Pandemic unemployment fraud estimate reaches $46.5 billion

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 the dead and other tactics to mislead and mock the U.S. government.

The new estimate is a dramatic increase from the roughly $16 billion in potential fraud identified a year ago, and illustrates the immense task that still awaits Washington as it tries to pinpoint the losses, recover the money. and hold criminals responsible for stealing a vast array of federal emergency aid programs.

The report, issued by the Inspector General of the Department of Labor, paints a stark portrait of the country’s unemployment relief program that began under the Trump administration in 2020. The weekly benefits helped more than 57 million families in its first five months alone. of the crisis – yet the program quickly emerged as a tempting target for criminals.

To siphon money, scammers allegedly filed billions of dollars in unemployment claims in multiple states at once and relied on suspicious, elusive emails. In some cases, they used more than 205,000 Social Security numbers that belonged to dead people. Other suspected criminals obtained benefits using the identities of prisoners who were not eligible for assistance.

But watchdog office officials warned that their accounting records may still be incomplete: They said they couldn’t access more updated federal inmate data from the Justice Department, acknowledging that they focused their report only on “high-risk” areas. for fraud. The two factors raised the prospect that they could uncover billions of dollars in additional theft in the coming months.

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

Asked about the findings, a spokesman for the Department of Labor pointed to a reply letter from the agency that accompanied the inspector general’s report. The agency said it is “committed” to helping states “fight the ever-changing and new types of sophisticated fraud affecting the UI system.” It pointed to monetary grants and other recent guidelines designed to help states improve their systems for granting and verifying claims.

The Covid Money Path

It was the largest 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 saved the U.S. economy and brought vaccines into millions of weapons, but it also led to unprecedented levels of fraud, abuse and expediency.

In a year-long investigation, The Washington Post follows the covid money trail to find out what happened to all that money.

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The new unemployment fraud report highlights the ongoing challenge facing the federal government, two years after it approved the first of about $5 trillion in response to the worst economic crisis since the Great Depression. That money helped save the economy from collapse early in the pandemic, but it quickly became a ripe target for waste, fraud and abuse, as The Post has documented in a year-long spending series, the Covid Money Trail.

The scale of that theft was staggering: Earlier this week, federal prosecutors indicted 47 defendants in an entirely different settlement that targeted a program to provide free meals to needy children. The organization, Feeding Our Future, has reportedly stolen more than $250 million from its meal program in what the Justice Department described as the largest single fraud case to date targeting coronavirus aid.

Federal investigators have similarly sounded the alarm and filed charges related to about $1 trillion in loans and grants intended to help small businesses. But theft isn’t the only problem: In some cases, the government’s generous aid proved ineffective or helped fund pet projects unrelated to tackling the coronavirus, The Post found. For example, Republican governors have tapped into a $350 billion program designed to bolster their response to the crisis for: a wide variety of controversial political causes, including tax cuts and immigration crackdowns.

Beginning in 2020, Congress expanded unemployment benefits to cope with the magnitude of the crisis. Lawmakers for the first time allowed a larger number of unemployed Americans, including contractors from gig economy companies like Uber, to raise jobless aid. And Washington repeatedly increased the size of those checks, at one point bringing in an additional $600 in weekly payments.

The massive applications — amid historic unemployment — quickly overwhelmed the government agencies running the program. Many of those agencies had been neglected for years, with underfunded staff relying on decades-old computers to process a historic number of requests for financial aid. As a result, millions of Americans saw massive delays in receiving aid, creating chaos that could be easily exploited by fraudsters, many of whom stole the identities of innocent Americans to get weekly checks in their name.

‘A Magnet for Scammers’: Fraud Raises Billions from Pandemic Unemployment Benefits

“Hundreds of billions in pandemic funds attracted fraudsters seeking to exploit the UI program — resulting in historic levels of fraud and other improper payments,” said Larry Turner, the Department of Labor’s inspector general, in a statement.

Studying the program between March and October 2020, the inspector general initially found more than $16 billion in potential fraud in key risk areas. But the watchdog recently began warning that the total was likely to rise, perhaps significantly. Testing before Congress in March, Turner said there may have been $163 billion in overpayments, a term that includes both fraud and money wrongly sent to innocent Americans. The amount was a projection, based on a sample of federal spending to calculate the total misspent of the nearly $900 billion in unemployment benefits paid during the pandemic.

On Thursday, federal watchdogs linked their latest estimate with new criticism of the Department of Labor, raising concerns that researchers’ access to state unemployment data — to further detect fraud — could be compromised after 2023. The issue, which dates back to an internal government dispute reported by The Post this year, has previously prompted the Inspector General to sound the alarm over his ability to oversee.

But the Department of Labor described the allegation in its formal response as “not fair”, citing that it has yet to review existing regulations. Separately, a White House official said on Thursday that the administration is working to address the data access issue. The person spoke on condition of anonymity to describe private conversations.

The sheer scale of the theft has already sparked a spate of federal enforcement actions, including this week when a federal court sentenced an Illinois man to 39 months in prison for fraudulently obtaining unemployment benefits while incarcerated. The Biden administration has similarly stepped up its work to address the problem, including by considering new government policies designed to address identity theft in federal programs.

On Capitol Hill, Senator Ron Wyden (D-Ore.), who chairs the Senate Finance Committee, praised the “strong effort to identify criminals.” But the senator on Thursday stressed the need for a legislative overhaul of the unemployment benefit 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 push through our reforms,” ​​he said.

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