US watchdog estimates $45.6 billion in pandemic unemployment fraud

US watchdog estimates $45.6 billion in pandemic unemployment fraud

A federal watchdog found Thursday that fraudsters may have stolen $45.6 billion from the National Unemployment Insurance program during the pandemic, using the Social Security numbers of deceased people and other tactics to deceive and defraud the US government.

The new estimate represents a dramatic increase from the roughly $16 billion in potential fraud identified a year ago, and illustrates the immense task still ahead of Washington as it seeks to identify losses, recover funds and to hold criminals accountable for the theft of a wide range of federal relief programs.

The report, released by the Labor Department’s inspector general, paints a grim picture of the nation’s unemployed relief program that began under the Trump administration in 2020. Weekly benefits have helped more than 57 million families in the during the first five months of the crisis. Yet the program quickly became a tempting target for criminals.

To siphon off funds, the scammers allegedly filed billions of dollars in unemployment claims in multiple states simultaneously and relied on suspicious and hard-to-trace emails. In some cases, they used over 205,000 social security numbers belonging to deceased people. Other suspected criminals obtained benefits using the identity of prisoners who were not eligible for aid.

But Oversight Office officials warned their accounting may still be incomplete: They said they were unable to access more recent data on federal prisoners from the Justice Department and acknowledged that they had only focused their report on “high risk” areas of fraud. Both factors raised the prospect that they could uncover billions of dollars in additional thefts in the coming months.

The government also announced on Thursday that it had reached the “milestone” of indicting 1,000 people for crimes involving unemployment benefits during the pandemic. Kevin Chambers, director of coronavirus enforcement for the Justice Department, described the situation in a statement as “unprecedented fraud.” The inspector general’s office, meanwhile, said it has opened about 190,000 investigation files related to unemployment insurance fraud since the start of the pandemic.

Asked about the findings, a Department of Labor spokesperson referred to a response letter from the agency attached to the inspector general’s report. The agency said it is “committed” to helping states “combat the ever-evolving and sophisticated new types of fraud that affect the unemployment insurance system.” He highlighted cash grants and other recent guidance intended to help states improve their systems for allocating and tracking claims.

The Covid Money Trail

It was the biggest burst of emergency spending in US history: two years, six laws and more than $5 trillion intended to break the deadly grip of the coronavirus pandemic. The money has spared America’s economy from ruin and put vaccines in millions of weapons, but it has also invited unprecedented levels of fraud, abuse and opportunism.

In a year-long investigation, the Washington Post is following the covid money trail to figure out what happened to all that money.

Read more

The new unemployment fraud report underscores the continuing challenge facing the federal government, two years after approving the first of about $5 trillion in response to the worst economic crisis since the Great Depression. This money helped save the economy from collapse at the start of the pandemic, but it quickly became a ripe target for waste, fraud and abuse, as The Post has documented in a series of one. year on expense tracking called Covid Money Trail.

The scale of that theft has been vast: Earlier this week, federal prosecutors indicted 47 defendants in an entirely different scheme targeting a program to provide free meals to children in need. The organization, Feeding Our Future, allegedly stole more than $250 million from the meal program in what the Justice Department has described as the largest case of fraud targeting coronavirus aid to date.

Federal investigators have also sounded the alarm and pursued charges involving an estimated $1 trillion in loans and grants meant to help small businesses. But theft isn’t the only problem: In some cases, generous government aid has proven ineffective or has helped fund pet projects that had nothing to do with the fight against coronavirus, found The Post. Republican governors, for example, tapped into a $350 billion program to bolster their crisis response to a wide range of controversial political causes, including tax cuts and immigration crackdowns.

Starting in 2020, Congress expanded unemployment benefits to address the scale of the crisis. Lawmakers have allowed a wider range of unemployed Americans, including contractors for gig-economy companies like Uber, to receive unemployment assistance for the first time. And Washington has repeatedly increased the size of those checks, at one point providing an additional $600 in weekly payments.

The influx of applications — amid historic unemployment — quickly overwhelmed state labor agencies that administer the program. Many of these agencies have been neglected for years, with underfunded staff relying on decades-old computers to process historic numbers of requests for financial support. Millions of Americans have thus seen massive delays in receiving aid, creating chaos easily exploited by fraudsters, many of whom have stolen the identities of innocent Americans to obtain weekly checks on their behalf.

‘A magnet for scammers’: Fraud diverted billions from pandemic unemployment benefits

“Hundreds of billions in pandemic funds have attracted fraudsters seeking to exploit the unemployment insurance program, resulting in historic levels of fraud and other abusive payments,” said Larry Turner, the inspector general of the Department of Labor, in a statement.

Studying the program between March and October 2020, the Inspector General initially found over $16 billion in potential fraud in key high-risk areas. But the watchdog more recently began warning that the total was likely to rise, possibly significantly. Testifying before Congress last March, Turner said there could have been $163 billion in overpayments, a term that includes fraud as well as money wrongfully sent to innocent Americans. The amount was a projection, drawing on a sample of federal spending to calculate the total mis-spent funds among the nearly $900 billion in unemployment benefits paid out during the pandemic.

Federal watchdogs on Thursday linked their latest estimate to fresh criticism of the Department of Labor, raising concerns that investigators’ access to state unemployment data – to further find fraud – could be at risk after 2023. The issue, which dates back to an internal government dispute The Post reported on this year, had previously prompted the inspector general to sound the alarm about his ability to carry out oversight.

But the Labor Department, in its official response, called the claim “not fair”, citing the fact that it has yet to revise existing regulations. Separately, a White House official said Thursday that the administration was working to resolve the data access issue. The individual spoke on condition of anonymity to describe private discussions.

The sheer scale of the theft has already sparked a wave of federal enforcement action, including this week when a federal court sentenced an Illinois man to 39 months in prison for fraudulently obtaining unemployment benefits during his incarceration. The Biden administration has also stepped up work to address the problem, including considering new government policies to address identity theft in federal programs.

On Capitol Hill, Sen. Ron Wyden (D-Ore.), who chairs the Senate Finance Committee, praised “extensive efforts to identify criminals.” But the senator stressed on Thursday the need for a legislative overhaul of the unemployment compensation system.

“I have long said that we need a national set of technology and security standards for state systems to better prevent this type of fraud, and we will continue to work to pass our reforms,” he said. he declares.

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