The report, issued by the inspector general of the Labor Department, paints a bleak portrait of the nation’s jobless assistance program that began under the Trump administration in 2020. The weekly benefits helped more than 57 million families in just the first five months of the crisis — yet the program quickly rebounded as a tempting target for criminals.
To siphon off funds, scammers allegedly filed billions of dollars in unemployment claims in multiple states simultaneously and relied on suspicious, hard-to-trace emails. In some cases, they used more than 205,000 social security numbers belonging to dead people. Other suspected criminals gained benefits by using the identities of inmates who were not eligible for assistance.
But watchdog office officials cautioned that their accounting may still be incomplete: They said they were unable to access more up-to-date federal prisoner data from the Justice Department, and acknowledged that they focused their report only on “high-risk” areas for fraud. The two factors raised 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 the “milestone” of charging 1,000 people with crimes involving unemployment benefits during the pandemic. Kevin Chambers, director of coronavirus-related enforcement for the Justice Department, described the situation in a statement as “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 spokesperson for the Department of Labor pointed to a response letter from the agency that accompanied the inspector general’s report. The agency said it is “committed” to helping states “combat the ever-changing and emerging types of sophisticated fraud affecting the user interface system.” It pointed to monetary grants and other recent guidance to help states improve their systems for awarding and monitoring claims.
Covid Money Trail
It was the largest burst of emergency spending in American history: Two years, six laws and more than $5 trillion aimed at breaking the deadly grip of the coronavirus pandemic. The money spared the American economy from ruin and put vaccines in millions of guns, but it also invited unprecedented levels of fraud, abuse and opportunism.
In a year-long investigation, The Washington Post follows the covid money trail to find out what happened to all that money.
The new report on unemployment fraud underscores the continuing 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, yet it quickly became a ripe target for waste, fraud and abuse, as The Post has documented in a yearlong series tracking the spending called Covid Money Trail.
The scope of this theft has been enormous: Earlier this week, federal prosecutors charged 47 defendants in a completely different scheme that targeted a program to provide free meals 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 single case of fraud targeting coronavirus aid to date.
Federal investigators have similar raised the alarm and pursued charges involving about $1 trillion in loans and grants intended to help small businesses. But theft is not the only problem: in some cases, generous government aid proved ineffective or helped finance pet projects that had nothing to do with addressing the coronavirus, The Post has found. Republican governors, for example, tapped a $350 billion program to bolster their response to the crisis for a wide range of controversial political causes including tax breaks and immigration reactions.
Beginning in 2020, Congress expanded unemployment benefits to meet the scale of the crisis. Lawmakers allowed a wider range of unemployed Americans, including contractors for gig economy companies like Uber, to collect unemployment benefits for the first time. And Washington repeatedly increased the size of those checks, at one point giving an extra $600 in weekly payments.
The glut of applications — amid historic unemployment — quickly overwhelmed the state workforce agencies that administer the program. Many of these agencies had been neglected for years, with underfunded staff relying on decades-old computers to process historic numbers of financial aid requests. Millions of Americans experienced massive delays in receiving aid as a result, creating chaos that was easily exploited by fraudsters, many of whom stole the identities of innocent Americans to get weekly checks in their names.
“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,” Larry Turner, inspector general of the Labor Department, said in a statement.
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. Witnesses to the Congress in March, Turner said there could have been $163 billion in overpayments, a term that includes fraud as well as money sent to innocent Americans. The amount was a projection, based on a sample of federal spending to calculate the total misused funds among the nearly $900 billion in unemployment payments made during the pandemic.
On Thursday, federal watchdogs combined their latest estimates with fresh criticism of the Labor Department, raising concerns that investigators’ access to state unemployment data — to further find fraud — could be at risk after 2023. The problems, which date back to an internal government dispute that The Post reported on this yearhas previously caused the inspector general to sound the alarm about his ability to oversee.
But the Ministry of Labor in its formal response described the claim as “not fair”, citing the fact that it still needs to review existing rules. Separately, a White House official said Thursday that the administration is working to resolve the data access issue. The person spoke on condition of anonymity to describe private discussions.
The sheer scale of the theft has already sparked a wave of federal enforcement actions, including this week when 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 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 “strong effort to identify criminals.” But the senator on Thursday stressed 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 state systems to better prevent this type of fraud, and we will continue to work to get our reforms passed,” he said.