COLUMBUS, Ohio (AP) – With doors slated to open in another round of unemployment benefits, states are being attacked with a new wave of fraud as they shoot to upgrade security systems and block scammers who have already siphoned off billions of dollars from the pandemic. jobless related programs.
Fraud is running away from taxpayers, delaying legitimate payments and turning thousands of Americans into involuntary victims of identity theft. Many states have failed to adequately safeguard their systems, and according to a review by The Associated Press, some will not even publicly acknowledge the scope of the problem.
The massive drill comes from the previous identity theft of banks, credit rating agencies, health systems and retailers. Fraudsters, sometimes in China, Nigeria, or Russia, buy personally identifiable information stolen from the dark web and use it to flood fake state unemployment systems.
The U.S. Department of Justice is investigating unemployment fraud by “transnational criminal organizations, sophisticated national actors, and people 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 unduly paid for fraud or error, about 10 percent of the total amount paid by the pandemic-related unemployment programs. coronavirus since March.
“We are all aware that there is an epidemic of fraud,” said U.S. Rep. Kevin Brady of Texas, a Republican on the House’s powerful forms and media committee. Brady said the $ 63 billion estimate “is larger than the entire Department of Homeland Security budget.”
“These are terrifying levels of fraud,” he said.
California has been the biggest target, with an estimated $ 11 billion in fraudulent payments and an additional $ 19 billion in suspicious accounts. Colorado has paid almost as much to scammers (approximately $ 6.5 billion) as to people who filed legal unemployment claims.
Other estimates, according to AP reports in all states, range from several hundred thousand dollars in smaller states like Alaska and Wyoming to hundreds of millions in more populated states like Massachusetts and Ohio.
Nationwide fraud has been fueled by two vulnerabilities: a flood of unemployment benefit claims since the pandemic began, which has overwhelmed state unemployment agencies and outdated benefit systems that are easy to prey on. by cunning and persistent criminals.
In Ohio, weekly unemployment claims for the first time ranged from 17,000 to more than 40,000 during the pandemic. But since the end of last month, these claims have surpassed 140,000 some weeks, and many of them are believed to be fraudulent. The state has paid at least $ 330 million in claims for unemployment benefits for a fraudulent pandemic.
Trying to catch so many false claims delays payments to Ohioians who need help legitimately. In the Columbus neighborhood of Upper Arlington, Cynthia Sbertoli earned $ 228 a week after being fired in March from her job with a nonprofit organization that ran high school student exchange programs.
His benefits were suspended in January after he reported to the state that someone had tried to use his identity in a scam to claim benefits. She thought the problem was resolved, but has yet to see a renewal of her benefit checks, which she and her husband use to help pay for a child’s vision and hearing therapy.
“It’s just not a good way to take care of people,” Sbertoli, 49, said.
In Indiana, Kentucky and Maryland, officials have said that during certain weeks of the new year, at least two-thirds of the complaints they received were classified as suspicious because of problems verifying identities. It is not the first time with a serious fraud for Maryland. In July, officials said they had discovered a massive criminal enterprise that had stolen more than $ 500 million in unemployment benefits.
Among the states most affected are those that participated in the pandemic unemployment assistance program approved by Congress last year. It has been a lifeline for the self-employed and workers who do not normally meet the requirements for unemployment insurance, but it has also been an advantage for criminals who use stolen identities to make claims. Nearly 800,000 of the 1.4 million claims Ohio has received through this program have been labeled as possible fraud.
The scams have been so widespread that the U.S. Department of Justice is allocating 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 these efforts, a government surveillance agency says there are not enough states taking the necessary steps to prevent fraud.
In its note last week, the U.S. Department of Labor’s Office of Inspectors General said that as of late last year, 22 of the 54 state and territorial labor force agencies were still unaccounted for. its repeated recommendation to adhere to a data exchange led by the National Association of State Workforce Agencies.
This system is designed to check the Social Security numbers used in claims to see if they are used in multiple states or if they are related to dead people or other scam methods. The office said it had found $ 5.4 billion in fraudulent payments from March to October.
The largest piece of these, $ 3.5 billion, came through claims that used the same Social Security numbers in several states. A number of claims from 40 states was used. Twenty-nine of the states paid these claims, for a total of more than $ 220,000.
“The Department must take immediate action and step up its efforts to ensure (states) implement effective controls to mitigate fraud in these high-risk areas,” the inspector general warned Labor officials.
People who use their identity to claim inadequate benefits often do not find out until they receive their tax returns.
Andrew Heidtke received a September letter from the Wisconsin Department of Labor Development Development, notifying him that unemployment claims he was never applying for were being processed.
“I had no idea what was going on,” said Heidtke, who works as an administrative assistant for an engineering lobbying organization. “At first I thought it was spam at first.”
Another victim was Harry Hollingsworth, 99, of Strongsville, Ohio. The retired worker from the elevator 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 inconvenience.
“It looks like the state dropped the ball completely,” he said.
In its own survey of state governments, the PA found that many do not publicly disclose the level of fraud. Some officials expressed concern that providing information, in general, could offer criminals an opportunity to deepen their systems.
The administration of President Joe Biden is committed to reducing unemployment fraud, although it is trying to extend benefits until September. As part of previous legislation, the administration is sending states $ 200 million to combat it.
This would be welcome in Virginia, where Republican minority leader House Todd Gilbert said the legislature’s oversight agency should investigate how the state allowed $ 40 million in false payments through ‘prisoner-related scams.
“How many desperate people, fired through no fault of their own, could have been helped with this money?” he asked. “It’s crazy.”
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Mulvihill reported from Cherry Hill, New Jersey.
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The writers of the Associated Press, Kimberlee Kruesi, in Nashville, Tennessee; Sarah Rankin in Richmond, Virginia; Todd Richmond in Madison, Wisconsin; and Casey Smith in Indianapolis contributed.