About $45.6 billion in pandemic unemployment benefits may have been paid fraudulently to criminals between March 2020 and April 2022, the U.S. Department of Labor’s Office of the Inspector General said in a note on Thursday. It’s the latest report to identify widespread schemes to steal money from a variety of federal relief programs.
The updated number is a big jump from the $16 billion in potentially fraudulent unemployment payments the office cited in a June 2021 warning that looked at claims from March to October 2020. Since then, there have been increases in payments tied to people’s Social Security numbers , who filed in multiple states who were dead and who used suspicious email accounts in their claims — all considered high-risk areas.
The 2021 alert also found payments tied to social security numbers of federal prisoners to be a high-risk area. The office said in Thursday’s memo that it could not update that figure because of a lack of new data from the Federal Bureau of Prisons, which declined to provide it because of the burden the request would place on the agency’s resources and technology platform, the inspector general. the general’s office said.
Fraud within the nation’s unemployment system skyrocketed after Congress passed a historical expansion of the program to help Americans deal with the economic upheaval unleashed by the Covid-19 pandemic in March 2020. State unemployment agencies were overwhelmed with a record number of injuries and relaxed some requirements in an attempt to get the money out the door quickly for those who had lost their jobs. Within five months, more than 57 million people filed for unemployment benefits, the inspector general’s office said.
“Hundreds of billions in pandemic funds attracted fraudsters who sought to exploit the UI program — resulting in historic levels of fraud and other improper payments,” Inspector General Larry Turner said in a statement.
States and Congress subsequently tightened theirs verification requirements in an effort to combat fraud, particularly in a new temporary program that allowed freelancers, gig workers and others to collect benefits for the first time.
A key component of the relief effort was a federal weekly allowance for Americans out of work. The unemployed received a $600 per week boost from April to July 2020. Congress then revived the enhancement in late December 2020, but reduced it to $300 a week. That extension expired in September 2021, although many Republican-led states and one with a Democratic governor ended it earlier.
Lawmakers also created two other measures to help the unemployed. The Pandemic Unemployment Assistance program provided payments to freelancers, the self-employed, independent contractors and certain individuals affected by the outbreak, while the Pandemic Emergency Employment Compensation program extended payments to those who exhausted their regular government benefits. These programs also ended in September 2021.
A total of $872.5 billion in pandemic-related unemployment benefits have been paid since March 2020, the inspector general’s office estimates.
Nearly a million Social Security numbers were used by people who applied for benefits in two or more states, resulting in benefits paid from more than one state, the inspector general’s office said. They received nearly $29 billion in potentially fraudulent payments.
Nearly 206,000 Social Security numbers of deceased people were used to receive more than $139 million in potentially fraudulent benefits. And 1.7 million Social Security numbers linked to suspicious email addresses were used to file $16.2 billion in benefits.
In its previous report, the inspector general’s office found that Social Security numbers of potentially ineligible federal prisoners were used to apply for more than $267 million in benefits.
The inspector general’s office said it has had difficulty obtaining unemployment insurance data from state workforce agencies until subpoenas were issued. In some cases, the data sent was incomplete or unusable.
The inspector general’s office also took issue with the Department of Labor’s Employment and Training Administration, which oversees the unemployment insurance program, saying the agency has failed to implement the office’s previous recommendations, including working with state agencies to establish effective controls to mitigate fraud and work with Congress to require state agencies to cross-match high-risk areas.
“ETA’s lack of adequate action significantly increases the risk of even more UI payments to ineligible applicants,” the inspector general’s office wrote in the memo.
In a response to the memorandum, the agency said it continues to “actively and aggressively address fraud” in unemployment compensation programs. It said it is committed to helping states combat the “constantly changing and emerging types of sophisticated fraud.”
The inspector general’s office also announced Thursday that more than 1,000 people have been charged with crimes involving unemployment benefits fraud since March 2020, and there have been more than 400 convictions to date. It has opened more than 190,000 investigations into unemployment benefit fraud, a more than 1,000-fold increase in the scope of the office’s unemployment insurance work.
The unemployment insurance system is not the only pandemic program that fell victim to fraud in the chaos the pandemic brought.
The Small Business Administration’s Paycheck Protection Program, or PPP, was plagued by questionable lending and widespread fraud, although it succeeded in helping many businesses continue to pay their workers during the pandemic.
In total, the program provided $813.7 billion in loans to small businesses that were forgiven if the business spent the money on qualifying expenses.
The Small Business Administration’s Office of Inspector General has said more than 70,000 PPP loans totaling more than $4.6 billion may be potentially fraudulent, according to a May 2022 report.
“These loans can only be considered potentially fraudulent because the OIG has not conducted a document-by-document review of loan files to confirm or resolve the suspicious activity; however, our investigations have substantiated an unprecedented level of fraudulent activity. We are working to identify the full extent of PPP fraud,” the report read.
Separately, the Ministry of Justice has prosecuted over 150 defendants in more than 95 criminal cases and, as of May 2022, has seized over $75 million in cash proceeds as well as real estate and luxury goods.
And just this week, the department announced charges against 47 people accused of stealing $250 million from a federal program designed to provide meals to needy children during the pandemic. The order is biggest Covid-19-related fraud uncovered by investigators to date, the department said. The defendants face a variety of charges including conspiracy, fraud, money laundering and paying and receiving illegal kickbacks.
The defendants created a network of shell companies linked to the Minnesota-based nonprofit Feeding our Future to take advantage of the federal child nutrition program, which is designed to provide meals for children from low-income families, prosecutors said.