Fraud Files: Pandemic relief unemployment fraud predicted to top $60 billion; government addresses issue

InvestigateTV - It’s a system that we all pay into, federal unemployment. Now, a federal watchdog group says it believes unemployment fraud during the pandemic topped $60 billion.

After one woman’s bizarre experience, she wants to know what the government plans to do in order to prevent identity theft and fraud before the next emergency strikes.

Unexplained Unemployment Letters

A strange type of junk mail that arrived at California resident Alana Schneider’s house made her nervous and concerned.

“I thought our information was compromised,” Schneider said.

In 2020, when the country was shut down because of the pandemic and millions of Americans filed for unemployment, Schneider said strange letters started flooding her mailbox from her state’s unemployment office. The letters, Schneider said, were addressed to people she did not know.

“Over time, we started to get like stacks of these letters, and the names were just so weird. Like, the origin of the first name and the origin of the last name never matched,” Schneider said.

Schneider said she never opened them, but she recognized the envelopes as the same type of letters that her husband received when he applied for unemployment during the pandemic.

“There was like no stopping. We reported all of these, and we sent it back. We wrote, ‘attention director,’ nothing ever happened!” Schneider explained.

What Schneider found even more troubling was that some of the letters coming to her address were from out-of-state unemployment offices.

“I don’t know how things work, but like, how does someone from California get unemployment from Kentucky,” Schneider said.

Schneider’s experience matches what experts told InvestigateTV they have heard from people across the country.

Fraudsters are masters at manipulating different scenarios to see what works, as they try new scams and schemes to get unemployment insurance.

GAO Analysis of Unemployment Fraud During Pandemic

The U.S. Government Accountability Office, or GAO, recently released a new analysis highlighting several examples of unemployment insurance fraud, including claims being filed in multiple states.

In one case, a former state workforce agency employee used other identities to submit at least 197 fraudulent applications, including false addresses and inflated incomes.

In another case detailed in the GAO report, a person used stolen identities to submit at least 300 applications in 17 states and territories. The person obtained benefits from eight states and was ordered to pay more than $1.6 million in restitution. They’re also facing more than three years in prison.

The letters mailed to Schneider’s home were never addressed to her or her husband. For her, these strange letters are a security concern.

“They need to flag addresses. Like, if they see that all these people are getting something sent to one address, like that’s not right,” Schneider said.

David Williams is President of Taxpayers Protection Alliance, a consumer watchdog group. He believes the pandemic fraud and how it was handled was a colossal failure by the federal government and did not need to happen.

“There was nothing put in place at the beginning of the pandemic to make sure that these funds were spent wisely. And we’re talking about simple technology! These are computer systems that could’ve been created by a 15-year-old kid in his basement with a case of mountain dew and his hot pockets! I mean, this is not complicated computer systems that they’re creating! They just weren’t prepared for this,” Williams said.

What is the U.S. Government doing to tackle Unemployment Fraud?

Talks are mounting on Capitol Hill in Washington D.C. as lawmakers contemplate how to tackle fraud and prevention efforts.

In February, the House Oversight Committee and the House Ways and Means Committee held hearings to address waste, fraud and abuse with COVID relief programs.

“We’re going to see if there’s a way we can claw some of this money back that was stolen to fraudsters, to cyberhackers, and we’re going to see if we can hold people accountable for wrongdoing,” said U.S. Representative James Comer (R-Kentucky), chair of the House Oversight Committee.

The first hearing called several agencies, including the GAO and the U.S. Secret Service to testify and break down what went wrong.

“Criminals were prepared to exploit the pandemic, in part because for years, they were selling identities stolen from past data breaches. They were also fabricating identities using personal and financial data of real people, combined with false information,” said Secret Service Assistant Director of the Office of Investigations David Smith.

InvestigateTV found data from several state auditors and state unemployment departments that show states in every region of the country lost millions, and in some cases billions, of dollars to potential fraud. Experts predict they are just scratching the surface on the number of fraudulent payments that were distributed.

“It will be a while before the full extent of fraud is known,” GAO Head Gene Dodaro, said before Congress.

Experts also testified that changes and upgrades in unemployment systems on state and federal levels need to happen now.

“We have a decentralized system, with 53 different unemployment insurance programs. So, there were 53 opportunities for criminal fraud rings to attack the system,” National Employment Law Project CEO Rebecca Dixon, said before congress. “We need to actually make the changes that are needed so that these systems function correctly all the time. Whether it’s one family who’s suffering unemployment, or it is millions of people suffering unemployment.”

Republicans have blamed President Joe Biden’s administration for not doing enough during his time in office, while democrats have laid the blame on former President Donald Trump’s administration for not addressing fraud from the beginning. Democrats also stressed how pandemic relief programs helped millions of Americans stay afloat during a rough time period.

U.S. Senator Mike Crapo represents the state of Idaho. He said for the past two years he has tried to introduce legislation to combat fraud.

“I’d written two bills, one back in 2021, and one in 2022, and I’ll probably be writing a new one for this one, each one is kind of an improvement as things move along,” Crapo said.

Crapo explained he would like see communication between the U.S. Department of Labor and state agencies improve.

“One of the big things that really hasn’t been done yet is multiple fraudulent claims are made across multiple states and we’re not comparing among the states. So that we can see the same social security number or the same person is not making the same claim hundreds of times,” Crapo said.

After months of asking for an on-camera interview, InvestigateTV interviewed Gene Sperling, White House Coordinator of the American Rescue Plan, a plan that provided emergency grants, lending and investment to businesses and people hard by the pandemic. This month, the administration announced it’s introducing a three-part pandemic anti-fraud proposal.

“One, we have $600 million for enforcement to go after the most serious criminals. Number two, $600 million for prevention to prevent identity theft going forward. And three: funds to help victims of identity theft who wake up one day and realize someone’s stolen their identity is ruined because of it,” Sperling said.

Sperling added the proposal’s ultimate goal is to track and tackle fraud, regardless of how long it takes to bring those responsible to justice.

“The message is, if you’re sophisticated, if you think we’re going to give up because it’s taking five or six years to go after you, you are wrong. This proposal is to fund people to do long efforts, however long it takes, to catch the worst criminals, punish them and hopefully recapture some of that money and hopefully bring it back to the American taxpayer,” Sperling said.

InvestigateTV asked if the true magnitude of unemployment fraud will ever be known.

“If it’s $20 billion, that’s a huge amount of money. If it’s $80 billion it’s four times as bad. But, in some sense, we don’t need to know the exact number to know there were criminals (and not just ordinary people) cheating their government of a few hundred dollars here and there. We’re talking about international criminal syndicates, and we want to be able to go after them,” Sperling said.

InvestigateTV reached out to Schneider’s state employment development department, or the California EDD. It released the following statement:

The unprecedented fraud that occurred against every state in the country in 2020 is no longer occurring in California. California took action in 2020 to stop that type of fraud against the federal programs by launching new identity verification and other security measures to stop identity theft. In addition, the federal benefit program that was the target of that type of fraud in 2020 has since ended.

Fraudsters attacked every benefit system in the nation in 2020 and California took aggressive action to put a stop to it. EDD’s mailed letters provide an additional check to help protect legitimate customers by notifying them of scammers trying to steal identities.

The California Employment Development (EDD) is dedicated to combating fraudulent activity and protecting benefits for legitimate California workers in need. We encourage Californians to remain vigilant and safeguard financial and personal information to help prevent fraud, including identity theft.

Those who received documents from EDD but did not file a claim may be victims of identity theft or attempted identity theft. Benefit fraud can be reported by visiting Report Fraud in Ask EDD.

Please refer to our Help Fight Fraud webpage that has a lot of useful information. Also, our Response to Fraud webpage goes in-depth on investigations, arrests, and funds seized or recovered.

Thank you,

EDD Media Services

As for Schneider’s case, the strange letters eventually stopped coming to her house. However, she still worries her family’s information and security may have been compromised. For her, strengthening our government’s fraud detection against cybercriminals cannot wait.

“There needs to be a way of tracking who applies for these benefits because clearly there’s something wrong,” Schneider said.

In its report, the GAO acknowledged the Department of Labor had taken a few steps to address unemployment fraud risks. It added, however, that the agency had not yet developed a thorough anti-fraud strategy, including six recommendations it had given the Department of Labor in October 2021. Those recommendations include identifying, assessing the impact of, and prioritizing unemployment insurance fraud risks.

The GAO said these are essential pieces to inform an overall antifraud strategy. Without an antifraud strategy, the GAO said the Department of Labor is not able to ensure that it is addressing the most significant fraud risks facing the unemployment insurance system.

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