The new estimate is a dramatic increase from the roughly $16 billion in potential fraud identified a year ago and shows the enormous task still ahead of Washington as it tries to trace the losses, recover the funds and bring criminals to book. responsible for stealing from a vast array of federal relief programs.
The report, issued by the Labor Department’s inspector general, paints a grim portrait of the nation’s unemployment assistance program launched under the Trump administration in 2020. The weekly benefits helped more than 57 million families in just the first five months of the crisis — However, the program quickly emerged as a tempting target for criminals.
To siphon off the funds, the scammers allegedly submitted billions of dollars in unemployment claims in multiple states at once and relied on suspicious, hard-to-trace emails. In some cases, they used more than 205,000 Social Security numbers that belonged to dead people. Other suspected criminals received benefits using the identity of inmates who were not eligible for assistance.
But watchdog officials cautioned that their accounting may still be incomplete: They said they could not access more up-to-date federal inmate data than the Justice Department and acknowledged that they focused their report only on “high-risk” areas for fraud. . The two factors raised the prospect that additional billion-dollar thefts could be uncovered in the coming months.
The government also announced on Thursday that it had reached the “milestone” of charging 1,000 people for crimes involving unemployment benefits during the pandemic. Kevin Chambers, the Justice Department’s director of coronavirus enforcement, described the situation in a statement as an “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 Labor Department spokesman pointed to a response letter from the agency included in the inspector general’s report. The agency said it is “committed” to helping states “combat the ever-changing and new types of sophisticated fraud affecting the user interface system.” He pointed to grants and other recent guidance intended to help states improve their systems for assigning and tracking claims.
The Covid Money Trail
It was the biggest emergency spending spree in US history: Two years, six laws and more than $5 trillion meant to break the deadly grip of the coronavirus pandemic. The money saved the US economy from disaster and put vaccines into millions of guns, but it also spawned unprecedented levels of fraud, abuse and opportunism.
In a year-long investigation, The Washington Post follows the Covid money trail to figure out what happened to all that cash.
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The new report on unemployment fraud underscores the persistent 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 series of years tracking spending called the Covid Money Trail.
The scope of that theft was massive: Earlier this week, federal prosecutors indicted 47 defendants in an entirely different scheme that targeted a free meal program for needy children. The organization, Feeding Our Future, allegedly stole more than $250 million from the meal program in what the Justice Department described as the largest fraud case targeting coronavirus aid to date.
Federal investigators have also raised alarms and brought charges involving about $1 trillion in loans and grants meant to help small businesses. But theft isn’t the only issue: In some cases, generous government aid has proven ineffective or helped fund pet projects that had nothing to do with the coronavirus response, The Post found. Republican governors, for example, tapped a $350 billion program to bolster their crisis response for a wide range of controversial political causes, including tax cuts and immigration crackdowns;
Beginning in 2020, Congress expanded unemployment benefits to meet the size of the crisis. Lawmakers allowed a wider range of Americans who were out of work, including contractors for gig economy companies like Uber, to collect unemployment benefits 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 crush of applications — amid historic unemployment — quickly overwhelmed the state workforce agencies that administer the program. Many of these services had been neglected for years, with underfunded staff relying on decades-old computers to process a record number of requests for financial support. Millions of Americans saw massive delays in receiving aid as a result, creating chaos easily exploited by fraudsters, many of whom stole the identities of innocent Americans to receive weekly checks in their names.
‘A magnet for con artists’: Scam siphoned off billions in 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 Labor Department’s inspector general.
Studying the program between March and October 2020, the inspector general initially found more than $16 billion in potential fraud in key high-risk areas. But the watchdog recently began warning that the total was likely to rise, perhaps significantly. In testimony to Congress in March, Turner said there could be $163 billion in overpayments, a term that includes fraud as well as money mistakenly sent to innocent Americans. The amount was a projection, based on a sample of federal spending to calculate total lost funds among the nearly $900 billion in unemployment payments made during the pandemic.
On Thursday, federal watchdogs combined their latest assessment with fresh criticism of the Labor Department, raising concerns that investigators’ access to state unemployment data — to detect further fraud — could be compromised after 2023. The problem, which dating back to an internal government The dispute, which The Post reported on this year, previously prompted the inspector general to raise concerns about his ability to exercise oversight.
But the Ministry of Labor in its official response called the claim “unfair”, citing the fact that it still needs to revise existing regulations. Separately, a White House official said Thursday that the administration is working to address the data access issue. The person spoke on condition of anonymity to describe private discussions.
The enormity of the theft has already sparked a wave of federal enforcement actions, including this week when a federal jury 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 aimed at cracking down on identity theft in federal programs.
On Capitol Hill, Sen. Ron Wyden (D-Ore.), who chairs the Senate Finance Committee, praised the “robust effort to track down criminals.” But the senator stressed Thursday the need for a legislative overhaul of the unemployment benefits system.
“I have long said that we need a national set of technology and security standards for government systems to better prevent this type of fraud, and we will continue to work to pass our reforms,” he said.
