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Watchdog: COVID-Era Unemployment Fraud Topped $45 Billion

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Unemployment Claim Application | Image by Shutterstock

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Roughly $45.6 billion was paid out in fraudulent unemployment claims from March 2020 to April 2022, according to a report by the Department of Labor’s (DOL) Office of the Inspector General released Thursday.

The latest estimate is nearly $30 billion more than the $16 billion in potentially fraudulent unemployment payments that the inspector general estimated had been paid out from March through October 2020.

The increased estimate includes a range of potentially fraudulent areas of activity: applications from the same Social Security number in multiple states, claims filed with the information of the deceased, or claims filed with suspicious email addresses.

The previous $16 billion estimate accounted for payments tied to Social Security numbers of federal prisoners. The inspector general said in Thursday’s memo that it could not take into account that data for its latest estimate because of a lack of new figures from the Federal Bureau of Prisons.

The bureau declined to provide updated data because of the burden the request would create on its resources and technological platform, according to the inspector general report.

Fraudsters took advantage after Congress expanded the unemployment system to compensate those forced out of work by business closures starting in March 2020.

Within five months, more than 57 million people filed claims for unemployment benefits, the inspector general’s office said. During the same period, Congress also passed financial aid packages increasing the amount paid out to people through unemployment benefits and expanding eligibility.

State unemployment agencies were overwhelmed with the extreme numbers of claims and relaxed some requirements to more quickly disburse money to those who had lost their jobs.

The inspector general’s office said that nearly a million Social Security numbers were used by people who filed for benefits in two or more states, resulting in $29 billion in benefits paid to an individual from more than one state.

Nearly 206,000 Social Security numbers of deceased people were used to receive more than $139 million in potentially fraudulent benefits. Another 1.7 million Social Security numbers associated with suspicious email addresses were used to file for $16.2 billion in benefits.

“Hundreds of billions in pandemic funds attracted fraudsters seeking to exploit the UI program – resulting in historic levels of fraud and other improper payments,” Inspector General Larry Turner said in a statement.

A total of $872.5 billion in pandemic-related unemployment benefits have been paid since March 2020, the inspector general’s office estimates.

The latest $45.6 billion fraud estimate may also be low because the watchdog report warns that the department’s Employment and Training Administration has not taken “sufficient action” to implement additional safeguards, leaving it susceptible to future fraud.

“While these [numbers] are shocking and huge, they fall far short of what we expect these numbers to be,” said Matt Weidinger, a senior fellow at the American Enterprise Institute think tank.

Over 1,000 people have been charged with fraud for stealing billions through the government’s unemployment insurance program.

“This milestone of 1,000 individuals being charged with crimes involving UI fraud and the identification of $45.6 billion in potentially fraudulent UI payments highlights the magnitude of this problem,” said Inspector General Turner.

Approximately 190,000 investigations have been opened into possible unemployment insurance fraud.

Lawmakers on both sides of the aisle said the report should push state and federal officials to pass reforms to prevent fraud in the future.

“I’ve long said we need a national set of technology and security standards for state systems to better prevent this kind of fraud and we’re going to keep working to get our reforms passed,” said Sen. Ron Wyden (D-OR), who chairs the Senate Finance Committee.

“The government has an obligation to taxpayers to recover as much of this stolen money as possible,” said Sen. Susan Collins (R-ME).

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