Pandemic unemployment scam estimate hits $46.5 billion

A federal watchdog found Thursday that scammers may have stolen $45.6 billion from the country’s unemployment insurance program during the pandemic, using dead people’s Social Security numbers and other tactics to deceive and defraud the U.S. government.

The new estimate is a dramatic increase from the roughly $16 billion in potential fraud cases identified a year ago, and it illustrates the immense task Washington has ahead of it in trying to locate the losses that stole the funds and hold criminals accountable for the theft of vast amounts of money Series of federal assistance programs.

The report, issued by the Labor Department’s inspector general, paints a bleak picture of the country’s unemployment benefit program, which began in 2020 under the Trump administration. The weekly benefits helped more than 57 million families in the first five months of the crisis alone – but the program quickly emerged as a tempting target for criminals.

In order to siphon off money, scammers allegedly filed billions of dollars in unemployment claims in several states at the same time, relying on suspicious, difficult-to-trace emails. In some cases, they used more than 205,000 social security numbers belonging to dead people. Other suspected criminals obtained benefits by using the identities of prisoners who were not eligible for help.

However, officials at the Watchdog Office warned their accounting may still be incomplete: They said they were unable to access more recent federal prisoner data from the Justice Department and acknowledged they only limited their report to areas of “high risk” for fraud focused. The two factors raised the prospect that they could uncover billions of dollars in more thefts in the coming months.

The government also announced on Thursday that it had reached the “milestone” of charging 1,000 people with crimes related to unemployment benefits during the pandemic. Kevin Chambers, the director of coronavirus enforcement at the Justice Department, described the situation as “unprecedented fraud” in a statement. The Office of the Inspector General, meanwhile, said it had opened about 190,000 investigations related to unemployment insurance fraud since the pandemic began.

When asked about the findings, a Labor Department spokesman referred to a letter in reply from the agency that accompanied the inspector general’s report. The agency said it is “dedicated” to helping states “fight the ever-changing and new types of sophisticated fraud impacting the UI system.” It pointed to grants and other recent guidance designed to help states improve their systems for awarding and monitoring entitlements.

The Covid money trail

It was the largest outbreak of emergency spending in US history: two years, six laws and more than $5 trillion to break the deadly grip of the coronavirus pandemic. The money has saved the US economy from bankruptcy and fed vaccines to millions of guns, but it has also fueled an unprecedented level of fraud, abuse and opportunism.

In a year-long investigation, the Washington Post is tracking the Covid money to find out what happened to all the money.

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The new unemployment fraud report underscores the ongoing challenge the federal government faces, 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, but quickly became a ripe target for waste, fraud and abuse, as The Post has documented in a year-long series tracking spending Covid money trail.

The scale of this theft was enormous: Earlier this week, federal prosecutors charged 47 defendants in an entirely different scheme aimed at a scheme provide free meals to needy children. The organization Feeding Our Future has allegedly stolen more than $250 million from the food program in what the Justice Department called the largest single scam yet targeting coronavirus relief.

Federal investigators have similarly Raised the alarm and filed charges These are loans and grants amounting to around 1 trillion US dollars to help small businesses. But theft isn’t the only problem: in some cases, generous government help has proved ineffective or helped fund it favorite projects That had nothing to do with fighting the coronavirus, The Post found out. Republican governors, for example, have drawn on a $350 billion program designed to strengthen their response to the crisis a wide range of controversial political issues, including tax cuts and immigration raids.

Beginning in 2020, Congress expanded unemployment benefits to reflect the magnitude of the crisis. Lawmakers allowed a broader spectrum 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 providing an additional $600 in weekly payments.

The spate of applications — amid historic unemployment — quickly overwhelmed the state employment agencies that administer the program. Many of these agencies have been neglected for years, with underfunded staff relying on decades-old computers to process historic numbers of financial assistance applications. Millions of Americans experienced massive delays in getting help as a result, creating chaos that was easily exploited by scammers, many of whom stole the identities of innocent Americans to receive weekly checks in their names.

‘A magnet for rip-off artists’: Fraud has siphoned billions from pandemic unemployment benefits

“Hundreds of billions in pandemic funds attracted scammers looking to exploit the UI program – leading to historic levels of fraud and other improper payments,” said Larry Turner, the Department of Labor’s inspector general, in a statement.

Investigating 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 increase, perhaps significantly. witness to the congress In March of this year, Turner said there could have been $163 billion in overpayments, a term that includes both fraud and money mistakenly sent to innocent Americans. The amount was a projection that relied on a sample of federal spending to calculate total misspent funds among nearly $900 billion in unemployment benefits paid out during the pandemic.

On Thursday, federal regulators linked their latest estimate to fresh criticism of the Labor Department, raising concerns that investigators’ access to state unemployment data — to further uncover fraud — could be at risk after 2023. The anger stemming from internal government denies that The Post reported on this yearpreviously urged the inspector general to sound the alarm about his ability to conduct oversight.

But the Department of Labor described the claim as “not fair” in its formal response, citing the fact that it has yet to revise existing regulations. Separately, a White House official said Thursday that the administration is working to address the data access issue. The person spoke on condition of anonymity to describe private conversations.

The sheer scale of the theft has already sparked a wave of federal enforcement action, including this week when a federal court went to court convicted a man from Illinois sentenced to 39 months in prison for fraudulently obtaining unemployment benefits while incarcerated. The Biden administration has similarly stepped up its work to address the issue, including by considering new government policies aimed at combating identity theft in federal programs.

On Capitol Hill, Sen. Ron Wyden (D-Ore.), chairman of the Senate Treasury Committee, praised the “strong effort to identify criminals.” But the senator on Thursday stressed the need for a legislative overhaul of the unemployment benefit system.

“I have long said that we need a national set of technology and security standards for government systems to better prevent this type of fraud, and we will continue to work to get our reforms passed,” he said.

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