COLUMBUS, Ohio (AP) – As the floodgates open for another round of unemployment assistance, states are hammered with a new wave of fraud as they rush to update security systems and block scammers who have already siphoned billions of dollars from pandemic-related unemployment programs.
The fraud corrupts taxpayers, slows legitimate payments, and turns thousands of Americans into unwitting victims of identity theft. Many states have failed to adequately secure their systems, and a review by The Associated Press shows that some will not even publicly acknowledge the magnitude of the problem.
The massive sham stems from past identity theft by banks, credit rating agencies, healthcare systems and retailers. Perpetrators of fraud, sometimes in China, Nigeria or Russia, buy stolen personal identification information on the dark web and use it to flood the state’s unemployment systems with false claims.
The United States Department of Justice is investigating unemployment fraud by “transnational criminal organizations, sophisticated domestic actors and individuals in the United States,” said Joshua Stueve, a spokesman for the department’s criminal division.
The Office of the Inspector General of the Labor Department estimates that more than $ 63 billion has been falsely disbursed through fraud or error – about 10% of the total amount paid since March under coronavirus pandemic-related unemployment programs.
“We are all learning that there is an epidemic of fraud,” said US Representative Kevin Brady of Texas, the Republican on the House’s powerful Ways and Means Committee. Brady said the $ 63 billion estimate “exceeds the entire Department of Homeland Security budget.”
“These are frightening levels of fraud,” he said.
California was the biggest target, with an estimated $ 11 billion in fraudulent payments and an additional $ 19 billion in suspicious bills. Colorado has paid out almost as much to scammers – an estimated $ 6.5 billion – as to people who submitted legitimate jobless claims.
Other estimates, according to AP reports in the states, range from several hundred thousand dollars in smaller states like Alaska and Wyoming to hundreds of millions in more populous states like Massachusetts and Ohio.
Rural fraud has fed on double vulnerabilities: a deluge of unemployed benefit claims since the start of the pandemic has overwhelmed unemployment agencies and outdated benefit systems that are easy prey for devious and persistent criminals.
In Ohio, weekly first-time unemployment claims during the pandemic ranged from 17,000 to more than 40,000. But as of late last month, those claims have exceeded 140,000 in a matter of weeks, and many of them were considered fraudulent. The state has paid at least $ 330 million in fraudulent pandemic unemployment benefits.
Trying to catch so many bogus claims is delaying payouts to Ohioans who rightly need help. In the Columbus suburb of Upper Arlington, Cynthia Sbertoli was paid $ 228 a week after she was fired from her job in March at a nonprofit that runs exchange programs for high school students.
Her benefits were suspended in January after she informed the state that someone had tried to use her identity in a scam to claim benefits. She thought the problem was resolved, but has yet to see an extension of her benefits checks, which she and her husband use to pay for a son’s vision and hearing treatment.
“It’s just not a good way to take care of people,” says Sbertoli, 49.
In Indiana, Kentucky and Maryland, officials have said that during certain weeks in the New Year, at least two-thirds of the claims they received were classified as suspicious because of problems verifying identities. It’s not Maryland’s first brush of serious fraud. In July, officials said they discovered a massive criminal enterprise that stole more than $ 500 million in unemployment benefits.
Among the states hardest hit are those participating in the Pandemic Unemployment Assistance Program passed by Congress last year. It’s been a lifeline for unemployed freelancers and gig workers who don’t normally qualify for unemployment insurance, but it’s also a boon for criminals who use stolen identities to make claims. Nearly 800,000 of the 1.4 million claims that Ohio has received through this program have been flagged for potential fraud.
Scams are so widespread that the US Department of Justice is setting aside money to hire more prosecutors. In New York alone, the Department of Labor says it has referred “hundreds of thousands of fraud cases” to federal prosecutors. The state says it has blocked $ 5.5 billion in fraudulent claims, while New Jersey says it has prevented $ 2.5 billion from flowing into the hands of criminals.
Despite those efforts, a government watchdog agency says not enough states are taking the necessary steps to prevent fraud.
In its memo last week, the Office of Inspector General of the United States Department of Labor said that late last year, 22 of the 54 national and territorial workers still had not made its repeated recommendation to participate in a data exchange led by the National Security Agency. followed. Association of National Employment Services.
That system is designed to monitor Social Security numbers used in claims to see if they are used in multiple states or linked to dead people or other scam methods. The office said it found $ 5.4 billion in fraudulent payments from March to October.
Most of that, $ 3.5 billion, came from claims using the same social security numbers in multiple states. A number was used for claims in 40 states. Twenty-nine of the states paid those claims, totaling more than $ 220,000.
“The Department must take immediate action and increase efforts to ensure that (states) implement effective controls to reduce fraud in these high-risk areas,” the Inspector General warned Labor officials.
The people whose identities are used to claim improper benefits often don’t find out until they receive their tax returns.
Andrew Heidtke received a letter from the Wisconsin Department of Workforce Development in September informing him that unemployment claims he had never asked for were pending.
“I had no idea what was going on,” said Heidtke, who works as an administrative assistant for a technical lobby organization. “I thought it was spam at first.”
Another victim was 99-year-old Harry Hollingsworth from Strongsville, Ohio. The retired factory worker in the elevator car received a form in late January showing that he had received $ 3,156 in benefits. Hollingsworth passed away recently, and his son, Jim Hollingsworth, said the false claim created a lot of hassle.
“Looks like the state, they dropped the ball all the way on here,” he said.
In its own survey of state governments, the AP found that many do not disclose the extent of the fraud. Some officials were concerned that providing information, however general, could allow criminals to further exploit their systems.
President Joe Biden’s administration pledges to reduce unemployment fraud even as it tries to extend benefits until September. As part of previous legislation, the government is sending states $ 200 million to combat it.
That would be welcome in Virginia, where House Minority Leader Todd Gilbert, a Republican, said the legislature’s watchdog should investigate how the state allowed $ 40 million in bogus payments through inmate defrauding.
“How many desperate people, fired through no fault of their own, could have been helped with that money?” he asked. “It’s maddening.”
Mulvihill reported from Cherry Hill, New Jersey.
Associated Press Writers Kimberlee Kruesi in Nashville, Tennessee; Sarah Rankin in Richmond, Virginia; Todd Richmond in Madison, Wisconsin; and Casey Smith in Indianapolis contributed.