COLUMBUS, Ohio (AP) – With the floodgates set to open another round of unemployment benefits, states are being attacked by a new wave of fraud as they struggle to update security systems and block scammers who have already diverted billions of dollars from pandemic. related unemployment programs.
The fraud is robbing taxpayers, delaying legitimate payments and turning thousands of Americans into unwitting victims of identity theft. Many states have failed to adequately protect their systems, and an analysis by The Associated Press concluded that some would not even publicly acknowledge the extent of the problem.
The big scam comes from the previous identity theft from banks, credit rating agencies, healthcare systems and retailers. Fraud perpetrators, sometimes in China, Nigeria or Russia, buy personally identifiable information stolen on the dark web and use it to flood state unemployment systems with false claims.
The U.S. Department of Justice is investigating unemployment fraud by “transnational criminal organizations, sophisticated domestic actors and individuals across the United States,” said Joshua Stueve, a spokesman for the department’s criminal division.
The Department of Labor’s inspector general’s office estimates that more than $ 63 billion has been paid in error through fraud or errors – about 10% of the total amount paid for coronavirus pandemic-related unemployment programs since March.
“We are all learning that there is a fraud epidemic,” said US deputy Kevin Brady of Texas, a Republican on the House’s powerful Forms and Means Committee. Brady said the $ 63 billion estimate “is larger than the Department of Homeland Security’s entire budget.”
“These are scary levels of fraud,” he said.
California has been the biggest target, with about $ 11 billion in fraudulent payments and an additional $ 19 billion in suspicious accounts. Colorado paid almost as much to scammers – estimated at $ 6.5 billion – as to people who filed for legitimate unemployment.
Other estimates, according to AP reports in every state, 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.
Fraud across the country has fed on double vulnerabilities: a flood of unemployment claims since the beginning of the pandemic that has overwhelmed state unemployment agencies and old-fashioned benefit systems that are easy prey for cunning and persistent criminals.
In Ohio, weekly first jobless claims ranged from 17,000 to more than 40,000 during the pandemic. But since the end of last month, those complaints have exceeded 140,000 in a few weeks, with many of them considered fraudulent. The state paid at least $ 330 million in fraudulent pandemic unemployment insurance claims.
Trying to catch so many fake claims delays payments to Ohio citizens who are legitimately in need of help. In Columbus’ suburb of Upper Arlington, Cynthia Sbertoli was earning $ 228 a week after she was released in March from her job at a nonprofit organization that runs high school student exchange programs.
Her benefits were suspended in January after she informed the state that someone had tried to use her identity in a coup to claim the benefits. She thought the problem was resolved, but she has yet to see the renewal of her benefit checks, which she and her husband use to help pay for a son’s vision and hearing therapy.
“It is not a good way to care for people,” said Sbertoli, 49.
In Indiana, Kentucky and Maryland, officials said that in certain weeks of the new year, at least two-thirds of complaints received were classified as suspicious due to problems with identity verification. It is not the first contact with a serious fraud in Maryland. In July, officials said they discovered a large criminal company that stole more than $ 500 million in unemployment benefits.
Among the states most affected are those participating in the Pandemic Unemployment Assistance program, adopted by Congress last year. It has been a lifeline for unemployed freelancers and concert workers who do not normally qualify for unemployment insurance, but it has also been a boon for criminals who use stolen identities to make claims. Almost 800,000 of the 1.4 million complaints that Ohio received through this program were marked as possible fraud.
The scams have spread so widely that the U.S. Department of Justice is setting aside money to hire more prosecutors. In New York alone, the Department of Labor claims to have forwarded “hundreds of thousands of fraud cases” to federal prosecutors. The state says it has blocked $ 5.5 billion in fraudulent claims, while New Jersey claims to have prevented $ 2.5 billion from falling into the hands of criminals.
Despite these efforts, a government enforcement agency says few states are taking the necessary steps to prevent fraud.
In its memorandum last week, the Office of the Inspector General of the US Department of Labor said that, at the end of last year, 22 of the 54 state and territorial workforce agencies were still not following his repeated recommendation to join a data exchange administered by the National Association of State Workforce Agencies.
This system is designed to check Social Security numbers used in claims to see if they are being used in multiple states, or are linked to dead people or other methods of fraud. The office said it found $ 5.4 billion in fraudulent payments from March to October.
Most of this, $ 3.5 billion, came from claims that used the same Social Security numbers in several states. A number was used in claims in 40 states. Twenty-nine of the states paid these claims, totaling more than $ 220,000.
“The Department needs to take immediate action and increase its efforts to ensure (states) that effective controls are in place to mitigate fraud in these high-risk areas,” warned the inspector general to Labor officials.
People whose identities are used to claim improper benefits usually don’t find out until they receive their tax returns.
Andrew Heidtke received a letter in September from the Wisconsin Department of Workforce Development notifying him that unemployment claims for which he never applied were being processed.
“I had no idea what was going on,” said Heidtke, who works as an administrative assistant for an engineering lobby organization. “At first, I thought it was just spam.”
Another victim was Harry Hollingsworth of Strongsville, Ohio, 99. The retired worker at the elevator car factory received a form in late January showing that he had received $ 3,156 in benefits. Hollingsworth died recently, and his son, Jim Hollingsworth, said the false statement created a great deal of annoyance.
“It looks like the state, they dropped the ball completely,” he said.
In its own survey of state governments, AP found that many do not publicly disclose the level of fraud. Some officials expressed concern that providing any information, no matter how general, could give criminals an opening to further explore their systems.
President Joe Biden’s government is pledging to reduce unemployment fraud while trying to extend benefits until September. As part of the previous legislation, the government is sending the states $ 200 million to fight 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 false payments through inmate-related scams.
“How many desperate people, fired without their own fault, could have been helped with that money?” he asked. “It is maddening.”
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Mulvihill reported from Cherry Hill, New Jersey.
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Associated Press writers Kimberlee Kruesi in Nashville, Tennessee; Sarah Rankin in Richmond, Virginia; Todd Richmond in Madison, Wisconsin; and Casey Smith in Indianapolis contributed.