Watchdogs Say Unemployment Fraud Likely Topped $191 Billion

Conservative News DailyFebruary 9, 2023

By Brett Rowland (The Center Square).

A little more than 1 out of every 5 dollars distributed during the pandemic in unemployment insurance payments could have been fraudulent, mostly fraud.

Larry Turner, the inspector general for the U.S. Department of Labor, said Wednesday that of the more than $888 billion in total federal and state unemployment insurance benefits distributed during the pandemic at least $191 billion could have been improper payments, “with a significant portion attributable to fraud.” Turner addressed members of House Ways and Means Committee during an hearing. That’s up from a previous estimate of $163 billion.

“The reliance solely on claimant self-certifications without evidence of eligibility and wages during the program’s first nine months rendered the Pandemic Unemployment Assistance program extremely susceptible to fraud,” He said.

Pandemic Unemployment Assistance provided unemployment insurance benefits for people who were not traditionally eligible, such as gig workers and self-employed workers.

The U.S. Department of Labor oversees the administration of unemployment insurance by states. The joint federal-state program has been in place for over eight decades and serves as a safety net to people who lose their jobs due to no fault of their own. An assortment of factors contributed to an increase in fraudulent payments and improper payments when the pandemic struck. A 2022 audit found that fraudulent claims were paid 60.5% of the time from March 28, 2020, to Sept. 30, 2020.

“This created multiple high-reward targets where an individual could make a fraudulent claim with relatively low risk of being caught,” Turner said. “For example, as time went on, one fraudster could have been issued several UI debit cards, with tens of thousands of dollars on each card.”

Turner used the example of Turner who cited Turner as an example. Turner said that a person filed a claim using a three-bedroom house, which was also shared with 90 other claims. This same person also shared an email address with 145 claims. That person was involved in 235 additional claims in three states. The person also got benefits on 87 of these claims. California paid $1,569.762. California stopped payment 164 days after the initial payment when officials were unable to verify the person’s identity, according to that 2022 Audit.

Part of the problem was caused by the nature of crisis. The pandemic and governments’ response to it put millions of people out of work in a matter of weeks. Unemployment levels rose to historic levels. The Department of Labor reported 282,000 first unemployment claims on March 14, 2020. Initial claims rose by 100% in just a few weeks. “far higher than state systems were designed to handle,” Turner wrote Testimony. The Department of Labor reported 57.4 Million Initial Claims in just five months. This is the highest number of initial claims since 1967, when the agency started tracking unemployment insurance data.

The pandemic was not preceded by problems with the unemployment insurance program. Turner claimed that the program was among the most inept payment rates in the federal government. For 15 of the 19 previous years, it had been higher than 10%. The agency estimates that the improper payment rate has been 18.71% and 21.52% in the past two years.

Gene Dodaro, the Comptroller General United States of America, stated that although some improvements have been made in order to combat frauds, there is still much to do.

“I think we’re slightly better prepared, but not fully prepared for the next crisis,” He said. “A number of our recommendations at the Labor Department have been not fully implemented yet. I think states are trying to make improvements – there have been some improvements that have been made, but they’ve all be ad hoc. There hasn’t been a systematic approach to doing this.”

He stated that while the government should try to recover as much fraud possible, prevention would be more effective.

“The only way to effectively deal with this is to prevent it up front,” Dodaro said.

Michael Horowitz, chairman of the Pandemic Response Accountability Committee, told the House Ways and Means Committee that the fraud was not limited to U.S. residents.

“One of the biggest challenges we have is following the fraud through overseas gang activity and fraudsters,” Horowitz said. “The Secret Service has reported that they’ve seen that occur through entities in Nigeria, China, Russia. That will be our biggest challenge.”

U.S. Rep. Vern Bucanan (Republican from Florida) asked for an estimate on the cost of this fraud to U.S. taxpayers.

Horowitz denied that such an estimate was possible.

“That’s among the hardest fraud to find, track and figure out,” He said. “Because it is through overseas networks … the process is very challenging.”

Syndicated with permission of The Center Square