Pandemic unemployment fraud estimated to reach $46.5 billion

Fraudsters may have stolen $45.6 billion from the country’s unemployment insurance program during the pandemic, federal regulators found on Thursday, using the Social Security numbers of deceased people and other tactics to trick and deceive the U.S. government.

The new estimate is a big jump from the roughly $16 billion in potential fraud identified a year ago, suggesting Washington still faces a huge task as it tries to pinpoint losses, recover funds and hold criminals from a sprawling A range of federal relief programs.

The report, released by the Labor Department’s inspector general, paints a grim picture of the country’s jobless aid program starting in 2020 under the Trump administration. In the first five months of the crisis alone, the weekly benefits helped more than 57 million families—yet, the program quickly became a tempting target for criminals.

To drain the funds, scammers allegedly filed billions of dollars in unemployment claims in multiple states at the same time and relied on suspicious, hard-to-trace emails. In some cases, they used more than 205,000 Social Security numbers belonging to the deceased. Other suspects exploited the status of inmates who were not eligible for assistance.

But watchdog officials warned that their accounts may still be incomplete: They said they could not get more updated federal prisoner data from the Justice Department, and admitted they only focused their reports on “high-risk” areas of fraud. These two factors increase 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 a “milestone” of charging 1,000 people with crimes involving unemployment benefits during the pandemic. Kevin Chambers, the Justice Department’s coronavirus-related enforcement director, described the situation in a statement as “unprecedented fraud.” Meanwhile, the Office of the Inspector General said it has opened about 190,000 investigations related to unemployment insurance fraud since the pandemic began.

When asked about the findings, a Department of Labor spokesman pointed to a response letter from the agency included in the inspector general’s report. The agency said it was “committed” to helping states “combat new and evolving sophisticated fraudulent practices affecting UI systems.” It pointed to monetary grants and other recent guidance aimed at helping states improve their systems for awarding and monitoring claims.

Covid Money Road

It’s the largest burst of emergency spending in U.S. history: two years, six laws and more than $5 trillion aimed at breaking the deadly grip of the coronavirus pandemic. That money saved the U.S. economy from ruin and put vaccines in the arms of millions, but it also invited unprecedented levels of fraud, abuse, and opportunism.

In a yearlong investigation, The Washington Post is following the coronavirus money trail to find out where all that cash is going.

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The new report on unemployment fraud highlights the ongoing challenges the federal government faces after it approved roughly $5 trillion in funding two years ago in response to the first funding in the worst economic crisis since the Great Depression. That money helped rescue the economy from collapse early in the pandemic, but it quickly became a ripe target for waste, fraud and abuse, as The Washington Post documents in its year-long series on tracking spending, Called the Covid Money Trail.

The scope of the theft has been determined: Earlier this week, federal prosecutors charged 47 defendants in an entirely different scheme to provide free meals to children in need. The group “Feed Our Future” allegedly stole more than $250 million from meal plans in what the Justice Department said was the largest single fraud against coronavirus aid to date.

Federal investigators are also sounding the alarm and pursuing allegations involving roughly $1 trillion in loans and grants designed to help small businesses. But theft isn’t the only problem: The Washington Post found that in some cases government generosity proved ineffective or helped fund pet programs unrelated to the coronavirus response.For example, Republican governors have tapped into a $350 billion plan to bolster their response to the crisis A range of controversial political reasons, including tax cuts and immigration crackdowns.

Starting in 2020, Congress expanded unemployment benefits in response to the severity of the crisis. For the first time, lawmakers have allowed a wider range of unemployed Americans, including contractors for gig economy companies such as Uber, to receive unemployment benefits. Washington has repeatedly increased the size of these checks, at one point offering an additional $600 in weekly payments.

The flood of applications — amid historic unemployment — quickly overwhelmed the state workforce agency that administers the program. Many of these agencies have been neglected for years, with underfunded staff relying on computers that have been in use for decades to process a historic number of requests for financial support. Millions of Americans have thus experienced huge delays in receiving aid, creating a mess easily exploited by fraudsters, many of whom have stolen the identities of innocent Americans to get weekly checks in their names.

‘Magnet for con artists’: Fraud siphons billions from pandemic unemployment benefits

“Hundreds of billions of pandemic funds have attracted fraudsters seeking to exploit UI programs, leading to historic levels of fraud and other improper payments,” Labor Department Inspector General Larry Turner said in a statement.

The Inspector General studied the scheme between March 2020 and October 2020 and initially found more than $16 billion in potential fraud in key high-risk areas. But regulators have recently begun to warn that the total could rise, perhaps even significantly. In March, Turner testified before Congress that there may have been $163 billion in overpayments, including fraud and money mistakenly sent to innocent Americans. The amount is a forecast that relies on a sample of federal spending to calculate the total misuse of nearly $900 billion in unemployment benefits paid during the pandemic.

Federal regulators on Thursday combined their latest estimates with fresh criticism of the Labor Department, raising concerns that investigators’ access to state unemployment data to further uncover fraud could be in jeopardy beyond 2023. The problems can be traced back to a controversy reported this year by the Washington Post, an internal government, that previously prompted the inspector general to issue warnings about its ability to oversee it.

But the Labor Department called the argument “unfair” in its official response, arguing that it still had to revise existing regulations. Separately, a White House official said Thursday that the administration is working to resolve the issue of accessing the data. The person, who asked not to be named, described private discussions.

The magnitude of the theft has sparked a wave of federal enforcement actions, including this week a federal court sentenced an Illinois man to 39 months in prison for fraudulently obtaining unemployment benefits while in prison. The Biden administration has similarly stepped up efforts to address the problem, including considering new government policies aimed at combating identity theft in federal programs.

On Capitol Hill, Senator. Senate Finance Committee Chairman Ron Wyden (D-Ore.) praised “strong efforts to identify criminals.” But the senator on Thursday stressed the need for legislative reforms to the unemployment benefit system.

“I’ve said long ago that we need a national system of national technology and security standards to better prevent this kind of fraud, and we’ll continue to work to get our reforms through,” he said.

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