9/11 Fraud Scandal 'Probably' More Widespread, Top Official Says

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But Democrats such as Rep. Charles Rangel of New York applauded the agency and its independent watchdog for uncovering abuses that have cost taxpayers.

"I listened to the Chairman's opening statement and I liken it to blaming the homeowner when their house is broken into," said another New York Democrat, Rep. Joseph Crowley.

Still, Crowley said the fraud perpetrated allegedly by public servants whose brethren perished by the hundreds in the towers' collapse on 9/11 was appalling.

"Congress will have to bail out the program, with taxpayers coming to the rescue to bear the burden of a crime wave," Johnson said. "It's only two years before Social security pays reduced benefits unless Congress acts."

The Chairman demanded Colvin conduct an internal investigation and report back to the committee within 30 days.

Colvin, who is the acting administrator of the SSA, pledged to move aggressively, noting the New York cases also touched a special nerve within the SSA agency, whose New York offices were located near the twin towers and promised fraudsters will see the maximum penalty under law.

ABC News' Alexander Tucciarone in New York contributed to this report.

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