you again. Would you restate for me the categories of immigrants that you give a Social Security card to?

Mr. LOCKHART. There are a whole series of different visas that are created by the INS, and I am not an expert on all this, but really, there are two main categories, if you look at it that way. One is that they are permanently authorized to work, and maybe about a half million of the cards we give each year are that group. The other million or so that we give are temporarily authorized to work under a whole series of things. A lot of them are student-related. Then there are the whole series of people coming in for software firms. The whole series that are given by the INS, but those are temporary.

Ms. JACKSON LEE. Do you feel comfortable in the procedures at the Administration, that you are accurately providing those who have documentation to work, that you are fairly accurate, or do you need additional resources or additional assistance in making sure you are accurate on the issuance of those types of cards?

Mr. LOCKHART. We feel, with the new procedures, we are doing a lot better job. Now what we are doing is verifying every document with the INS.

Now, new and better systems are needed because it is still a pretty paper-intensive process. The INS is starting to get more and more of the documents quickly into the system called the Systematic Alien Verification for Entitlements (SAVE) program. They have a student system coming up next year, which will help a lot.

We also have some other important procedures that I think will really help this and really put the workload where it should be. One of these that we are looking at is called Enumeration at Entry, which I mentioned, which would be that the State Department and the INS, when they are giving these work-authorizing documents, that they just send us an electronic message that this person is authorized, so we can issue them a Social Security number. Then we don't have to go through this roundabout procedure.

So that is the long-term solution, I think, for a lot of this.

Ms. JACKSON LEE. What kind of efforts are you making to get to that point? Certainly, it makes a lot of sense to me. You are talking about, by technology, send an e-mail, a note, a notice, if you will, to the Social Security Administration. Where are you on that?

Mr. LOCKHART. We have been working on that for several years. Our systems are all ready for it, and it is supposed to start next month, actually, with the State Department. Then, we will roll it out over time throughout the State Department and the INS.

Ms. JACKSON LEE. I think that is an important step to announce or to at least make known that you are moving toward that, because then that helps, if you will, keep the pathway of legality even more on track, because you are getting information as it comes. I think one of the difficulties is trying to go back and restructure documents and to look at what happened as opposed to getting that information as it is happening.

Mr. LOCKHART. That is correct. I think that will be a very important step forward. We are going to put a lot of resources in it. As I said, our systems are already ready to do it, and we hope to have it as a very high priority over the next year or two.

Ms. JACKSON LEE. To capture of the essence of the problem, you said millions of cards are issued for those with documents and allowed to work. Then there are about a million, if I understand, you left of an "S." You said there are about a million that may come in that don't have documentation or don't have authorization to work but ultimately may secure that. What kind of monitoring do you have to know the ones that are securing it and ultimately may need the right kind of Social Security card?

Mr. LOCKHART. Well, what I said, I think, is that there are about a half a million who have permanent authorization to work and about a million a year that we give cards have some sort of temporary work permit.

Ms. JACKSON LEE. Then there is a group that--

Mr. LOCKHART. Then there is a whole group that is not authorized to work, and we do not give them Social Security cards. We do not give them Social Security numbers, except for a very, very small group, about now 20,000 to 30,000 a year, that get these nonwork cards because they are authorized for some benefit program, but generally, they would not be a major threat.

Ms. JACKSON LEE. So you feel fairly confident that you are not giving now Social Security cards to those without the documentation to work? Do you feel fairly confident of that, in terms of immigrants?

Mr. LOCKHART. I visited our field offices in California a couple of weeks ago and watched them work, and it seems to be working, the new procedure. Again, we rolled it out over the last 3 or 4 months. We have 1,300 field offices countrywide. The last one just implemented it September 1.

We are very hopeful that this procedure will work and that people will follow it, and they seem to be following it very well.

Ms. JACKSON LEE. I thank you. My time is out. I will just simply say the suggestion or maybe what we might have read or heard of millions of individuals who may be immigrants who don't have authorization to work, such as that figure you gave, 20,000 to 30,000, is not as accurate as we may have heard. The number of cards that you are dealing with that are unauthorized to work are about 20,000 to 30,000, and not millions.

Mr. LOCKHART. Those that are nonwork cards. Now, there is obviously a whole series of people that are working in this country that do not have legitimate Social Security numbers. As we were talking earlier, some of those are showing up in our suspense file. A lot of our suspense file just may be typos and stuff like that, but there are people that are working, and it is probably in the millions, without proper Social Security cards and numbers in this country.

Ms. JACKSON LEE. We will work through that. Thank you very much.

Mr. JOHNSON. [Presiding.] Thank you, Ms. Jackson Lee. The Chair recognizes Mr. Hayworth.

Mr. HAYWORTH. I thank you, Mr. Chairman.

Mr. Lockhart, thank you for coming to testify today. I want to make sure that I understand exactly the status of foreign students who come to the United States to study at our colleges and universities, vis-à-vis Social Security cards. Now, you mentioned some distinctions here; those who come who are authorized to work, those who are on public assistance.

Help me nail down the student status. Do we classify that as an authorization to work? Authorized to study? What classification are they given?

Mr. LOCKHART. The general student status at, say, a university is, they are authorized to study. Then the INS, as I understand it, has authorized the universities to authorize them to work within the college, not somewhere else, just within the university.

The way the statute works is, if they come in with a letter from an authorized person from that university to say this person is authorized to work at the university and is expected to work at the university, then we will give them a Social Security number.

Now, what has happened, frankly, is some universities, because they may need Social Security numbers for these individuals for their records or something, are not actually putting these people to work, so that they are not actually working. And yet, we are getting a letter that says--

Mr. HAYWORTH. So, what you have are universities engaged in defrauding the Federal Government, saying they have people working who are not working, to get Social Security numbers?

Mr. LOCKHART. We may have some universities sending letters, and they may be interpreting differently than we are.

Mr. HAYWORTH. No, no. Let's get down to brass tacks here. If people are attempting to defraud and deceive the Federal Government in wartime for easy bucks, this is serious.

Mr. LOCKHART. Yes sir, and I know our Inspector General has looked at some cases. I have heard of situations where a university has actually advertised in foreign newspapers that "come to our school and we'll get you a Social Security number." You know, that is not right.

Mr. HAYWORTH. What is the name of the university that has done that?

Mr. LOCKHART. I am not sure. I heard about it in our Oklahoma City office, though.

Mr. HAYWORTH. Let me ask you a further question. This is very disturbing, to say the least. Maybe this is a question better suited for INS, but do we keep track of the nationalities of those who come to study? Do we know, for example, the number of Iraqi students who are in the United States on study programs or work study programs? Do you have any estimate today how many Iraqi students are here in the United States on a work study program?

Mr. LOCKHART. You are right, it is an INS question. We would not have that information in any of our databases.

Mr. HAYWORTH. Is there any particular reason not to keep that information?

Mr. LOCKHART. Again, what we are looking at is to make sure that people are paying their FICA taxes, and that is what the Social Security number has been created for. It is the INS's job to authorize people to work. That is what they are there for. That is their law. It is not our law.

Mr. HAYWORTH. Let me ask you this question. You say things have changed under the new programs, the combination of pre-September 11 reforms and post-September 11 reforms, and we are about 4 months into the situation now. How would you evaluate the level of communication between Immigration and Naturalization Service and the Social Security Administration? Are your computers able to talk to each other?

Mr. LOCKHART. Well, first of all, I think we are doing a lot better with communicating with the INS. In fact, I just talked to the Deputy Commissioner there this morning, and we are trying to work better than we have in the past. So, I think on the human level, it is working better. We are having many more meetings. I think they understand our issues now a lot better, and we are beginning to understand theirs.

From the computer standpoint, they do have this SAVE program that does tell us when someone is authorized to work. We have access to it in our field office. A person right at the service window who is reviewing a document will have access to the system. I saw them bring one up when I was in California. Momentarily it comes up, and it says whether this person is authorized to work or not.

The problem is not all of the data is in there.

Mr. HAYWORTH. So, we have incomplete data. Again, as we opened this questioning period, I am very concerned about the status of some colleges and universities who seem to be playing fast and loose with work study.

There is perhaps, Mr. Chairman, an appropriate role legislatively to crack down on those who would deceive the government for work study dollars.

I see my time has expired. I thank you, and thank you, Mr. Chairman.

Mr. JOHNSON. The time of the gentleman has expired. The Chair recognizes Mr. Collins.

Mr. COLLINS. Thank you, Chairman Johnson.

Mr. Lockhart, you know, we talk about these Social Security numbers, and it seems as though we kind of hand them out in a manner that has no system to it. Do we do benefits the same way? They get these Social Security numbers and they are here and they work temporarily--

Mr. LOCKHART. First of all, I would say that we do have a system for handing out Social Security numbers. We do hand out approximately 18 million a year. A major portion of those are actually replacement cards, but we hand out about 5 million new cards a year.

We do have systems in place. We have significantly strengthened those systems, as I have already said, but there were systems in place before September 11 as well. There were procedures in place.

On the benefits side, we have a whole series of systems. I think I can say, having come to Social Security only 7 or 8 months ago, that the systems at Social Security are some of the best in government, and we are always well-rated that way.

For benefits, obviously we have some issues with the suspense file, which we already talked about, but I think we do a reasonable job of keeping track of people's benefits. We have maybe that 3-percent error rate, but we have a 97-percent match every year, which is significant. We are talking about $4 trillion in wages a year.

So, our systems are doing what I consider a good job. We could do better, and I am not trying to say that we couldn't do better. We could do significantly better, and we are continuing to work on it. Commissioner Barnhart and I have made it very clear since we arrived here that we are not going to accept the status quo. We want to improve this agency dramatically.

Mr. COLLINS. Well, that is encouraging, and truthfully, I think you have. I have talked with the Commissioner on several occasions, and you too, and I think you have made some good strides.

I have a situation that has occurred in my district, which includes Fort Benning, Georgia. We have a local judge there who has called on a number of occasions, but his first call was in reference to several who had appeared in his court. They were here illegally, didn't have any kind of identification.

This is really an INS problem, too, because when he called INS to report them and ask them to pick them up, and this was after September 11 of last year, they said they didn't have the time, didn't have the money, couldn't do it. It was very frustrating to this particular judge.

He did call one day and said that they had incarcerated a person who was working at Fort Benning. He had a work pass, a work permit, and on that work permit was a Social Security number, and this person was here illegally also.

So, he sent a copy of the work permit over the office, and we double-checked it with your office and found that the number had not been issued.

How much of that exists? Do we have any idea? That is what this judge said, how much? Fort Benning, too, says, you know, this is not an isolated incident.

Mr. LOCKHART. It is a big issue. People make up Social Security numbers. As far as we can tell, all 19 terrorists, or however many that did have a Social Security number, they were all made up, and that is a big, big issue. As I said earlier to a question, there are probably millions in this country with made up Social Security numbers.

What we are trying to do is develop--and we do already have in place for employers, for State agencies, the ability to check those numbers with us, either in person or by computers. The idea is that, if they bring in a name, and they bring in a Social Security number, we can tell them if it is real or not. If there is a mismatch, then they should know that there is an issue with the individual.

Mr. COLLINS. I am glad that you are communicating with the people over at INS, because it seemed like there was a lot of slack there. For an INS office to inform a judge we don't have the time to pick up people who are here illegally, already incarcerated, something is wrong with that type of system.

I think it is a real threat and a danger to us to have people with work permits file Social Security numbers here illegally, working on a military installation.

Mr. LOCKHART. Yes. As you may have read in the newspaper, many of the agencies represented on the next panel, including our Inspector General, have been very active at the airports in this area, in verifying Social Security numbers. We are very committed to helping out in those kinds of law enforcement activities because we do believe it is extremely important for this country.

Mr. COLLINS. Well, in closing, the Office of the Inspector General for Social Security has been very helpful in this case, too. They are investigating this and investigating the employer.

Thank you.

Mr. LOCKHART. Thank you.

Mr. JOHNSON. Some of my colleagues and myself would like to clarify the statement you made. Did you indicate that all the terrorists had illegal Social Security numbers?

Mr. LOCKHART. Well, what I said is, I am not sure if all of them had Social Security numbers, but as far as we can tell--and the Inspector General has talked to the FBI, and the FBI I guess will be up--as far as we know at this time, none of the terrorists received a Social Security number at one of our offices. That is why we need to use the kinds of systems that we are building. We have had in place systems for 20 years for employers and other people to verify Social Security numbers. They just have not been used.

We now have a test, which, again, I mentioned in my testimony, with about eight major employers of an online system. I think over time, if we can do that, it will help protect the Social Security number from people that just make it up.

Ms. JACKSON LEE. Mr. Chairman, if you would just yield for just a brief moment?

Mr. JOHNSON. I yield to the gentlelady.

Ms. JACKSON LEE. There is a question that I left on the table, when you said millions of made-up numbers, you are not saying that there are millions of immigrants with made-up numbers? There are people all over the United States with made-up numbers. Is that what you are saying?

Mr. LOCKHART. You have to go back to that suspense file we were talking about. There are 10 million that we can't match every year. A lot of it is typos, wrong names, but there are certainly people in there that are working, whether they are immigrants, illegal or not, I don't know. There are certainly--I think most people would say many millions that are working without a proper Social Security number.

Ms. JACKSON LEE. Not all of one label?

Mr. LOCKHART. What?

Ms. JACKSON LEE. Not all of one label, one type of people, there are many--

Mr. LOCKHART. We just don't have the data. I mean, if we could find them, we could match them.

Ms. JACKSON LEE. We would find out.

Mr. Chairman, thank you. I do want to say that the INS is really trying to work on this issue, to the extent that I have visited sites, airports around the country I spent my time visiting. I will tell the Committee, if they have interest, that I literally saw the INS recognize undocumented individuals coming in from a country overseas, and was able to match the fact that their documents were fraudulent and was there to greet them. I saw the action when I was there. They were able to greet them immediately as they deplaned.

This is happening across the Nation. I think that we can be assured that they listen to Congress on the responsibilities that they have.

I thank the Chairman for yielding.

Mr. JOHNSON. I thank the lady for her comments. The Chair recognizes Mr. Hulshof.

Mr. HULSHOF. Thank you, Mr. Chairman. Welcome, Mr. Lockhart. We certainly welcome our colleagues from the Subcommittee on Immigration, Border Security, and Claims.

A lot of the questions to you, Mr. Lockhart, have been referenced around the issue of illegal immigrants that are here. What I would like to do is focus, as is also the subject of our hearing, on identity theft. Our Subcommittee, the Social Security Subcommittee, has heard some heart-wrenching stories from citizens, sometimes elderly citizens, who have been bilked of thousands of dollars in personal savings, with credit histories being just turned upside down because of identity theft. So, I would like to ask a couple of questions along that line.

You mentioned about 18 million cards a year, some of those are replacement cards. What percentage per year are replacement cards?

Mr. LOCKHART. About 12.5 million of those, so two-thirds.

Mr. HULSHOF. A couple of hypotheticals. If I come in to get a replacement card, I presume I could get one. What if I had just been given a replacement card the week before?

Mr. LOCKHART. You can get one with the proper documentation. You just can't ask for it. Yes, assuming you had the proper documentation, you can come in.

At the moment, we don't have a limit. It is one of the areas we are really looking at, because not only is there an integrity issue here, there is also a tremendous workload issue. Some of our offices are spending a third of their time issuing replacement cards. So, we are looking at it to see if we should limit the number, to see if we should charge, to see if they even need a replacement card.

I mean, what is happening in many of these offices is we have the Supplemental Security Income, SSI, population that we serve, and many of them have mental impairments, are homeless, and they are always losing the cards. We have people that have had 30 or 40 cards, and they are being required by some State agency to produce it. Now, if we can go to more of a verification electronically, that might relieve some of that workload as well.

Mr. HULSHOF. So, the Inspector General's recommendation to put perhaps some limit on the number of replacement cards, with some exception for extraordinary circumstances, that would be something that you would support?

Mr. LOCKHART. I am about ready to get a white paper on the topic. There is a series of issues. Some of the people I have talked to in the field office say why not charge them something for it. Maybe that will discourage them. A limit would be another way. There is a whole series of ways.

I mean, what is important is actually the number, not the card, when you really think about it.

Mr. HULSHOF. A couple of other quick areas, as my time is dwindling. If the Social Security Administration receives a report from an employer that indicates that somebody is working in America, say in Phoenix, Arizona, using my Social Security number, do you let me know that?

Mr. LOCKHART. What we do, if there is more than one wage report on a Social Security number, we try to unscramble it, and that unscrambling may mean that we call someone. By the time we receive the information, we are receiving information well over a year old on wage reports by the time it is entered in the system. It is probably not very helpful, if your identity has been stolen. You would probably know by then anyway.

The other thing we do, though, is we also put out annually the Social Security statement, as you know. In that, when you see it, if there is an incorrect wage, you could call us, and we would unscramble it that way.

Mr. HULSHOF. Okay, the final area of questioning regards data sharing with law enforcement agencies. Of course, the Privacy Act does say that agencies can share information with another information for the purpose of civil or criminal law enforcement purposes, if the head of that agency makes a written request.

Yet, it is my understanding that regulations within your agency limit disclosure to law enforcement activities relating to serious crimes like murder and crimes of violence. What about identity theft itself? I mean, for instance, if law enforcement were to contact the Social Security Administration and say, "We are working on an identity theft case. We need some data from your agency to be shared with us," would you provide it to them?

Mr. LOCKHART. It is not only serious crimes but it also is fraud against a Social Security number, and it is also if our IG opens a case. So, if the law enforcement person comes to the IG, which is where they would come, and the IG opens a case, we would certainly provide the information. We are not protecting identity thieves, in any sense of the word.

Mr. HULSHOF. Local law enforcement would then have to go the Inspector General.

Mr. LOCKHART. Which is part of Social Security, yes.

Mr. HULSHOF. Okay. Thank you, Mr. Chairman. I yield back.

Mr. JOHNSON. Thank you. Mr. Brady, do you care to question? The gentleman is recognized for 5 minutes.

Mr. BRADY. Thank you, Mr. Chairman.

I want to follow up on Congressman Hulshof's questions on collaboration. First, I want to thank the Social Security Administration for your collaboration with law enforcement on Operation Tarmac, which was launched after September 11. It has uncovered a large number of individuals with security clearances working at our Nation's airports under false pretenses, obviously a practice that cannot be allowed to continue.

On the 9th of this month, in my community, just 2 days before September 11's anniversary, Operation Tarmac indicted 143 individuals working at Houston's Bush International Airport, the airport that I and many of my neighbors fly in and out of on a weekly basis.

These people acquired airport security badges by using a nonexistent Social Security number of someone else's Social Security number.

From my viewpoint, the operation was a very solid preventative measure because these individuals each had access to airplanes, ramps, and tarmacs, regardless of their security clearance.

You have really addressed the question of what we can do to prevent this type of fraud in the future, but following on to Congressman Hulshof's question, is there not a way to increase cooperation with law enforcement, short of the IG opening up a case? Obviously, what we are tying to do here, the 143 who were indicted, perhaps and most likely there isn't a terrorist among them. Just as you arrest speeders before they cause an accident, someone who tries to buy a gun illegally, in hopes to prevent harm from happening later, it is important that we have these measures in place, even though they may seem to be small, preventative measures.

What can we do to increase, short of having to open up a case, to increase this type of cooperation with law enforcement?

Mr. LOCKHART. Really, the best way is for the security companies, everybody that is hiring at the airports or anywhere else, to use our systems. We have the systems, and any employer can come in and verify Social Security numbers when a hiring decision is made. That is the best prevention by far, just not to employ them to start with.

It is not being used as well as it should, and we are trying to get the word out that we have those systems in place, and they should be using them. So, that is the first thing that should be done.

The second thing is, we are continuing to work with our IG and our IG is continuing to work with all law enforcement to see how we can better fit our constraints.

Our constraint really is that this is taxpayer information. It is protected by the Internal Revenue Code, and it is a very important issue with them, that taxpayer information is secure.

So, we are working with the IRS, and we are working through our IG with the various law enforcement officials.

Mr. BRADY. That is a very good answer. My thought was, in the case with Houston's airport, Federal agents went through, under the leadership of our U.S. attorney, Mike Shelby, went through some more than 21,000 individual files to make those match. The good news is, there are only 143 who didn't, which tells you there is a level of security there.

My thought was, can we not make it, with certain restrictions, as easy for law enforcement, again, under certain restrictions, to match those numbers as it would be for employers to go online to do it?

Mr. LOCKHART. It is an issue we talked about in the agency, and certainly we talked it over with the Inspector General, and he is certainly recommending it. Again, it is an issue that is partially out of our hands, from the standpoint that the taxpayer information belongs to the IRS. So, it is one of the issues that we have to continue to work with them on, as to what are the procedures.

We have certainly, as you said, been able to do it for Operation Tarmac, and we hope that we can do it whenever necessary.

Mr. BRADY. I was just thinking, if there was some law enforcement clearinghouse at some level that works directly with the Social Security Administration and the appropriate authorities to be able to access, so that you don't have 10,000 going on from different jurisdictions, but actually a good, cooperative, laid-out, disciplined process that speeds up having to run through 21,000 files, where we can do more security because we save time.

Mr. LOCKHART. It is certainly something we should consider, yes.

Mr. BRADY. Thank you, sir. Thank you, Mr. Chairman.

Mr. JOHNSON. Thank you. Let me follow up on that for just a second. I am told, and I would like for you to verify it, that if an employer called you with a number for you to check, you say it is okay or not, but you don't tell them whether the guy is dead or if he is on a nonwork Social Security number. Is that true?

Mr. LOCKHART. Yes, sir. That is true. That is a flaw in our system that we are in the process of correcting. I was not aware of that until very recently myself, and I had the same concern that you do, that it doesn't make any sense to verify in that circumstance, if someone is dead or they have a nonwork number. We are making the system changes so that our verification systems will tell that.

Mr. JOHNSON. You will be in the near future, then?

Mr. LOCKHART. We are implementing those changes. Yes, sir.

Mr. JOHNSON. Okay. Let me ask you one other thing. I believe the Social Security Administration Inspector General is on record as supporting Social Security privacy legislation. This bill would prevent numbers from being used as ID numbers for many purposes, including military ID. At a time when military personnel are deployed worldwide, and terrorists are trying to exploit our weaknesses in everything from the Internet to our own financial systems, I don't know if it is wise for the military to be using their Social Security number for everything from checking out equipment to cashing a check. I would like to hear your comments on that.

Mr. LOCKHART. There is certainly an overuse of the Social Security number in our society. It has become a de facto identifier one way or another. The problem is that, in many ways, something else will have to be substituted for it. In some cases, it is useful for prevention of fraud and prevention of terrorists. So, there are pluses and minuses to all this.

Certainly, in your legislation, there are a lot of reasonable things that we can think about on how to limit the use of the Social Security number, because it has really grown dramatically more than it was ever supposed to do in this country.

Mr. JOHNSON. You agree with the original concept, as far as Social Security and tax purposes, period?

Mr. LOCKHART. That is the original concept. Unfortunately, I think the cat's out of the bag.

[Laughter.]

Mr. JOHNSON. Okay. Let me ask you one other quick question. In reference to the illegals that I spoke of earlier, I recognize it is mostly an Immigration and Naturalization Service problem, but if you issue a temporary work permit and the Immigration and Naturalization Service then follows up 2 months later with a letter to these guys, saying, "You are going to be deported. Come on back home," maybe some of them will, how do you get termination on that Social Security number?

Mr. LOCKHART. The procedures of the agency have been that, once a Social Security number is issued, it is issued. If we think there has been some fraud, we do put in the record that there has been some fraud, and we won't issue a replacement card, but the numbers are not canceled.

Mr. JOHNSON. So, they are out there indefinitely? So, if the guy is deported back to Mexico, let's say, and then comes back across the border, he still has a good Social Security number?

Mr. LOCKHART. He still has a Social Security number. If we have entered into our records that we think fraud has been involved, if they came into our office, we could find that out, but it is something that we need to look at. It is an issue that I think we need to look at, as to whether we should do anything to cancel a number. Historically, we never have. We have issued 415 million numbers.

Mr. JOHNSON. Thank you. I appreciate your honest testimony and openness with us. We thank you for the job you all are doing over there. Keep up the good work.

With that, we will close your testimony and ask the second panel to step up. I am going to turn the meeting over the Chairman Gekas.

Mr. LOCKHART. Thank you, Mr. Chairman.

[Questions submitted by Chairman Shaw to Mr. Lockhart, and his responses follow:]

Social Security Administration
Baltimore, Maryland 21235

1. During the hearing, Mr. Lockhart stated that SSA has a scorecard on the recommendations the Inspector General had made to tighten controls related to issuing Social Security numbers (SSNs).  As requested by Chairman Gekas, we would appreciate your providing a copy of that scorecard to both of our subcommittees.

2. During the hearing, Mr. Johnson, who represents the Dallas area in Texas, mentioned that illegal aliens in an 18-wheeler had been apprehended.  Approximately 26 of the individuals were released and told by the local Immigration and Naturalization Service (INS) office that they could get a Social Security number from SSA and go to work.  Can you provide more details on this situation?

Our understanding is that approximately two dozen Mexican immigrants survived a harrowing journey that began in El Paso and ended in North Texas aboard an unventilated tractor trailer rig.  Two men died of heat exhaustion and nearly a dozen others were hospitalized briefly for heat stress. Because of the need for witnesses against the smugglers when the cases come to trial, the INS granted the immigrants permission to work.

The Attorney General pursuant to §212(d) [8 U.S.C. §1182(d)] of the Immigration and Nationality Act has the authority to parole individuals into the United States for reasons specified in the Act and provide them with work authorization.  Inquiries should be directed to the Department of Justice because once the Attorney General exercises his discretion and issues work authorization, SSA has no discretion. Section 205 (c)(2)(B)(i) of the Social Security Act requires that the Commissioner of Social Security issue a work Social Security Number if an individual has a valid INS work authorization.

3. The Earnings Suspense File (ESF) has increased more than four-fold in the last 10 years.  The SSA's Office of Inspector General (OIG) found there are patterns of reporting errors among certain employers, including identical Social Security numbers (SSNs) used for more than one employee, non-issued SSNs, and consecutively numbered SSNs - all of which end up in the Earnings Suspense File.  There are also many instances of employers and industries that continually submit erroneous wage reports - one study of 20 agriculture employers in which 60% of their wage reports had inaccurate names or SSNs and who submitted almost $250 million in mismatched wages between 1996 and 1998 - and that three industries (agriculture, food and beverage and services) account for almost half of wage items in the suspense file.  What is the agency doing to address this growing file?  Is SSA making any special endeavor to refer these employers to the Immigration and Naturalization Service (INS) or the Internal Revenue Service (IRS) or to otherwise target them for corrective action in submitting erroneous wage reports?  What else can be done?  Please also provide information requested by Mr. Becerra regarding the administrative costs associated with the ESF (sending out letters responding to workers/employers' questions, etc.).

The ESF contains approximately 238.2 million items (name/SSN mismatches).  This covers items submitted for tax years (TY) 1937 through 2000.  Approximately 25 percent or 61.6 million items were added to the ESF for TYs 1991-2000, which is an increase of about one-third.

SSA developed a tactical plan to address the growth and management of the ESF.  As a result SSA:

• Has instituted multiple computer-matching routines to increase SSA’s ability to match a reported name/SSN that does not match SSA’s record with the correct record.
• Is building a new process that would electronically find millions of additional matches and post them to the correct earnings record.  The new process would compare earnings items to the Master Earnings File (which includes the Employer Identification Number), the benefit record, and the Numident (the record of SSNs assigned to individual names).  (The current matching process compares earnings items only to the Numident.)  The new process would also employ new techniques with earnings record patterns to match the earnings to the correct individual.  It is estimated that at least 30 million items would be removed from the suspense file and credited to the records of individual workers.  If so, benefits for several hundred thousand beneficiaries would be increased.
• Provides regional office assistance to employers with a high volume of mismatches to assist them in improving the accuracy of their records.
• Is discussing with IRS its existing authorities to penalize employers who contribute a large number of or a high percentage of name/SSN mismatches to the ESF.  (The penalties for submitting erroneous records are in the Internal Revenue Code.)  We understand that the IRS has begun to pilot a process to penalize these employers.
• Currently piloting with a small group of employers the Social Security Number Verification Service (SSNVS), an Internet option to verify the accuracy of employees’ names and Social Security Numbers (SSN) by matching the employee-provided information to SSA’s records.  SSA's current system provided to the employer community through SSA's 800 number and through electronic (magnetic tape, diskettes) and paper processing is time consuming for employers.  An Internet option will be more efficient and encourage more employers to use SSA's name/SSN verification program for new employees, thereby reducing items posted to the suspense file.
• Developed and conducted outreach programs to the employer and payroll communities to address the issue of correctly matching names and SSNs.  SSA staff have spoken to numerous employers and payroll groups on this and related issues.  SSA has made changes to our publications to help employers better understand the issues.  In our quarterly publication, the “SSA/IRS Reporter,” which is sent to over 6.5 million businesses, we have had numerous articles on the importance of providing correct name/SSN information on the Form W-2.   SSA has built a website that is designed specifically for employers to address their payroll reporting issues and provide guidance.
• Has worked with both the INS and IRS on the mismatch issue.  Both agencies have incorporated training on the importance of name/SSN information into their training programs for businesses.
• Has revised the letters sent to the employer to provide more detailed information about name/SSN mismatches.  SSA also provides detailed step-by-step instructions of what the employer should do to resolve the discrepancy.  The letters highlight the responsibilities of employers and the rights of employees when there are name/SSN mismatches.
• Worked with the IRS to revise the Form W-2 and its magnetic and electronic formats to provide separate first and last name fields to facilitate capturing the proper last name. This separation of the last name better assures that the information reported can be properly matched to SSA’s records, especially in cases where a person has a multiple or hyphenated last name.  Similar name presentation changes have also been made to the Form W-4.
• Modified the Spanish version of the Form SS-5 (Application for a Social Security Card) to separate the first name from the last name.  There are plans to make similar changes to the English version of the Form SS-5.
• Improved the timeliness of the notices sent to every employee whose name and SSN do not match requesting correction information.
• Has engaged Price Waterhouse Coopers to review the Agency’s management practices of the ESF and make recommendations as appropriate for improvement.

You asked if SSA is making any special endeavor to refer these employers to the INS or the IRS or to otherwise target them for corrective action in submitting erroneous wage reports.  SSA shares name and SSN mismatch data reported on the Form W-2 with the IRS since SSA processes these forms on behalf of the IRS.  SSA is working with IRS cooperatively in the development of its penalty program.

SSA is precluded from making referrals of name/SSN mismatch information to the INS due to section 6103 of the Internal Revenue Code, which prevents SSA from sharing tax information with other agencies.

In response to your question concerning what else can be done, SSA is now piloting an Internet based SSNVS.  This is a free service where employers can verify that the name and SSN on their payroll records matches SSA's records.  Expanding this limited pilot to the entire employer community will offer an inexpensive and easy way for all employers to verify their employee's names and SSNs.

As far as the administrative costs associated with the earnings suspense file, SSA sends a notice to every individual whose name and SSN does not match SSA's records. For TY 2001 (calendar year 2002), it costs SSA approximately $5.4 million to send these notices.

SSA also sends notices to employers. For TY 2001, SSA sent notices to all employers that had an item go into the ESF at a cost of $600,000 for the 944,000 notices sent.

There are additional costs associated with both types of notices:

• Over $200,000 for system maintenance and cyclical changes; and
• An average of $9.00 for each call to our national 800 number generated by the notices.  We estimate that we received about 100,000 inquiries about the TY 2001 letters.

4. SSA shares information on work credited to non-work SSNs with INS annually (worker name, address, employer, wages).  What does INS tell you they do with the information?  In 2000, about 9.6 million wage items representing $49 billion in wages did not match SSA's records.  The SSA IG recommended that SSA share information on wage records that do not match SSA files.  The IG also recommended that SSA match Office of Child Support Enforcement files with non-work SSNs and share that data with INS.  What are your views and do you plan to take action on these recommendations?

With regard to the INS' use of information on work credited to non-work SSNs, we defer to the INS for an explanation of what they do with the information and its usefulness.

Concerning IG’s recommendation that SSA share information with INS on wage records that do not match SSA files, SSA does not have the legal authority to share such records with INS.  Whether or not the wage records submitted to SSA match SSA records, they constitute tax return information subject to the disclosure restrictions in the Internal Revenue Code (IRC) (26 U.S.C. 6103). Section 6103 of the IRC prohibits sharing of wage records when SSNs on those records do not match information in SSA records.

With respect to the IG recommendation that SSA match Office of Child Support Enforcement files with non-work SSNs and share that data with INS, SSA cannot act on this recommendation for reasons similar to those cited above regarding sharing wage data with INS.  SSA’s access to and use of OCSE data is subject to limitations specified in section 453 of the Social Security Act (the Act) (42 U.S.C. 653).  Section 453(l)(1) of the Act prohibits SSA from sharing this information with INS.

5. Do you believe it would make it easier for employers to identify illegal workers if the SSN number itself was changed to indicate whether the person is not authorized to work?  If so, are you planning to implement this change and if yes, when?

It is not clear if the SSN itself were changed to indicate whether the person is not authorized to work whether it would significantly help employers identify “illegal” workers.  Most illegal workers use made up numbers.  The best way for employers to identify them is to use one of SSA's matching systems.

6. An article published by The Deseret News, of Phoenix, Arizona, on Tuesday, October 01, 2002 entitled "Thefts of social security ID rising fast," by Pat Reavy, Deseret News staff writer, described the substantial problems of a retired woman named Frances Stone, aged 70.  According to the article:

"…in 1992, Stone noticed her Social Security checks were getting smaller.  After some investigating, Stone discovered that the woman who allegedly took her wallet, an illegal immigrant, had gotten a job and was earning wages using her Social Security number.  The government thought Stone was earning more money than she really was.  Now, 10 years later, the problem still hasn't been settled.  Each year Stone's Social security checks are cut, and each year she has to go through a lot of red tape to prove somebody else is using her Social security number.  And each year it takes three to four months' worth of phone calls and letter writing to get the matter cleared up."

The SSA sent some eight million letters to people identified with "mismatched SSNs."  How many of these were to people who are using someone else's SSN?  Has the SSA compiled any reports as to how many people receiving SSA benefits are experiencing the same kind of fraud experienced by Frances Stone?  How many citizens and lawful residents are now subject to erroneous records of SSA benefits and don't recognize the problem?  If SSA receives a report from an employer that indicates someone else is working using another's SSN, would SSA contact the true owner to let him or her know?   Doesn't the SSA have a responsibility to the person to whom the SSN was lawfully issued?  Why not?

SSA is committed to achieving the results our citizens expect.  We regret the difficulties that Frances Stone experienced resulting from the theft of her wallet.  Her earnings record is now correct.

SSA/OIG does not have enough information to determine how many no-match letters went to people who are using someone else's SSN.  For Tax Year 1999, SSA has over 8.3 million wage items in suspense because the name/SSN on the employer wage reports failed to match SSA's records.  SSA produced no-match letters in an attempt to resolve these suspended items.  About 2.6 million wage reports could not be matched due to zero SSNs, invalid SSNs, no names, etc.  About 5.7 million wage reports contained SSNs that matched SSA's records; however, the names did not match.  SSA/OIG does not know how many of the 5.7 million letters were mailed to individuals who used someone else's valid SSN.  Without a valid name/SSN match, these earnings could not be posted to an individual's master earnings record.

Although 5.7 million of the wage items could have led to letters going to people who are using someone else's SSN, they could have also gone to the owner of the SSN who used an incorrect name (i.e. married name, improperly hyphenated name, etc.)  Since these items are still in need of resolution, SSA/OIG cannot determine the actual number of people who are using someone else's SSN.

You asked, if SSA receives a report from an employer that indicates someone is working using another's SSN, would SSA contact the true owner to let him or her know? SSA does not notify the actual SSN holder if someone is using his or her SSN.  SSA has a number of ongoing processes to obtain the correct name and SSN associated with the wages, including manual and automated edits. Due to these internal efforts, notifying the actual number holder of this situation may be premature and create unnecessary alarm.  In addition, the earnings history of the SSN owner, as well as their status with SSA's programs, has not been impacted since the wages earned by the other user (who may or may not have fraudulently used the number) remain in suspense.

SSA does not have reports as to how many people receiving SS benefits are experiencing the same kind of fraud experienced by Frances Stone.  SSA's IG is currently completing an audit of Internal Revenue Service referrals to SSA where a taxpayer has claimed that someone else is working under their name and SSN.  IRS refers such cases to SSA so that their earnings history within SSA's records can also be corrected.  SSA/OIG's audit work has found numerous instances of potential and actual identity theft.  While SSA/OIG does not know how many other citizens and lawful residents do not recognize this problem, SSA does send annual Social Security statements to the public which allow the individuals to identify anomalies in their earnings records.

SSA has a responsibility to ensure that the earnings recorded on all wage reports with names/SSNs that match SSA’s records are properly posted to employees' earnings records.  In addition, should the SSN owner request a correction to their earnings history, SSA has the ability to do so.

SSA also has the ability to assign a new SSN if this is the only means of resolving an identity theft situation.  SSA allows a second SSN to be issued when: (1) attempts to locate the individual using the number holder's SSN have been unsuccessful; (2) the number holder has earnings posted to his/her account in the last 2 years which belong to someone else; (3) the number holder requests or agrees to accept a new SSN; and (4) the number holder has cooperated with SSA.

7. What is the timeframe for merging your data systems so that employers who verify SSNs will be notified that an SSN is a non-work SSN or that the individual assigned the SSN is deceased?