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[Senate Report 114-95]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 167
114th Congress    }                                     {       Report
                                 SENATE
 1st Session      }                                     {       114-95

_______________________________________________________________________

           REPRESENTATIVE PAYEE FRAUD PREVENTION ACT OF 2015

                               __________

                              R E P O R T

                                 of the

                   COMMITTEE ON HOMELAND SECURITY AND

                          GOVERNMENTAL AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                                S. 1576

       TO AMEND TITLE 5, UNITED STATES CODE, TO PREVENT FRAUD BY 
                         REPRESENTATIVE PAYEES.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                 July 27, 2015.--Ordered to be printed
                 
                                  ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

49-010 PDF                     WASHINGTON : 2015                  
                 
                 
                 
                 
                 
                 
                 
                 
                 
        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin Chairman
JOHN McCAIN, Arizona                 THOMAS R. CARPER, Delaware
ROB PORTMAN, Ohio                    CLAIRE McCASKILL, Missouri
RAND PAUL, Kentucky                  JON TESTER, Montana
JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
MICHAEL B. ENZI, Wyoming             HEIDI HEITKAMP, North Dakota
KELLY AYOTTE, New Hampshire          CORY A. BOOKER, New Jersey
JONI ERNST, Iowa                     GARY C. PETERS, Michigan
BEN SASSE, Nebraska

                    Keith B. Ashdown, Staff Director
                  Christopher R. Hixon, Chief Counsel
       Patrick J. Bailey, Chief Counsel for Governmental Affairs
Gabrielle D'Adamo Singer, Deputy Chief Counsel for Governmental Affairs
              Gabrielle A. Batkin, Minority Staff Director
           John P. Kilvington, Minority Deputy Staff Director
               Mary Beth Schultz, Minority Chief Counsel
       Peter P. Tyler, Minority Senior Professional Staff Member
                     Laura W. Kilbride, Chief Clerk
                     
                     
                     
                     
                     
                     
                     
                                                       Calendar No. 167
114th Congress    }                                     {       Report
                                 SENATE
 1st Session      }                                     {       114-95

======================================================================

 
           REPRESENTATIVE PAYEE FRAUD PREVENTION ACT OF 2015

                                _______
                                

                 July 27, 2015.--Ordered to be printed

                                _______
                                

 Mr. Johnson, from the Committee on Homeland Security and Governmental 
                    Affairs, submitted the following

                              R E P O R T

                         [To accompany S. 1576]

    The Committee on Homeland Security and Governmental 
Affairs, to which was referred the bill (S. 1576) to amend 
title 5, United States Code, to prevent fraud by representative 
payees having considered the same, reports favorably thereon 
with amendments and recommends that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
  I. Purpose and Summary..............................................1
 II. Background and Need for the Legislation..........................2
III. Legislative History..............................................3
 IV. Section-by-Section Analysis......................................3
  V. Evaluation of Regulatory Impact..................................4
 VI. Congressional Budget Office Cost Estimate........................5
VII. Changes in Existing Law Made by the Bill, as Reported............5

                         I. Purpose and Summary

    The purpose of S. 1576, the Representative Payee Fraud 
Prevention Act of 2015, is to protect recipients of government 
federal retiree benefits from unscrupulous caretakers who take 
the retiree's payments and use them not for the retiree's 
benefit, but for their own. S. 1576 closes a loophole that 
currently exists in statute whereby the embezzlement or 
conversion of federal Social Security and Veterans' benefits by 
representative payees is a federal felony, but the same 
embezzlement or conversion of benefits provided to federal 
retirees through the federal retirement system is not.

              II. Background and the Need for Legislation

    In addition to other federal benefits, federal employees 
may be eligible for federal retiree benefits processed through 
the Office of Personnel and Management (OPM): Federal Employees 
Retirement System (FERS) benefits,\1\ and Civil Service 
Retirement System (CSRS) benefits.\2\ Under federal statute, 
individuals who are minors, mentally incompetent, or under some 
other qualifying legal disability can have their benefits paid 
on their behalf through a court-appointed or agency-approved 
representative.\3\ Such individuals authorized to receive the 
payments under these circumstances are frequently referred to 
as ``representative payees.''
---------------------------------------------------------------------------
    \1\5 U.S.C. Sec. 8401, et seq.
    \2\5 U.S.C. Sec. 8331, et seq.
    \3\5 U.S.C. Sec. 8466(c); 5 U.S.C. Sec. 8345(e).
---------------------------------------------------------------------------
    The OPM Office of Inspector General (OIG) has reported to 
Congress an increase during recent years in the number of 
representative payees who take advantage of their position and 
use the money they receive for purposes other than to benefit 
the federal retiree.\4\ The OPM OIG has further reported that 
OPM has an extremely antequated paper system for tracking 
representative payees, and does very little, if any, oversight 
work to ensure representative payees are using federal monies 
for the benefit of the retiree.\5\
---------------------------------------------------------------------------
    \4\Meetings and written communication between OPM IG staff and 
Committee staff in May, June, and July, 2015.
    \5\Meetings between OPM IG staff and Committee staff in May, June, 
and July, 2015.
---------------------------------------------------------------------------
    From 2004 to 2005, Congress created penalties for anyone 
who takes the funds from Social Security Disability Insurance 
Benefits,\6\ Social Security Supplemental Income,\7\ or 
Veterans' Benefits\8\ and fraudulently uses them for their own 
purposes, rather than on behalf of the intended recipient. 
These statutes criminalize such misuse of government benefits 
as a felony, punishable by a fine of up to $250,000,\9\ up to 
five years in prison, or both.
---------------------------------------------------------------------------
    \6\42 U.S.C. Sec. 408 (characterizing the conversion of another's 
Social Security benefit payments as a felony, punishable by fine 
pursuant to title 18 and/or up to five years in prison).
    \7\42 U.S.C. Sec. 1383a.
    \8\38 U.S.C. Sec. 6101 (criminalizing fiduciary misuse of money or 
property intended for the veteran's use).
    \9\18 U.S.C. Sec. 3571(b)(3).
---------------------------------------------------------------------------
    No similar penalty was created for those representatives 
who misuse or embezzle CSRS or FERS benefits distributed by 
OPM. The absence of federal statutory authority often dissuades 
U.S. Attorneys from bringing to justice those appointed to take 
care of government retirees' benefits when they use these funds 
for any purpose other than for the benefit of the retiree that 
they represent.\10\
---------------------------------------------------------------------------
    \10\Meetings between OPM IG staff and Committee staff in May, June, 
and July, 2015.
---------------------------------------------------------------------------
    In one example provided by the OPM OIG, Sakina Park 
represented that she was running a personal care facility out 
of her home in Philadelphia, housing at least seven people with 
mental-health problems.\11\ However, Ms. Park did not have a 
license to do so.\12\ At least one of the individuals alleged 
to be under her care was a federal annuitant entitled to OPM 
benefits, but mentally incompetent and unable to accept federal 
payments for herself.\13\ Ms. Park was listed as that 
individual's representative payee, authorized to collect OPM 
benefits on the annuitant's behalf.\14\ In 2009, investigators 
arrived with police at the home and removed the occupants of 
the home.\15\ At that time, it was discovered that the 
annuitant was not present--Ms. Park stated that the retiree was 
``always running away'' and investigators found she had been 
admitted to another facility after being found on a street 
unconscious.\16\ The OPM OIG determined that Ms. Park had 
received just under $8,000 from OPM on the annuitant's behalf 
and did not use any of those funds to care for the 
annuitant.\17\
---------------------------------------------------------------------------
    \11\Information provided to Committee staff by the OPM IG; see also 
Court shuts down West Philly mental health facility, Philly.com (Jan. 
18, 2008).
    \12\See Court shuts down West Philly mental health facility, 
Philly.com (Jan. 18, 2008).
    \13\Information provided to Committee staff by the OPM IG; see also 
Court shuts down West Philly mental health facility, Philly.com (Jan. 
18, 2008).
    \14\Information provided to Committee staff by the OPM IG.
    \15\Information provided to Committee staff by the OPM IG; see also 
Court shuts down West Philly mental health facility, Philly.com (Jan. 
18, 2008).
    \16\Information provided to Committee staff by the OPM IG.
    \17\ Id.
---------------------------------------------------------------------------
    The local district attorney prosecuted Ms. Park in 2013 
because she also embezzled Social Security benefits from other 
individuals that were supposed to be in her care. Federal 
prosecutors may be reluctant to prosecute the misuse of OPM 
benefit payments alone because while such conduct may violate 
state embezzlement or conversion laws, it is not a specific 
federal crime.\18\
---------------------------------------------------------------------------
    \18\Meetings between OPM IG staff and Committee staff in May, June, 
and July, 2015.
---------------------------------------------------------------------------
    The Committee believes this lack of federal penalty leaves 
some of its most vulnerable civil servants, including those who 
may be mentally incompetent, with less legal recourse when they 
are taken advantage of and their retirement funds are misused. 
This legislation criminalizes the misuse of CSRS and FERS funds 
in the same manner as already exists for Social Security and 
Veterans' benefits. In addition to prosecuting those who 
abscond with benefits intended for government retirees, S. 1576 
prevents those who have committed this crime before (whether 
for CSRS, FERS, Social Security, or Veterans' benefits) from 
future services as a representative payee.

                        III. Legislative History

    Senators James Lankford and Heidi Heitkamp introduced S. 
1576 on June 15, 2015. The bill was referred to the Committee 
on Homeland Security and Governmental Affairs. Senator Ron 
Johnson joined as a cosponsor on June 24, 2015.
    The Committee considered S. 1576 at a business meeting on 
June 24, 2015. The Committee ordered the bill reported 
favorably by voice vote. Senators present for the vote on the 
bill were Senators Johnson, McCain, Lankford, Ayotte, Ernst, 
Sasse, Carper, Tester, Baldwin, and Heitkamp.

        IV. Section-by-Section Analysis of the Bill, as Reported

Section 1. Short title

    This section provides the bill's short title, the 
``Representative Payee Fraud Prevention Act of 2015.''

Section 2. Representative payee fraud

    Paragraphs (a)(1) and (a)(2) of this section amend Title 5, 
chapter 83, subchapter III of the United States Code to add a 
new section 8345a following section 8345, and Title 5, chapter 
84, subchapter VI of the United States Code to add a new 
section 8466a following section 8466, respectively.
    New section 8345a makes it unlawful for any person 
authorized by the Office of Personnel Management to receive 
CSRS payments on behalf of a minor or other qualifying 
individual (a representative payee) to embezzle or in any 
manner convert any portion of the amount received from such 
payments to a use other than for the use and benefit of such 
individual. Such conduct is punishable by a fine under title 18 
of the United States Code or imprisonment for not more than 5 
years, or both. A representative payee's willful neglect or 
refusal to make and file proper accountings concerning use of 
the received payments as required by law shall be considered 
prima facie evidence of embezzlement or conversion of such 
amounts.
    New section 8466a makes it unlawful for any person 
authorized by the Office of Personnel Management to receive 
FERS payments on behalf of a minor or other qualifying 
individual (a representative payee) to embezzle or in any 
manner convert any portion of the amount received from such 
payments to a use other than for the use and benefit of such 
individual. Such conduct is punishable by a fine under title 18 
of the United States Code or imprisonment for not more than 5 
years, or both. A representative payee's willful neglect or 
refusal to make and file proper accountings concerning use of 
the received payments as required by law shall be considered 
prima facie evidence of embezzlement or conversion of such 
amounts.
    Paragraph (a)(3) makes technical and conforming amendments 
to the table of sections of chapters 83 and 84 of Title 5, 
United States Code, to reflect the new sections added in 
paragraphs (1) and (2).
    Paragraph (b) prohibits an individual from being appointed 
as a representative payee to receive CSRS or FERS payments on 
behalf of a minor or individual with a legal disability if he 
or she has been convicted of violating the new sections 8345a 
or 8466a created by this bill), 42 U.S.C. 408 or 1383a (similar 
prohibitions on embezzlement of Social Security benefits), or 
38 U.S.C. 6101 (similar prohibitions on embezzlement of 
Veterans' benefits).

                   V. Evaluation of Regulatory Impact

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee has 
considered the regulatory impact of this bill and determined 
that the bill will have no regulatory impact within the meaning 
of the rules. The Committee agrees with the Congressional 
Budget Office's statement that the bill contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would impose no costs 
on state, local, or tribal governments.

             VI. Congressional Budget Office Cost Estimate

                                                     July 10, 2015.
Hon. Ron Johnson, Chairman,
Committee on Homeland Security and Governmental Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1576, the 
Representative Payee Fraud Prevention Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

S. 1576--Representative Payee Fraud Prevention Act of 2015

    CBO estimates that implementing S. 1576 would have no 
significant cost to the federal government. Enacting the bill 
could affect direct spending and revenues; therefore, pay-as-
you-go procedures apply. However, CBO estimates that any 
effects on direct spending or revenues would be insignificant.
    S. 1576 would establish new federal crimes relating to 
federal retiree representatives who misuse funds from the 
Federal Employees Retirement System and the Civil Service 
Retirement System. A federal retiree representative is a person 
or an organization that manages federal retirement benefits for 
recipients who are unable to do so themselves under the 
Representative Payee Program. As a result of enacting S. 1576, 
the government would be able to pursue cases that it otherwise 
would not be able to prosecute. CBO expects that S. 1576 would 
apply to a relatively small number of offenders, however, so 
any increase in costs for law enforcement, court proceedings, 
or prison operations would not be significant. Any such costs 
would be subject to the availability of appropriated funds.
    Because those prosecuted and convicted under S. 1576 could 
be subject to civil and criminal fines, the federal government 
might collect additional fines if the legislation is enacted. 
Civil fines are recorded in the budget as revenues and 
deposited into the general fund of the Treasury. Criminal fines 
are recorded as revenues, deposited in the Crime Victims Fund, 
and are available to spend without future appropriation action. 
CBO expects that any net effects associated with collecting and 
spending such penalties would not be significant in any year 
because of the relatively small number of cases likely to be 
affected.
    S. 1576 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Matthew 
Pickford. The estimate was approved by H. Samuel Papenfuss, 
Deputy Assistant Director for Budget Analysis.

       VII. Changes in Existing Law Made by the Bill, as Reported

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
S. 1576 as reported are shown as follows (existing law proposed 
to be omitted is enclosed in brackets, new matter is printed in 
italic, and existing law in which no change is proposed is 
shown in roman):

TITLE 5

           *       *       *       *       *       *       *

PART III--EMPLOYEES

           *       *       *       *       *       *       *

SUBPART G--INSURANCE AND ANNUITIES

           *       *       *       *       *       *       *

CHAPTER 83--RETIREMENT

           *       *       *       *       *       *       *

SUBCHAPTER III--CIVIL SERVICE RETIREMENT

           *       *       *       *       *       *       *

SEC. 8345. PAYMENTS OF BENEFITS; COMMENCEMENT, TERMINATION, AND WAIVER 
                    OF ANNUITY.

    (a) * * *

           *       *       *       *       *       *       *

    (f) The Office may not authorize a person to receive 
payments on behalf of a minor or individual of legal disability 
under subsection (e) if that person has been convicted of a 
violation of--
          (1) section 8345a or 8466a;
          (2) section 208 or 1632 of the Social Security Act 
        (42 U.S.C. 408 and 1383a); or
          (3) section 6101 of title 38, United States Code.

           *       *       *       *       *       *       *

SEC. 8345A. EMBEZZLEMENT OR CONVERSION OF PAYMENTS.

    (a) In General.--It shall be unlawful for any person that 
is authorized by the Office under section 8345(e) to receive 
payments on behalf of a minor or an individual mentally 
incompetent or under other legal disability to embezzle or in 
any manner convert all or any part of the amounts received from 
such payments to a use other than for the use and benefit of 
such minor or individual.
    (b) Penalty.--Any person who violates subsection (a) shall 
be fined under title 18, imprisoned for not more than 5 years, 
or both.
    (c) Prima Facie Evidence.--Any willful neglect or refusal 
to make and file proper accountings or reports concerning the 
amounts received from payments authorized under section 8345(e) 
as required by law shall be taken to be sufficient evidence 
prima facie of the embezzlement or conversion of such amounts.

           *       *       *       *       *       *       *

TITLE 5

           *       *       *       *       *       *       *

PART III--EMPLOYEES

           *       *       *       *       *       *       *

SUBPART G--INSURANCE AND ANNUITIES

           *       *       *       *       *       *       *

CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM

           *       *       *       *       *       *       *

SUBCHAPTER VI--GENERAL AND ADMINISTRATIVE PROVISIONS

           *       *       *       *       *       *       *

SEC. 8466. APPLICATION FOR BENEFITS.

    (a) * * *

           *       *       *       *       *       *       *

    (d) The Office may not authorize a person to receive 
payments on behalf of a minor or individual of legal disability 
under subsection (c) if that person has been convicted of a 
violation of--
          (1) section 8345a or 8466a;
          (2) section 208 or 1632 of the Social Security Act 
        (42 U.S.C. 408 and 1383a); or
          (3) section 6101 of title 38, United States Code.

SEC. 8466A. EMBEZZLEMENT OR CONVERSION OF PAYMENTS.

    (a) In General.--It shall be unlawful for any person that 
is authorized by the Office under section 8466(c) to receive 
payments on behalf of a minor or an individual mentally 
incompetent or under other legal disability to embezzle or in 
any manner convert all or any part of the amounts received from 
such payments to a use other than for the use and benefit of 
such minor or individual.
    (b) Penalty.--Any person who violates subsection (a) shall 
be fined under title 18, imprisoned for not more than 5 years, 
or both.
    (c) Prima Facie Evidence.--Any willful neglect or refusal 
to make and file proper accountings or reports concerning the 
amounts received from payments authorized under section 8466(c) 
as required by law shall be taken to be sufficient evidence 
prima facie of the embezzlement or conversion of such amounts.

           *       *       *       *       *       *       *

                                  [all]
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