business hearing on the impact of colorado's hazardous wastewater spill that occurred in august, contaminating the state's animus river. among the businesses was a local business owner and a western colorado official. there was also testimony from congressman scott tipton whose district was affected by the spill. this is just over an hour. good morning. we will call the committee to order for this morning's hearing which will examine the significant costs and related burdens for small businesses tod resulting from the gold king mine waste water spill near eror silverton, colorado. chairman vitter could not attend.orado. i want to thank him to have thin opportunity to chair this his hearing.tend i ask that his statement be entered into the record. without objection it will be entered into the record. before hearing from the st honorable scott tipton, i want e to mention that the epa was invited to testify this mornings

but was unable to send a ct, representative.epa instead they submitted testimony and we have their testimony before us.instead i ask it be entered into the record. and i also want to welcome to o. the committee senator bennett nd who will be here momentarily ano will be joining us not as a who member of the committee but as t member of the senate who will also be able to participate in this committee hearing. he will be here shortly.mittee h in the interest of time, i wille withhold my opening statement the congressman's district tip includes silverton and north tet where the spill occurred. mr. tipton was elected to represent this area in november 2010.orado wh congressman, your perspective i. invaluable. we appreciate your service and look forward to your statement. welcome, congressman tipton.he >> thank you, senator gardner. extend my thanks to chairman

vitter for convening today's my issues. when it comes to the impacts sse we're going to be feeling in southwestern colorado but in other states as well.lorado i would like to extend my thanks to the small business committee for focusing on what i believe is a very important issue, the life blood of our economies in i rural colorado and the rural united states which is our smalr businesses.he i'm grateful for your lik willingness to work with me to begin what will be a long, complicated process to obtain at complete picture of what the economic impacts of the epa caused gold king mind blowout have been so far and into the future. busines i first would like to provide context for why in the wake of this disaster a focus on its a impacts on small businesses in this area is so crucial.mpact there's without question going n to be a long-term impact on farm and ranch communities in the s

area from this spill as well ass many other sectors of the regional economy. r given the approach you have eco. given me today, i will focus on, one sector where we are likely y to see the most impact more than any other, and that's in regards to tourism. many decades ago, western colorado relied largely on its mining and agricultural industries for economic growth. however, our state economy is diversified. growt we are fortunate to have e ec beautiful landscapes that rtunat stimulate and thriving tourism industry. thrilling vistas, unparalleled r outdoor recreation and finest facilities in the nation. skiers descend on our slopes. it thrives the rest of the yeare by offering mountainous terrains to hike and explore as well as fishing, rafting, kayaking m opportunities and other outdoor activities on our rivers. many of the small businesses that cater to tourists are founy throughout my district. including southwest colorado's

regional directly impacted by di the gold king mine spill.colora a study published this year courtesy of the colorado tourism office provides a detailed lookt at the importance of tourism to the various regions and counties in colorado. in 2014, direct travel spendingt totals $18.6 billion, supportinn approximately 155,000 jobs in over $5 billion in wages.er $5 the first county down stream, relies on tourism to sustain ite economic well-being. the county of over 53,000 people will plot a share of that t spending, supporting about 3,00a jobs and generating close to $8 million in local tax revenue. let's not discount the importance of tourism in san juan county.upport it has 692 people.

in 2013, tourists brought $14.2 million to san juan county. that's a little over $200,000 for every man, woman and child that live there. a loss of that revenue would devastate the economy of a remote area with few other economic opportunities. the epa maintains the people, businesses and local governments can apply for competition. this sounds great in theory. calculating a dollar amount in this situation is difficult at best.in the for example, how do local ng for businesses accurately estimate lost revenue from tourists thatw don't come this summer?es or the next or the one after fo that?do almost every county in colorado has seen a year over year xt or increase in direct tourism eve spending since 2009.ry how do you calculate the loss ia that would have been seen from larger increases? these are the questions that we must start to try to grapple with.these ar some have opined designating ito as a super fund site is sensible.

but what do the town residents think? shouldn't they be at the centern of the debate?bu it's my understanding that the residents still oppose any such? listing on the national the priorities list, fearing it would negatively impact the al r tourist economy. their fears are not without ourt merit. designating it a super fund th site, a town in which many of the local businesses rely on seasonal visits for outdoor a tourist enthusiasts could damage the town's reputation and prove costly to the local economy.se many of the local businesses ary small operations, as are many of the ranches and farms in the and area.oper as a small businessman myself for over three decades, i know how important credit and loans a are to staying afloat in a lean year. ultimately, a bank wants their t money back and will not loan tot a business whose customer base they believe is in decline or as farm or a ranch whose access tod clean water supply is in custom

jeopardy. the uncertain status of the whs river means many businesses that were healthy and thriving now y are consequently struggling or feel they about to be endangered. without certainty, that comes an from the tourists and providinge crop water, they may not be able to make it through lean times.ce a listing under the super fund could taint the area for decade to come without regard to the impact it could have on rfund businesses. we can all agree tourism requires a clean environment. it especially river-based tourism.n tourism is also dependent on a e perception, a belief the area ii contaminated with toxic waste would affect how many people ar willing to spend the night and spend their money there. w super fund status is a billboard announcing to the world that ths environment here is not safe for humans.. whether it's true or not, people will look to the rivers, see the super fund designation is there and decide possibly to go

elsewhere. d san juan rivers, se destination is there and possibly go elsewhere. superfund status does bring with it a stigma, right or wrong. often with that perception is a reality. a choice, to spend vacation dollars somewhere other than southwestern colorado would have a severe impact for small business owners who rely on that tourism income. we all want a fast solution to this spill. but throwing it onto silverton and durango when other equally and effective options could be available could have serious consequences for these communities and beyond. i've always believed that local communities know what's best for themselves. they have an intimate understanding of their hometown economies and hear firsthand from their customers about why they visit the area. so planning government's judgment with their on-the-ground knowledge stands to hurt the economic harm already done to this area.

we should see solutions to address these problems in the hands of the folks on the ground who have been working to solve these problems for years. the good samaritan approach i have been broaching, please be able to see both our senators from the state of colorado here who join with us in that concept of being able to address the problem and make sure we're achieving a positive result, and i appreciate that support as one of the possible solutions as opposed to superfund designation. the animas river is a significant source of revenue in southwestern colorado and beyond, especially in the tourism season. this avoidable spill will have a significant impact, a long-term impact, and we're working with state, local and federal officials to gather information to assess the damages and get a full accounting of what transpired. as we contend with the damage already inflicted on small businesses in southwest colorado and the future difficulties that they will face as a direct result of the gold king mine blowout, i urge everyone to consider options that do not

ultimately compound the disaster. i appreciate this hearing and appreciate the opportunity to be able to testify. >> thank you, congressman tipton, thank you for your testimony this morning, and i know you've got a vote that you probably will be able to make now. so thanks for your time today to be here, and i dismiss the first panel. >> senator bennett, a pleasure to see you. thank you. i'll now proceed with my opening remarks. on august 5th, 2015, the environmental protection agency released approximately 3 million gallons of contaminated water into cement creek from gold king mine north of silverton, colorado. the water quickly moved down stream to the animas river and eventually into the san juan river and lake powell, which is 300 miles down stream. it had an impact on colorado, utah, the southern indian tribe, mountain ute and the navajo nation.

investigations must be kukt conducted, people must be held accountable, and tough questions must be asked. the sheriff closed access to the animas river on august 6. we visited the spill site on august 9, senator bennett and i, three days after the spill. the epa still did not have an appropriate response team in place. it was not until the following day, august 10, that the epa established a command center in durango to address the spill. the river was not open until august 14, nine days after the initial surge of contaminated water. water testing shows that the surface water of the river has returned to pre-event levels but many remain and have questions about sediment in the river bottom and the rocks lining the river. the sediment contains various pollutants, and the epa initially installed settling ponds to address this contamination, which we hope will slow the flow of contaminants in the animas river. last month there was a series of congressional oversight hearings

that took place in both the senate and the house of representatives. we learned examples of testimony at these hearings, but more questions remain on the events leading up to and following this bill and how to get our communities back on track, including liability compensation from the epa. it's my hope that the epa's office of the inspector general's report will provide more clarity of the spill and i also look forward to an assessment of the gold king mine spill. there are still concerns that exist that the epa must address. the epa recently announced that by october 14, the agency will open a temporary water treatment system which will replace the settling ponds that were first constructed by the epa in august. it's good news for our communities for the winter months, but for the mitigation like the epa's long-term remediation plan and the plan for spring runoff must still be addressed. some claim the gold king mine includes reforms of the mining law of 1872.

in reality, what we have to work on right now is the need for legislation that would allow these abandoned mines across the west to be cleaned up. other conversations about mining laws will move forward. there is a broad bipartisan support for working with legislation in the past. i look forward to working with the chairman to get good legislation in the senate. that is the only way we'll get good samaritan legislation through, is to work in a good bipartisan fashion. i'm also working with senator bennett for a need for a water treatment plan. this provides a different view than we've had in different hearings. it provides an opportunity for people on the ground who are business owners, who represent businesses and communities, and who represent the people of the counties affected. and that's why i am disappointed we do not have an epa representative here who could answer basic questions about the points that congressman tipton raised in his opening statement

about compensation, about how do you determine what level of compensation to provide to a hotel, whether it's a cancellation. is that related to the gold king mine spill of a rafting trip? is it a cancellation of a hotel room, a dance lacancellation ofr reservation? how do we determine what costs incurred? we would like these questions answered today by the appropriate representative. property damage, lost economic opportunity, and as congressman tipton mentioned, the long-term impact. how do we get answers and compensation for these very significant issues? there are going to be a number of proposals before congress, and i look forward to working on them with senator bennett, and again, i think it's critically important that the only way we can address some of these issues is, of course, with bipartisan support. with that i'll turn it over to senator bennett for an opening statement. and the panel, if you would like to come take your seat while

we're opening the statement, that would be great. come on up, three panelists, and senator bebennett, if you would like to start. >> thank you for holding this hearing, and thank you for including me. you didn't need to do that. i appreciate it. i'm not on the committee, but as you know, i'm deeply interested in getting to the bottom of this as you are and getting the answers that we need, so thanks for inviting me this morning. it's my pleasure to have the chance to welcome commissioner blake, miss gallegos and miss decorah. the blowout at the king gold mine has affected businesses throughout southwest colorado, and there is no denial that the epa caused this, and that's entirely unacceptable. we've held hearings on the epa's actions and it's appropriate we now consider the economic aspects of this spill. the animas river is the lifeblood and economic engine of southwest colorado. as we'll hear today, rafting companies lost business, sport fishing trips were canceled,

tourism suffered and farmers couldn't water their crops. damages from the spill are still being calculated, and we may not know the full extent for years to come. businesses and individuals are starting to file claims to recover their losses. as chairman gardner said, they deserve to be fully reimbursed for their damages. the epa is committed to doing so. the gold king mine spill recovery act that i introduced with senator tom udall will ensure that the epa follows through on this promise. we continue to want to work with our colleagues to get that bill ready. the bill requires the epa to reimburse businesses, tribes, governments and individuals for property damage, lost revenue and emergency expenses. it also calls on the epa to construct a permanent water treatment plan north of silverton to tackle this problem at its source. the four mines in the upper animas river basin released more than 300 million gallons of acid mine drainage every year. we need solutions, as senator

gardner said, to address this pollution all across the west. that's why senator gardner and i were working on good samaritan legislation to encourage the cleanup of abandoned mines. it is long past time for us to address this issue, and i think part of the issue we've had, mr. chairman, is that people in this place are too focused on the east coast and the west coast and aren't paying attention to the rocky mountain watersheds, which, by the way, if you live downstream from the rocky mountain watersheds, which almost everybody in the united states does, you need to take an interest in what we're doing there to make sure we don't have another disaster like this. and i also believe that, as part of this, we should reform the 1872 mining law to make sure that mining companies pay royalties to taxpayers just like everybody else on our public lands. like many other business owners and elected officials, our witnesses today, commissioner blake, deanne gallegos and andy

decorah understand the legacy of the mine so we don't get another blowout. we appreciate the meeting during our visits together to durango four days after the spill. mr. kora is the co-owner of four corners river sports in durango. four corners river sports is an outdoor river store, paddle school and rafting business. it is open for business today, i'll bet, so if anybody is listening to the hearing, please go. mr. kora has built his business and raised his family in southwest colorado like so many other entrepreneurs. and as with so many other small business owners in durango, andy depends on the animas river for his livelihood. so when the water turned orange in august in the peak of rafting season, it hit his business hard and without warning. i look forward to learning more from all the witnesses this morning. mr. chairman, thanks again for inviting me to speak briefly and for holding this important hearing. >> thank you, senator bennett.

our first witness is the la plata county commissioner brad blake from la plata county, colorado. mr. blake's family first moovve to durango, colorado and we're happy to have him in his first term here. ms. gallegos is a third generation silverton resident. and last but certainly not least, we have mr. andy kora, as i mentioned, owner of four corners river sports. four corners is located on the banks of the animas river, which you described as the heart of durango, and has been in business for 35 years. mr. kora will be able to provide firsthand experience for what this spill has meant for the community in the region. thank you for the witnesses travel sog f traveling so far to be here today. mr. blake, if you would like to begin. >> thank you, senators.

i appreciate the opportunity, and i'd like to thank chairman bitter as well to speak at the small business committee and entrepreneurship concerning the impacts of the gold king mine spill. my name is bradford p. blake. i am a small business owner and a county commissioner in la plata county, colorado. i appreciate the opportunity to testify about how the incident has affected businesses in southwest colorado. we're very blessed to live in an area of great natural beauty, from 14,000-foot peaks to desert valleys. the rivers that run through this area are beautiful and clear. the premiere is the animas river that starts in the mountains of silverton and flows through colorado, and 126 miles through la plata county in the city of durango, the southern ute reservation, to the southern border and on to utah and lake

powell. the river is rich in minerals and metals which attracted miners to the area in the 1960s. mining support companies followed along with other businesses that developed as the community flourished. some you would recognize, such as the renowned durango-silverton gauge railroad. others you would not, but they comprise things such as tourism, rafting companies, biking, hiking and outfitters, hotels, restaurants and other related support services. la plata county also has significant agricultural interests, including organic farms, ranches that rely on the waters of the animas to support their operations, and then there are businesses you would expect to find in a thriving community, including retail, grocery stores, banks, and all other

services that support our economy. all of these great businesses employ a few to hundreds of people, and the spill has impacted all of them in some way. news of the gold king mine spread far and wide, not only nationally but around the world. the durango area tourism office conducted a media analysis for the period of august 5 through august 24 and determined that 19 million impressions were made, impressions like this that i have from the durango herald, and this was seen around the world. i had friends from all over the country call me and ask me about it. i brought you all a copy of the durango herald today to look at this. the 164 articles about the incident had a value of more than $3.4 million worth of advertising, the wrong kind of advertising. summer is the height of the

tourist season, and it was cut short. first by the visual impacts of the gold king and by lingering questions about the impact of the spill on the river and our community. the businesses most severely kbakd we impacted were the rafting companies. their season was abruptly interrupted on august 5 and 6, the day of the spill. there are 10 local rafting companies in la plata county that employ in excess of 150 people. all were directly impacted and had to lay off employees during the period of the river closure. one rafting company owner advised me that he estimates his losses to be $100,000. when tourism-related businesses are impacted, there is a ripple effect throughout our economy on hotels, restaurants and retail stores. those in turn impact the collection of local sales tax and lodgers' tax. but tourism businesses were not the only ones impacted. agriculture took a hit as well.

small local farmers had reduced crop yields due to the lack of water at the hottest and driest time of the growing season. ditches that provide irrigation water to farms were closed for up to 10 days, in some cases leaving farmers high and dry. one rancher reported to me that he lost half of his second cutting of hay which is $8600 worth of hay. for a small rancher, that's a big deal. equally significant is the impact of the spill on the reputation of the organic farms that utilize the river. how can their reputations be restor restored. in another example, a local plant and tree nursery located on the banks of the river was threatened by the inability to use the river for watering purposes. owner tom bridge had to haul water at his own expense until

arrangements were made for the water to be delivered until the river could be used again, but even that couldn't help bring customers in. tom estimates he lost $20,000 worth of business due to the declining customers during the period of the gold king incident. and sales have not recovered. in fact, tom estimates that his sales for the year will be down 1.25% from his projections as a result of this bill. as news of the incident spread, calls came in to our community from around the country asking questions like, are all the fish dead? will the fumes harm my family if we walk by the river? is the river ever going to recover? it's obvious to me that our community's image has, and reputation as a natural, scenic, family-friendly outdoor mecca, has been badly damaged as a result of this spill. clearly we do not know yet what the long-term impact of the gold king spill and the publicity

generated by it might be. but we anticipate there could be lingering, negative images, public health and safety concerns and a decline in future visitations, all of which will impact small businesses in la plata county. as a small business owner myself, i am concerned about uncertainty created for our local businesses resulting from the spill and heightened awareness of acid mine drainage. it is for this reason i ask for you to reimburse businesses and employees affected by the gold king mine spill. i ask for the gold king spill mine recovery act of 2015. i also advocate a speedy and collaborative response for loading in the upper animas.

i urge congress to act judici s judifferential -- judicially but also carefully, and i thank you for your time. thank you very much. >> without objection, your newspaper will be entered into the record. >> thank you. >> miss gallegos? >> good morning, gentlemen. thank you for the invitation in bringing silverton to the table. my name is deanne gallegos, and i'm the director of the silverton chamber of commerce. my intention, for my opening statement, is to tell you who we are. it was silverton that brought

mining to the hills as to why we still exist. silverton was incorporated in 1874. from 1881 to 1882, otto meares built the train which changed the area. we still depend on the train as part of the heart of our summer economy. there are 699 of us. technically 701 had babies this summer. about 520 of those actually live in the town of silverton. we get an influx of summer residents and then they go south, and then we get an influx of winter residents. so the solid, hard-core number of year-round residents is around 500. but we fluctuate.

the number one landowner is the federal government. 81% of our land is owned by the blm or the forest service. we have 388 square miles in our county, and silverton is the only municipal county left standing. san juan county used to be linked and littered with many mining towns which are now ghost towns, literally ghost towns, buildings that you can go in and see the past. but we are the heart of the san juan mountains right off the continent continental. my father and mother met silverton high school, were homecoming king and queen in --

i shouldn't say the year because you'll kind of pick up on the age, but it was in the late '50s. and then my father started a family right away and we also went into mining but then moved into the city, which i was born and raised in denver. it is like reliving your childhood. we live there so we can live in those mountains. that is something that is untangible unless you experience it, unless you stood in the bowl of that caldera, which is the volcano which created the only level land which is where my town was built. because of that, 48% of our economy is dependent on tourism. since the 1990s when the last mine closed, we have tried to figure out who are we and where are we going? but we also embrace and

celebrate our mining heritage. it is who we are. we offer tourism through ecology, yet our ecology in our economy are extremely fragile, just like the tundra that we live below. silverton is nestled at 9318 elevation feet, just below timberline. that is why folks come to visit us. repeat tourism is critical and actually a very stable part of our economy, as well as second homeowners in the influx of seasonal workers that come in and out of our community to help us get through our tourism seasons. we experience a little over 400 inches of snow in a year. we've got one road in and one road out in the winter, and that's highway 550, which is one of the most dangerous highways in the united states. along that highway which

separates us from services 50 miles either to the south to durango or 60 miles north to montrose, is 150 avalanche paths. it's mother nature's way of shedding snow, but that also means that we are vulnerable to being blocked in or blocked out, quite frankly. we have the alpine loop. that country experience with hiking, jeeping, camping, ohvs. and in this back country is exactly where red bonita and gold king are seated. so when you go into our back country now, you do see the incident firsthand. you do see the blue tarps with the sediment and the activity that's going on. across the street from our number one employer in the winter, silverton mountain, is this remediation situation and

base camp for the epa. we understand and acknowledge and know that we are now in a long-term relationship with the situation, with the epa. we look forward to taking responsibility and being proactive in dealing with being at the top of the watershed and the these old mines. again, if it were not for all these old mines, the west may not be what the west is today. and again, we embrace our heritage in our past, and we're proud of that. this situation has changed the way that is looked upon. talk about employers and employment. again, we are 48% of our economy is tourism. when you talk about the top

employers in san juan county, we have no corporate entity. we don't have a big office building. it is silverton mountain at 40 employees, second largest employer in san juan county is one of our largest restaurants at 22 employees. we have a 10-month business cycle out of a 12-year calendar year to make it. winter and summer are night and day. a lot of our town closes for the winter. and in the summer when that train comes rolling in, we open up all our doors, clean all our windows off, and we are there to welcome the influx of thousands, hundreds of thousands of tourists who come to experience us, whether it's a day a week or four months. and we are dependent on that, thankful for that, and understand that without that,

we, too, could have the potential of being one more ghost town. i bought my grandmother's home that was moved from a ghost town in eureka in the '40s. and my kitchen is slanted, and my walls are little and the doors are tiny, but i love my house. and i love my community. that's why we're all there. that's why i'm here, to speak up for them. before the incident, we already were struggling with a housing issue, which is a domino effect of, if we can't house seasonal employees, then who is going to work in the restaurants and the shops and the hotels? we were already struggling with more jobs than people in town. but we have to also be conscientious of switching of

seasons. the folks who leave in the summer, the winter people come in and replace them with housing. we don't live in a normal, typical, day-to-day town. we still have dead fiber in the ground. we are not connected to fiber. so when we sit around and we discuss what is economic development for silverton, and one of the type of individual we can bring in is someone who can bring their own business, we don't have the infrastructure to support that. so, again, we go back to tourism. gentlemen, we are counting on you two to represent us and to speak up for us. i know you both have been there. we had a meeting on august 12, senator gardner, that was set up before the epa incident, and i

bliss f blissfully, naively, wanted to stick to those issues to discuss the housing and the employment and the tourism, and where do we go from here, not knowing the train was coming down the tracks and we were tied to it. but what i do know about my community is that we still embrace that pioneer spirit. therefore, we want to create a new relationship with the federal government and the epa, not status quo. we want them and you to be aware of our situation. housing is an issue to have an influx of federal workers coming in and subcontractors, we cannot allow the housing we already didn't have for the people to be displaced because of that. because who is going to be there to help these small businesses? i've had small businesses tell me that they have left over 60 grand on the table this summer

alone because of lack of employees. i have a business that can only open five days a week instead of seven, which null and voids one week of business a month because we literally didn't have employees. we have had cancellations. we have had real estate deals fall through. we have had banks pull out of our new community construction loans, providing loans, just because of this talk, because of what's going on. so i ask you two to remember us. we are important. just because we're the little guy and there is only 700 of us doesn't mean that we don't matter. and we're putting trust and faith in you to do so. thank you. >> thank you, miss gallego.

mr. cora? >> yes. thank you for having me today, senator bennett and senator gardner. as senator bennett said, my name is andy cora and i own four corner river sports in durango, colorado. we're pretty diverse. we have a retail store, we have a paddle school and we have a commercial rafting operation. you know, the day the gold king spill happened, it was a hard day in durango. the river is, in many ways, the heart and soul of the community. it runs straight down the center of the valley and the mighty animas runs just adjacent to downtown, and it's important to the people in town. the picture there mr. blake has of those three, those are friend of mine that found themselves surrounded by the orange sludge. they're the first ones that told us, hey, something is going on with the river. word spread quickly throughout the community. i went out on the animas river trail late in the afternoon as the spill was moving towards

town, and there were literally hundreds of people gathering along the trail, just in the section i was in. so the whole trail through town, i understand, was filling up with people. and i can tell you it was like a funeral that day. people were really upset. it felt really personal. there was a lot of tears shed. it felt like a close family member had been injured or hurt. it really hurt the town. it hurt people's -- just morally hurt the people. but it woke us up. you know, it woke us up to this longstanding pollution issue that we have in the animas. durango invests a lot of money in making it a desirable place to live, and the investment pays off. we attract a lot of great businesses. we attract a lot of entrepreneurs, small business owners, creative thinkers, telecommuters, and you can see it. our economy is strong in durango. examples of these investments. we just completed a new $3 million whitewater park,

essentially a playground for rafters and kayakers. it's wonderful. the town invested $20 million in the animas river trail. i think one of the better examples is recently there was a half-cent sales tax passed in town. it's earmarked specifically for parks and recreation. that ballot measure passed by 69.5% of the vote. so nearly 70% of the people in our town voted to tax themselves at a higher rate. i don't think that happens very often. i think that's really a testament to the spirit of our community. so 2015 for my business was great. it was the best year that we had had in a long time. you know, we're used to a lot of adversity in the river business. we have drought years, we have down economies that seem to affect the tourism market first. we can plan and adjust for those things. this year we were going full speed. sales were great, the rafts are filled with tourists, and then boom. the river was closed. we didn't have any time to plan,

any time to adjust. so my rafting company, our sister company, lost about $19,000. the paddle school was down about $8200. stand-up paddle board rentals and raft rentals down about $3200. we went from up 20% to down 8%, and the $100,000 he lost, that was in the eight days of closure. so he was down 50% for that entire month of august. you know, and beyond those losses, it's the 150 employees who immediately lost their jobs. so those are raft guides. they're action video photographers, bus drivers, office personnel. they were immediately out of work. so, you know, while we had the problem in the business, it's really those individuals that really concern me. i'm confident. i'm confident that with senator bennett's bill, the gold king mine spill recovery act of 2015,

our local community, our state and the federal government that a lot of those people will be made whole. the gold king mine blowout was spectacular. 300 million gallons of toxic orange sludge going into the river in a matter of hours. i think it's important to know that the same mine was leaking 9.2 million gallons of the same water every minute prior to that. there are other contributing mines that add up to 6 million gallons a week, so that's 330 million gallons of toxic water going into our watershed every year. so the gold king represents, what, one week's worth of that natural drainage. so that's where the outrage

should be. that's where energy should be directed. i mean, this is the ticking as a businessowner, it makes me reluctant to invest in the future if this is going to happen again. and the impacts, live we've said, they go way beyond durango. from silverton, colorado, to grand canyon, arizona, people depend on this river. it's the life blood. it deserves to be cleaned up. i think everybody agrees that the epa messed this one up. right? we waste a lot of our energy and anger going after these epa firefighters who were tasked with the impossible job of putting out this out of control fire with a garden hose. the spill makes clear that the piecemeal approach isn't working. it's a complex problem. there's tons of mine portals. there is bulkheads that need to put in there. is water that needs to be redirected there is water that

needs to be treated. and it's an ongoing problem, you know. we need a comprehensive approach to cleaning this up. so yes, good samaritan legislation is proposed by the last congress makes good sense. yes. the 143-year-old 1872 mining law needs to be reformed and brought in line with other extraction injuries. the epa needs to partner with the stakeholder in silverton. they have a lot of knowledge up there. they need to consult with those folks. and, yes, we need a water treatment plant in cement creek today. and it needs to be fully funded. and i want to thank you senators here for proposing that. it's a really important first step. but understand that it is only a first step. all the above list does nothing to give us money today that we need. it does nothing to plant a long-term fix for this problem. look, it's a complicated problem.

there is really only one entity. if we can reinvent the wheel and get money elsewhere, great. let's do it. right now today there's only one entity that can handle this. only one entity that has the experience, the technical expertise and has the potential funding sources. and that's the epa. i understand that it makes a lot of people nervous to invite the epa in on a big basis. i get a lot of the senators may not want that type of fix. but right now, animas basis annusmis basin offending mines is really the only clear path forward. i know there is a lot of fear around that. but i go to mow an, utah. super fun site. it is is booming. there are thousands and thousands of tourists in that. as salesperson, colorado. i don't think they are hurting from this. they are a superfund site.

i think it can be done in a sensitive, directed manner just at those mines. if there is another funding source that can happen, great. if i were the federal government and somebody came to me with this laundry list, i would say that looks great. we have an excellent program with that. it's called the epa and super fund. so in conclusion, durango and surrounding communities depend on the animas river for water, drinking, industry, recreation. the ongoing pollution and the likely periodic releases affects the community's livelihoods. only the full effort and comprehensive approach of the epa can address these problems. i appreciate your comments is and welcome any questions. >> thank you, mr. corra. we'll jump right into questions. i think we will go back and forth on questions and get through several of these. mr. blake, start with this. feel free ms. gallegos or mr. corra to jump in as well. can you talk about some of the experiences you heard from businesses in the two counties

about how they will calculate revenue and talk about lost revenue to the county if you have been able to make that calculation yet. >> i will start with lost revenue to the county. we have a lot of time just with can county employees in working with the epa. i will add our staff, county manager and our county attorney and all the support staff just did an excellent job of really leading the effort and coordinating with the epa. they have done an excellent job. so there is cost there. if you want to look at larger taxes directly that were affected, we're not sure quite yet. not sure yet how much they were affected. but those were taxes that would take a hit. some people said, well, the epa

came to town and filled up all the rooms that weren't taken. but i'll remind you they don't pay lodgers tax. and lodgers tax goes directly to what we were talking about, fighting against any negative images that might have occurred. the durango area tourism office does a great job putting information out about the whole four corners area and drawing people in. as far as businesses, i have talked to a lot of business people from the farmers i mentioned to the real estate offices. i talked to one gal who actually had somebody just walk away from a real estate deal, as was mentioned by ms. gallegos. people are nervous about this. it really worries them. calls, i personally had calls from friends and family around the country that said, hey, what's going on? one of my cousins was extremely upset because he remembers the

days when we were kids fishing in that river. he said i remember those days fishing in the river and how fun they were, how beautiful the river was. he was very upset about it. so there are those images, those concerns. congressman tipton mentioned perception. it really is is a lot of peon. the river may have returned back to its normal -- or as close to normal as you can get. it's back to where it was. people don't necessarily get that information. they are still seeing the images like i mentioned earlier. and that's, i think, is what we're looking to next year, what will be the outcome of this, and maybe even the following year. >> mr. blake, to follow up on that, has the epa indicated they will reimburse the county then for the time, the employee time that you have had and the equipment time that you have had? >> they have. >> full cost reimbursement? >> we are working with them on

reimbursement. so far i think that's going as could be expected. as far as i know we have not received any funds yet. we have spent in excess of $200,000. just the county. >> that's the county budget? >> that's just the county. there are a lot of businesses that were impacted from small amount to a larger amount. some of the businesses that were mentioned, if they've been taking a hit of $100,000 or more, that's a problem. because the form 95 that the epa provides doesn't allow for recovering what you have lost. it has a limit on what you can actually recover. >> and thank you, mr. blake. if i could get 495 entered into the record, i think that would help as well. do we know whether the real estate deal that you talked about walking away, somebody is is there walking away from the

real estate deal, it's a lost opportunity, will that be something that you can submit on a claim? how do you prove that? that's just a loss that will be hard to prove that they didn't walk away. i mean, real estate deals fall apart all the time. and there was more than just one. i have a personal friend who said that her client walked away from the deal specifically because of that. i heard some other people mention similar stories, but hers they specifically said hey, that's it for us. >> mr. corra, i don't know if you want to comment. i'm rung out of time. i'll turn it over to the senator. feel free if you want to add to that as well. >> well, we know what our direct costs are. >> around 30,000, is that right? >> yeah. that's easy for us to back into. my concern is the long-term impact. like brad said, the media images were, you know, everywhere. we couldn't have asked for that kind of coverage and we didn't ask for that kind of coverage.

my concern is the people next year who are thinking about coming to durango. so what do we do about that? you know, i think showing a concerted effort, letting people know our river is cleaned up. i was in the river the day before it closed, and i was in the river the day it opened. it was looking messy in durango. >> i was very jealous, by the way. >> right. right. but it is looking better in town. it does. silverton, the same way. people are kind of used to the yellow stain are on the edge. that's been going on 100 years there. but it is things like when i first moved to durango 35 years ago, the river was pretty dead above town. there weren't many fish in the northern part of the north valley above durango. there were some, not many. and then they built a treatment plant on cement creek. it was run by one of the mining companies, in the mid ninths. it really cleaned up.

the durango section became a gold medal fishery. our status has since gone down. that operation shut down that was run by a mining company. that shut down. and the fish now the bad water the dead water is moving downstream again. durango is down a notch. we're not a gold medal anymore because we're not supporting as many fish. with a treatment plan and cement creek, i'm confident we will start to see that clean up again. when that's a gold medal fishery again five or ten years from now, people will forget about this. they will remember durango. they will remember the animas river. they will remember silverton as that clean river. >> senator bennett? >> thank you. since there are no other senators here today, i can say without fear of contradiction it is an enormous privilege to represent the most beautiful state in the country, colorado. i know senator gardener feels the same way. the testimony reminds me how much inspiration we draw from the people we represent.

you cannot come from the north or south to silverton and not think about the character of the people that built that community, ms. gallegos, as you were talking about, or take the alpine loop trail, which i have done, and see railroads built at almost 14,000 feet by people. and i always think when i'm there first of all, what the character must have been like, the collaboration must have been like, and how empty the political conversation here would sound to the people that built silverton. and the other thing you do when you're traveling a lot through colorado, you never stop when you're in one of these jobs. a favorite place for me is is the hotel that's right on the banks of the animas river, the double tree there in durango. if you get a room on the back, you open up the doors, and you can hear the river going by. there is nothing quite like it.

let me first say, as mr. corra was saying, this community is open for business. there's lots to do in the winter and the summer months. people shouldn't take the long wrong lesson from what we're trying to do here. because it's safe. but we want to make it safer. an that's why we're all here today. so let me start with you mr. core remarks first. first, you mentioned this woke up us. that's what you said in your testimony. and i think you talked about the long-term issue of legacy mine pollution in southwest colorado, which as far as i'm concerned, that's the heart of the issue here going forward. we need to clean up the water from preventing future blowouts. and to address the underlying pollution in the river. i wonder if you could use an opportunity here to tell a little bit about how the business community in durango is thinking differently about this. what did you wake up to and what can congress help do to help tackle this problem.

>> all right. thank you for that. i think what we woke up to, on a personal level, we woke up to maybe our river wasn't as pristine as we always had assumed. we woke up to the fact that, gee, my kid splashing around in the water as a toddler, am i super comfortable with that. you know, i think the reality is that water is safe. i trust the numbers that have come from the epa, and they've been confirmed by some local entities, and the water is safe. but it doesn't mean that the water is pure. it doesn't mean it is as good as it should be. below the town of silverton, below cement creek, the river is essentially dead. there aren't fish and there aren't bugs in that section of the river. mother nature, between, there is 50 miles of pretty wild water. we will take you on that stretch. that's great. and that naturally kind of cleans it up. the metals drop out at that point.

so we do have a pretty clean river in town. but a lot of business owners i speak with, they are concerned about the optics. so they are concerned we've got this tainted impression across the country. i got the same phone calls as brad got. so what i think that you can do is we can fund some real cleanup up there. it needs to be done in a sensitive manner. it needs to be done so it doesn't impact silverton. and i think it can be. the mines in cement creek aren't directly in the town. and i think if it's done properly, like in moab, utah, and other places, that the town will benefit in the long-term. as long -- if the optic is hey, we're taking proactive action to clean this up, i think that goes to a long way for the business of silverton and certainly in durango. >> so ms. gallego, let me jump to you on to the same point you. said in your testimony that

silverton was ready for a new relationship with epa, a different relationship with epa. >> yet. >> the epa is committed to constructing a temporary treatment plant as you know, but is not yet committed to finding a way to construct a permanent facility which i think most of us would like to see. tell us about the way you would like it to go going forward as we try to seek a solution to this. it is also important. i think mr. corra's points are very important ones too attend, and people need to understand this that the water being treated would not be right in silverton. it's north of the town. >> we are the top of the watershed. and we understand that. and, yes, has this been a long problem. but i don't believe that we have to go status quo. now i want to make a point i'm not a politician. i have not been to every meeting with the epa. but as a general citizen, also

being part of the incident crisis team, my personal concern has been lack of transparency. listening and analyzing all of these hearings that have been going on. again, my personal opinion is their testimony stands for itself. that's very concerning when you are inviting that into your backyard. i look at leadville. he says moab, i say leadville. there is a very well-written book on the impact on leadville and the impact on the community. just as many positive stories out there, there are also the horror stories. i personally see it as a wait list. that's my concern. i agree with mr. corra that something needs to happen now and today. i travel up to the actual site on a regular basis and i see the

blue tarps and the i see the remediation. i see the holes and i see the sediment. again, personal experience the fact that gina mccarthy has actually never stepped foot in my county. the fact that we had to fight to get the epa to come do a community meeting. the fact that not all situations work blissfully are concerning to me as a third generation silvertonian, a citizen, and a landowner. i guess i ask if it immediate money. when we ask that, when the epa came to town, there was a lot of we'll get back to you. i would love to trust. i would love to know for my

community that it would be instant, that it would come right away. but i don't. and hearing the real estate agency say just the talk of the stigma, deals are getting canceled. loans are not being offered for construction loans within our new anville community are desperately wanting to build are alarming for me. do i believe the intention is is there? yes. but i'm also a realist. and i also know what i've experienced. and i also know what i've seen and what i've heard in our relationship with the epa. i also would like to knowledge that we understand, and this might be weird to say. we are in an arranged marriage with the epa. we have been working with the epa for over 25 years. they're here. they've been here. it is this accident that they

caused that has brought this to the forelight, that has really made us the superchild to superfund or to not. where we are concerned as a community is is that it's your immediate neighbors. our definition of neighbors has changed. it's durango to farmington, to every county in town in state that touches that water. and we acknowledge that. we respect that. and we appreciate being brought to the table here today. what my personal experience is been is silverton a lot of times hasn't been invited to the table. there has been a lot of finger-pointing. i have received hate e-mails in my chamber inbox. we have received strange phone calls. we have gotten cancellations. we have had tourists turn down water. there is an impression and a stigma. and, again, we agree that that is our concern for long term.

to say your cash register didn't change today does not mean it is not going to change tomorrow, or next year, four years, five years. what is that going to look like? i'm thinking long term. for us to figure out and calculate what's happening today is going to be time in the future for when the tax numbers can come in and when the stories continue to roll. this is less than a couple months. it feels like 10 years. but it has only been less than a couple months. but what i ask, again, in the pioneer spirit, and this is again personalized is that we think outside of the box. is it the magic bullet? i don't know that. i can't say that. what does it actually mean to be on a priorities list, wait list, immediate remediation? we as well want to see immediate remediation, to see that the work that's happening up there is wonderful.

but let's keep going, let's move forward, let's make it permanent. we also want a water treatment plant. but does it have to be like it's been done since the '80s? i don't know that. and again, we're turning over our trust to you. >> thank you. to follow up on some of the comments that have been made about the funding and some of the form 95 or the claims itself. to your torj, to your knowledge, has anybody been reimbursed for a claim that has been filed? >> no. >> no. >> there is no timeline given for what it will be filed? i don't heard in the next week, month, six months? any time frame to the best of anybody's knowledge? >> no. >> the la plata county actually set up with the epa meeting place where people could come with their form to get help filling it out.

ing it's not a real easy form or friendly form to fill out. but la plata county actually was proactive in helping folks fill that out. and i believe they can still get help if they need to. i think the incident command center has kind of been -- has stood down at this point. but i think there is still some help out there. >> senator bennett, do you have any follow-up questions or anything? >> let me ask you one question which is, is there more that senator gardener and i can be helpful to you as you try to interact with these federal agencies or think about what legislation we might want to pass? >> well, the epa is a pretty big machine. we found that out when they come to town in force. they were up above silverton doing some work on a small scale. it turned into a big scale.

when they all came in, it was a pretty big group of folks that showed up. but i think that could be something that works against them almost. so many people that came. and a lot of different folks would show up every week. we would ask for certain things. the next group would come in and the ball would kind of get dropped. so i think the size might actually be a detriment. i would agree that a collaboration would be good if possible. because there are a lot of experts from the mining industry that have done a lot of good work up in the mineral creek drainage. they have done a lot of cleanup on their own on a piecemeal. they do one here, one there. and i think that's a great opportunity to see the best things happen, because you get experts that have been doing it.

they put bulkheads in those minds. they've seen a lot of cleanup. not that the epa doesn't have experts. but there are people who have been there a long time. i would agree i think a collaboration is really the best way to go. >> okay. well, i appreciate it. i just want to, as chairman gardner said, to thank each of you for coming here today. it's a long trip, i know, and you've got other things. you've got day jobs you need to worry about. so we're very grateful for this testimony. it's been incredibly helpful. and our offices are going to continue to work with you to make sure we put this right. thank you, senator gardner for holding this hearing. >> and thanks senator bennett for your participation and senator tipton for your participation. thanks to the witnesses for your time and testimony there is a lot of work that we need to do following up. ideas on reimbursement, getting ideas for time frames. we have to figure out what the

time frame is going to be, what kind of claims are going to be accepted. form 95 can be filed for two years. does that mean next summer, after they've seen an impact on this, can they file? or does it have to be during the time frame. again, we will get the answers from the epa for those questions. but you have a commitment from senator bennett and i to continue to work on these issues. whether it's conversation on the 1872 mining law, good samaritan law. these are things -- we can't wait. and you're here today as part of the solution. and we truly, truly appreciate that. thank you for your time and testimony today. thank you to chairman vitter for allowing this committee hearing to be held. and i wish you safe travels back home. this committee hearing is adjourned. >> thank you.

>> thank you, good to see you again. >> thank you very much, senator. i appreciate it.from law enforcn

administrato administrators. senator susan collins chairs the 90-minute hearing.

>> good afternoon. the hearing of the special committee on aging will come to order. thank you. decades ago the warren caveat emptor buyer beware was the best advice one could give to a consumer seeking to borrow money. well, that advice is still valid today. there are laws that seek to ensure that consumers understand the obligations that they're taking on and that lenders have to play by the rules. since the passage of the federal

truth in lending act in 1968, and similar state laws around the nation, credit providers have been required to disclose key terms of consumer credit agreements up front in the easy to understand language. if you want to know what interest rate you'll pay on a new credit card, you'll find it in big, bold letters right there on the front of your application. likewise, interest rates on car loans, personal loans, mortgages and myriad other consumer loan products are clearly and conspicuously displayed. but as we will learn today, that is not true for so-called pension advances. pension advances are agreements under which consumers usually

retirees receive cash lump sums in exchange for part or all of their monthly pension check. the effective interest rates on these lump sum payments can be outrageous. one company charged nearly 120% last year. that fact, however, is hidden in the pension advance agreements which do not include the simple and clear disclosures required by law for consumer loans. instead, these contracts are so convoluted that it is difficult for consumers to realize just how much their lump sum pension advance is really costing them. by way of comparison, i would like to direct your attention to

this chart. using the state of washington as an example, this chart shows the average interest rate charged on various forms of consumer debt compared to the effective rates on pension advances. the first three bars from the left show interest rates on typical sources of consumer credit. 4.3% for car loans. 9.7% for personal loans. and 12% for credit card debt. the three bars on the right are interest rates calculated by the government accountability office, better known as gao, on pension advances that one company sold in washington state over the past three years. as you will see, the rates

escalated to a astn astonishing high 117% last year. all of these rates are higher than the state of washington's usury rate of 25%. as if these interest rates weren't bad enough, many pension advance companies require their customers to sign complex documents whose terms can only be described as deliberately deceptive. typically, customers are required to take out life insurance policies naming the pension advance company as the beneficiary. most consumers simply don't realize that the rates that they are paying are so high. for example, one of my

constituents didn't understand that he was paying a rate of 54% on his pension advance until his tax preparer told him that the deal just didn't look right. and advised him to contact the main bureau of consumer credit protection. second, many of these consumers are financially vulnerable and desperate for cash. these pension advance companies exploit this desperation. they also use flashy aggressive and misleading advertising to encourage quick and uninformed decisions. it is extremely troubling that some companies aggressively target the patriots who have served our country, our veterans. they used websites displaying

the uniform and wrapped in red, white and blue and run ads in military magazines. federal law prohibits the assignment of pensions of enlisted military retirees but pension advance companies too often ignore this prohibition just as they ignore federal and state laws requiring clear disclosure of interest rates on consumer loans and just as they ignore state usury laws that set a ceiling on the amount of interest that can be charged on consumer loans. pension advance companies claim that these laws simply do not apply to them. arguing that their products are not consumer loans or assignments but simply advances. today's hearing builds on this

committee's ongoing investigation into pension advances and continues our efforts to protect america's seniors from shadowy schemes that threaten their financial security. i hope that any retiree considering a pension advance will think carefully before taking that step. and will seek advice on other ways to obtain financial assistance. i look forward to hearing the testimony of all of our witnesses today. with that, i'd like to turn to our ranking member, senator clair mccaskill. >> thank you. retirement security and consumer protection are both large parts of this committee's focus and mission under the leadership of

chairman collins. this is an opportunity to look at the alarming problem of both of these committee priorities. the defined benefit pension plan is considered the gold standard in terms of retirement security. although it is not as popular a as it once was, those people retiring today with a defined benefit plan are incredibly fortunate. they get a fixed payment for life, so they cannot outlive their savings, and they did not have to figure out how to invest this money or how much to put aside. so they are saved from the burden that they may not have the financial wherewithal to adequately care for themselves throughout retirement. nor do they have to worry about an economic down turn happening right before they cash out. some rob banks because that's where the money is. well, these seniors with defined benefit plans are similarly ripe

targets for a different type of crook. these fraudsters are undermining all the advantages of these defined benefit plans making what had been a secure retirement suddenly very unsettled. worse still, these folks are targeting some of the pillars of our communities, our firefighters, our teachers, our veterans. they're also finding unwitting victims among elderly investors, looking for a safe investment at a time in their lives when they are looking to earn a little bit of money without taking a large financial risk. it truly is an impressive scam that is able to take advantage of both sides of the financial transaction. the investor and the pensioner. but that is what these pension advance schemes have been doing. today we will hear first hand from victims of these schemes, as well as those in the public sector and consumer protection groups about their efforts to combat this problem. this committee is also investigating the bad actors

behind these schemes, and i commend chairman collins for using this committee's investigative and oversight powers to go after these folks. right now there simply is not enough being done here, because it's a legal gray area. so while we hear from our arkansas witness about all the good work she is doing down there to protect the public, unfortunately, once shy catches these guys she cannot prevent the same bad actors changing their corporate name and putting down rooting somewhere else to find new victims in other states. there's only one state in the country where pension advance companies are not trying to take advantage of teachers, veterans and firefighters, and that, i'm proud to say is in my home state of missouri. i want to commend the work of our state treasurer who joined with the assembly to push for legislation last year. this received bipartisan support with no one testifying against it. among those who spoke on the

bill is one of our witnesses today, maria walden, from the public school and education retiree systems in our state. she will talk about the legislation banning pension advances and the protections that cover her members. i'm also pleased to say that thus far our state has not had any reports of pension advance companies coming to missouri since the bill was signed into law. i am hopeful other states will follow missouri's lead and protect those public employees who have spent their careers protecting us. once again, i want to thank the chairman for calling this hearing and for our witnesses for joining us to discuss this problem today. i look forward to your testimony. thank you. >> thank you very much. we're now pleased to turn to our panel of witnesses. first we will hear from dr. and mrs. louis kroot. he is a retired navy physician from kentucky, and he and his wife kathy will share with us

their personal experience in selling their pension to a pension advance company. next we'll hear from stephen lord, the managing director at the government accountability office who will discuss gao's investigation of the pension advance industry. we will then hear from kaycee wolf, from the arkansas security department, and i would like to call on our colleague, senator cotton for the introduction of ms. wolf. >> thank you. i'm pleased to introduce kaycee wolf who will testify about the work she and her colleagues did fighting pension advance fraud in arkansas. kaycee is a university of arkansas alum and has been an attorney with the arkansas securities department. as we will hear, her team spent

thousands of hours successfully fighting outright fraud and blatant misrepresentation of contracts. k kaycee, thank you for the work you have done and we hope it can be a model for the entire country. >> thank you. we will then hear from stuart rossman from the consumer law center, and i understand that senator warren would like to introduce this witness. >> thank you, cheracair collins. i am pleased to introduce stuart rossman. he is from boston, massachusetts. he is deeply knowledgeable about the law, but he also has a very thorough understanding about what is actually happening to people across this country.

in other words, he knows his stuff. and we are lucky to have him here today. thank you, mr. rossman. >> thank you. and finally, i want to ask senator mccaskill if she would like to add anything. you mentioned our final witness on this panel, maria walden. if you have anything you would like to add to what you said in your opening statement. >> well, as i mentioned in my opening statement, she is the director of legislation and policy for the public school and education employee retirement system. and it is one of the finest pension programs in the country. we, i like to remind our teachers in missouri that we are not high on the scale, when it comes to salaries, but, when i was auditor, we were number one in the country, in terms of pension benefits. are we still number one? yeah. i know that we have one of the finest pension programs for people on the front line of every social ill that faces our

country. i think we forget that it is teachers that we're asking to do so much more than teach, in so many places in our country today. so well-deserved, good pensions, i think, are something that we all need to, in this country, realize is an important part of financial security. so i'm proud of your organization and so glad that you're here today. thank you. >> thank you all for joining us. we look forward to hearing from your testimony, and we're going to start with dr. and mrs. kroot. >> chairman collins, ranking minimum mccaskill, distinguished senators on the committee. thank you for the opportunity to appear before you today and testify about our family's experience with pension advances. we are here today as husband and wife, because in our 34 years of marriage, we've always operated as a team, and ours is a shared, cautionary tale. for 22 years, i served our

country in the navy as a physician. when i retired as commander, i intended to work as a doctor, and i did so as an e.r. attending physician in several hospitals. today i continue to work as an e.r. attending at a hospital in lexington, kentucky. my wife kathy has been at my side throughout most of my career, has done incredible work as an advocate for organ donation and as a dedicated volunteer at our sin gogs. when i left the military, planned to continue to provide for our family through work and my military pension, but due do a perfect storm of unfortunate events, we were left with debt spiraling out of control. first, we received bad tax planning advice and incurred around $100,000 in unexpected fees and penalties. second, we suffered over $10,000 in home repair from our basement flooding while our house was

ines crow. third, we incurred enormous medical expenses when it became necessary for our adopted, special needs daughter to be repeatedly hospitalized for a serious psychological condition. we were financially desperate at that time and did not know where to turn. we had incurred extraordinary and unexpected debt. we were looking for any way to pay off this debt. we had seen advertisements in military magazines from companies that gave lump-sum payments for military pensions. we contacted one of these companies, structured investments which was doing business under the name of retired military financial services. they offered a lump-sum payment against my future payments. we jumped at the opportunity. we felt that the lump sums allowed us to pay off a lot of our existing debt. we understood at that time that we were taking an advance on

future retirement payments. we understood there would be fees for this service. we did not realize how expensive it would be. we simply did not get out the calculator. we did not see it as a loan. we were desperate and panicked. we realized we were taken to the cleaners. we were shocked when the complex math and contract was broken down by a reporter and explained to us that we were paying over 30% interest on our advance. the paperwork we signed did not disclose the interest rate. it did not break down how the numerous fees were paid to structured investments raised our interest rate. an example of these fees are the thousands of dollars we paid for a life insurance policy on me, required for the advance of our structured investments, listing structured investments as a beneficiary. and we needed to continue to pay this two years after the loan was paid off, because we needed consent from them in order to

stop the insurance policy. we ended up paying more in interest with our pension advance than we would have paid if we simply paid off the interest over time on our existing debt. moreover, we learned after the fact that there were alternatives we could have used to reduce our debt load while avoiding the high fees charged by structured investments. we have fully paid off structured investments. looking back on our experience, it is clear we made a mistake. we should have been more aware of what we were buying. we also want to make clear that we accept that we signed the contract and accept responsibility for that. we should have known better. as we said, ours is a cautionary tale. we want to make two points to those who may find themselves in a situation similar to ours. first, you have other options. you should explore those options and resist the urge to reach for easy, immediate cash. second, had we known what we now know, we'd never have taken out

the pension bands with their unreasonable fees. we wish we could do everything over again and make better decisions. it is our fervent hope by testifying today we can prevent other individuals from making the same mistake we did. thank you again for the opportunity to be here. we look forward to your questions. >> thank you very much for sharing your personal experience. when people hear that a physician can be tricked by these convoluted contracts with the lack of disclosure, i think it is a cautionary tale to others. and by coming forward and being willing to share your story, i believe that you will save others from making the same mistakes. so i very much appreciate your sharing your story with us today. mrs. kroot, do you have anything you'd like to add from your

perspective? >> no. we should have known better. i'm a math major, and i should have done the math. >> well, i think the fact that these contracts could fool a physician and a math major probably tells you all you need to know about the lack of disclosure, the deception in the contracts, the hidden fees, the charges and i think we'll hear next from mr. lord that based on gao's investigation, your experience is not at all uncomm uncommon, unfortunately. thank you, mr. lord? >> thank you, chairman collins, ranking member mccaskill and members of the committee. i'm really happy to be here to discuss our june 2014 report on pension advances. and the status of the agency efforts to implement our really important recommendations. this is a really important

issue, because as highlighted by dr. kroot, there's companies out there using aggressive marketing techniques to target those who are vulnerable and those in urgent need of cash. today i'd like to discuss three issues. first, a number and types of companies, marketing these types of products. secondly, i'd like to discuss how the terms of these products compare to other similar products such as consumer loans. and finally, i'd like to clarify the role of the cfpd and the federal trade commission. first, the overall numbers at the time of our review, we identified 38 companies that offered lump sum pension advance products. while 18 of these companies were located in california, the remainder were spread across several other states, and virtually all of them marketed these products on a nationwide

basis through websites. i think that's one of the key points we revealed through our work as well. and we found interestingly, we found that at least 30 of these 38 companies were affiliated with, in some manner, with each other, and that, if you could turn your attention to, i call this our connecting the dots chart. this is not obvious from a consumer perspective, because if you make phone calls or conduct website research, you are initially led to believe there's 38 companies out there operating independently, yet, by virtue of our undercover phone calls and follow up research, we were able to identify connections between these entities. for example, dr. kroot, the two companies he dealt with are exhibited in the upper left hand corner. that's company four. that's, as well as company five, structured investments is

company four and retired military financial services company five. so it was obvious, it wasn't obvious to him at first blush that they're related, but through our work, we were able to identify these connections. bottom line is the lack of transparency can make it difficult to file a complaint, if you're a consumer, because you really don't know who you're dealing with. also, if you're considering making an investment in one of these companies, it's difficult to do the, any research to, you know, assess the reputability of these vendors before making a financial decision. second key point is regarding the terms of these deals as highlighted by dr. kroot, the terms don't compare favorably with other similar financial products. how did we determine this? we analyzed 99 offers provided by six companies in response to our undercover phone calls. they did not know we were gao

calling. they assumed we were aqicu con and just interested in investing in these. and we found first, these products had effective interest rates that were significantly higher than the legal limits set by states on consumer credit, called the state usury limits, and these rates range from 27% to 46% interest rates. as you can see, that's considered really high. second, we also found that these lump sums offered through these companies were about half of what you would get through a defined benefit pension provider. if you were to get it directly from your pence provider, it added to about half. 46 to 55%. so, again, you can see these terms were not really that attractive from a consumer perspective. in terms of disclosure, as also highlighted by dr. kroot, we

found of the 38 companies, most did not disclose an effective interest rate. so it's really difficult to assess what type of rate is being provided. bottom line of all of our analysis that these are not a good deal for consumers and the companies appear to be operating in a regulatory gray area. there is some good news here in terms of our report recommendations. cfpb has taken enforcement action. august of this year it filed a complaint against pension funding llc. that's one of the entities dr. kroot was dealing with as well as one other related entity. they also have released the cfpb some consumer advisories in this area. so it's, it's encouraging that the regulatory agencies are taking some regulatory and enforcement action, as we recommended in our report. and this concludes my prepared remarks, and i look forward to answering any questions you have

later. thank you. >> thank you very much. mrs. wolf? >> good afternoon. appreciate the opportunity to speak with you today about the investigation that the arkansas securities department conducted against one such pension advance company, voyager financial group and its owner andrew gamber. what we found in our investigation is that although bfg was located in little rock, arkansas, it used a network of individual agents who were located throughout the united states, as well as various websites with multiple domain names, different company names that was mentioned by the gao, under this one company. and so it seemed like there were several different companies out there, and it was all under the umbrella of bfg. through these websites, they would try to locate pensioners who were interested in selling

their pension for a lump sum. i believe some of the interest rates promised were between 7% and 9%, which was more than what the market was offering. some of the investors found out about this project through agents with whom they'd already had a professional relationship. the bfg facilitated everything. the investor and pensioner never spoke with each other and never dealt directly with each other. they always dealt with bfg and their agents. once it was located, bfg would place the pension up for sale and help the pensioner establish an escrow account. the pensioner would then submit paperwork provided by bfg to the pension k. and the pension company would be instructed to forward the pension amount to an escrow account. in turn, it was then to be forwarded to the investor each month. this is an important distinction, because at no time was the actual pension assigned. at no time candidate pensioner

relinquish control over his pension and at no time did the investor have control over that pension. the reason this is important is the number one complaint we received was the failure of bfg and its agent was to disclose the redirect address. because the pensioner maintained control of his account, especially with military pensions, they could direct the escrow company to or direct the pension company to redirect the funds back to a different account and no longer to that escrow account. or, if the pensioner got into financial trouble and had to file bank resultsy, the pension would get caught up in the bankruptcy. so they were no longer getting that monthly return. they were never warned that this was possible. the problem is that a lot of the investors we saw were senior citizens looking for a safe, low-risk investment, and that's how this was packaged to them. this is safe, you get a 7% to 9% return on your investment every

month. some were told it was government insured, which was patently false. another miscommunication and blatant, outright lie from bfg was the failure to disclose the fees involved in these type of products, and you've heard some about that. bfg failed to disclose a fee break down on both sides of the transaction. a pensioner never actually fwhu their pension sold for lump sum, and on the other side of the table, an investor never knew how much of that lump sum they paid actually went to the pensioner. they were told bfg would receive a fee, sometimes an administrative fee. and they were told but most of your money's going to go to the pensioner, and that ended up not being the case because there was a failure to disclose the fees. what happened in reality was bfg would receive the lump-sum payment from the investor. they would cut themselves a rather large commission offer the top and forward all of the commissions on to the individual agents. i saw one contract that had as many as six individuals

receiving commissions off of one sale. then think would pay out administrative fees and then along down the line, finally, the pensioner would receive a much, smaller, lump sum amount than what it was purchased for. and, again, there was no detailed disclosure about that to either side, either the pensioner or the investor. unfortunately, with the arkansas securities department, we were looking at this from the investor's side, and we are very limited in the type of regulatory abs we could take. fortunately for us, arkansas state law is the risk capital task to be able to analyze it as an investment contract, and we determined that it was under other state test, and therefore it was a security. so we able to taken forcement action against bfg, however the risk capital test is not the analysis in every state. it does vary state to state whether this would be considered a security. although we were able to shut

down bfg, it is unfortunate that mr. gamber has not learned his lesson. it seems he has continued to flout authority and has developed other companies and looks to be doing the exact same thing and we currently have an ongoing investigation against him and some eye diggsal companies. so i want to thank you for ha having me here to talk about our investigation and i look forward to any questions you may have. >> thank you very much. mr. rossman? >> thank you. appreciate being invited to testify today regarding pension advances. the report on recent cases involving military pension assignments where i have been counsel of record on behalf of retired veterans of our armed forces. i'm the director of litigation for the national consumer law center, for the past 16 years i've been responsible for coordinating and litigating cases on behalf of qualified

individuals. and i testify today on behalf of the low income and elderly clients. in may of 2003, nclc was researching consumer scams perpetuated on active military personnel and ultimately issued a report. while we investigating that report we came across a separate issue. they felt that some of the greatest abuses they were seeing contained the solicitation of retired military personnel to gain access to their pension payments. what we skfred was that companies and individuals were targeting veterans' benefits offering cash up front for several years of veterans' payments. veterans are highly attractive targets for financial exploitation. i'd like to say that guaranteed streams of income are like honey to bees. and particularly when we're dealing with vulnerable populations relying upon their pensions for their safety net. retirement and disability

benefits are regular, dependable and long term and it's easy to transfer the funds each month. in the military it's done by allotment. of more and more, it's now proliferated through the internet. the companies engage in ha we call lead generators. when dr. kroot was contacted by rmfs, that was a lead generator which then turned him over to strategic investmenting which was in fact the lender. so they're actually serving the agents as we previously heard. and finally, veterans may have perceived themselves to have the, they usually have heavy debt burdens or poor credit as a result of the financial strains of their deployment and their frequent relocation. i want to talk about a specific case that we had. a man who retired and had

payments of over $1,000 a month. when he went to purchase a home, he found out that the because of the dess he had when he left the service he did not qualify for a prime loan to purchase and in trying to find a better option he found an advertisement for a retired military financial services, same company that reached out to dr. kroot. they then referred him to the same company, and i've included the ad as part of my testimony. and he got a lump sum of payments, which he, as a chief petty officer figured out was 28%, high above the california usury law would permit. i do want to point out on usury laws, only approximately one third of the states in our country have usury laws at this point. in fact, in california he would have been protected under those circumstances, but in many cases that would not be true.

he was told since the transaction wasn't a loan, the credit score didn't make a difference. they used it as a way of selling it to him that he could improve his credit score by paying down his loans. mr. henry got in touch with us, and we ended up bringing suit on behalf of him and other enlisted personnel in a case in california in superior court. we alleged it was a contract that violated the usury statutes and was lass in violation of the truth in lending. we also indicated it was a violation of the federal senate outs, both from the department of defense and veterans administration that prohibit assignments. putting him in a rock and hard place. it wasn't a contract, it wasn't a signment. it was a violation of either of those statutes, it was a vie lafrgs the california consumer protection statute. in august 2011, the judge issued rulings finding it was a violation of dod and veterans

administration regulations and the california consumer protection statute and awarded our client $2.9 million worth of damages. unfortunately, in the interim, the california division of corporations had shut down mainly because our litigation had stopped their flow of income and subsequent to our getting the judgment against them and the two principals, they all filed for bankruptcy and received bankruptcy protection. interestingly enough, one of the reasons they don't want them to be contracts because as contracts they would be dischargeable as unsecured debt. but once we got the judgment they sought judgment in bankruptcy court to keep from paying the judgments. our client got nothing out of the deal because he had paid off his loans. a number of individuals who had been in the process of paying off loans could stop at that point. mr. henry told us that at least

he stopped this company from doing these bad transactions. quite honestly, my clients who are the heroes here, the lawsuit mr. lord was referring to, along with the new york department of financial services was against the company called pension funding. and three of their managers were named as defendants in those suits, one of whom was mr. steven kobe who used bankruptcy laws in order to get out of the debt that he owed in my case in 2011. the pension funding group does not do military loans, he apparently learned enough of that lesson, but fortunately, the regulators in that case were able to set forward. the bottom lean is that we need full disclosure. we need to ensure that the usury laws are obeyed. that various state and federal agencies are enforcing the law. individuals have the ability to use consumer advocates in order to protect their rights but ultimately preventing this from the very beginning is the best way to deal with this problem.

there are many, many other alternatives that are much better than these loans. >> thank you very much. ms. walden? >> chairman collins, ranking member mccaskill and other distinguished committee members. my name is marie wald en. i'm the director of the public retirement system in missouri. there are over 575,000 missouriens that are now protected under the statewide law ban that prevents pension advances in the state of missouri. since 1946, psr's peers have worked to establish stable retirement benefits to 250,000 missouri public education employees, we pay more than $2.5 million annually to retirees. we continue to be a financially stable benefit plan for our members. we have over $37.4 billion in assets. we are the largest public retirement plan in the state.

if you combine all other 85 retirement plans in the state we have more assets and more membership than all other. the quality of our plan designed as senator mccaskill mentioned has been nationally recognized bit public pension coordinating council. we are governed by a seve seven-member board of trustees. due to the independent nature of our trust fund. staff is limited in the ability to support matters of which the board has not yet taken an official position. the comments that i'm making today are solely for informational purposes and require that the systems remain neutral on this issue. as the chairment indicated pensions are financial instruments where the individual receives a lump sum for contracting away that payment. during the fall of 2013, there were several national media

reports of these plans. they started in the boot heel and worked their way up jefferson city. it can be subject to interest rates of 27% to 126%. in some cases, borrowers are required to take out a life insurance policy. in 2013, the state treasurer went on record as being very concerned about the practice in missouri. in an effort to protect missouriens, he established the pension advance portal on his website to allow pensioners to report any problems or concerns they had faced. that same month, the systems held several internal meetings to discuss the impact of those on our own members. anytime we see any firm or organization that may try to take advantage of our members we become concerned and work toward

protecting our individuals. we took a proactive stance and updated our website to educate our members. and we also informed them of the current statutory provisions that were in place that would prese protect them. in addition, staff notified our members about educational meetings. one of the challenges was educating members and the public on the statutory protections that were already in place. psr's peers members are covered by an anti-alienation and ant anti- -- it specifies that the beneficial or equitable owner of that property held in that agreement cannot transfer the interest to a third party. those provisions prevent psr's peers from paying benefit payments to anyone other than

the retiree or from accepting an assignment of the benefit. therefore, by statute, we are prohibited from paying benefits directly to a pension advance company. and many of our statewide plans provide similar presbyteriotect their statutes. however, a retiree can use his or her benefit in any manner. therefore, a psr peer's retiree would be able to enter into a contract with a pension advance company as long as the contract did not require psr's peers to make that payment to anyone other than our retiree. on january 7th, the request of state treasurer, and representative tony duggar sponsored the house bill 17. it cannot be transferred or assigned at law or in equity. a pension assignee would be

prohibited from using any device, scheme, transfer othr other artifice to evade this provision. any contract maid in violation would be considered void and all sums paid and collected by the assignee would be returned. during the legislative process, proponents of house bill 17 testified that the bill served as a good consumer protection for all missouri public pension retirees. proponents testified that the bill prohibited a person's missouri public retirement benefit from being transferred or assigned to a pension advance service and would keep it for what it was meant to be, a retirement benefit. it created a ban on pension linders and that pensions earned by teachers, firefighters and other public sir vants would be protected from such a practice. one of the reasons was to protect all of missouri's petitioners, especially those

members whose plans might not have an anti-assignment provision. we had five groups testify in support of the provision. there were no groups that opposed the legislation. it was approved by the governor on july 9, 2014, went into effect that august. since the implementation of this law, we are not aware of any retiree of our retiree, who has been sold an income stream for all or part of his pension. we have also not received a request from a retiree to make a payment in advance to a service or into an escrow request the. i look forward to any questions you may have. >> thank you viery much for you testimony. dr. kroot, what we've learned from your experience, from the testimony of mr. lord, mr. rossman is that veterans are frequently targeted, probably because it is known that military retirees have pensions

the way other public employees do. and so there's a regular stream of income. you mentioned that you saw an ad in a military magazine for one of these pension advances. and i want to put up a couple of examples of the typical ads that we're finding as part of our investigation. very patriotic-looking. you also initially dealt with an organization that was called retired military financial services. did that give you a sense of comfort, that this was a legitimate offering? >> yes, it did, senator. >> and how long did you sign away your pension, for how long

a period did you agree to sign away your pension? >> senator, it was for eight years. if we failed to make a payment, then we would automatically go into ten-year repay. >> so eight years is a very long time. can you tell us what portion of your pension that you agreed to give up for those eight years in return for the lump sum? approximately? >> approximately? currently, we're receiving a little over $3,000, like $3,015 in retirement benefits. during the time that we were paying structured, we would get a check from structured every month for about $300. so i would say between $2500 and

$2700 was taken each month. >> so instead of getting your military pension check each month of about $3500, you instead were getting $300? >> yes, ma'am. >> that must have been so difficult for you. >> ms. wolf, i want to commend you for being very aggressive in closing down voyager's operations in your state. in my past, i've spent five years as the chief regulator overseeing the bureau of insurance, consumer credit protection, banking and the security division, so i was very interested in the state of maine, i'm telling you about. i was very interested to hear you talk about not only the