The unemployment benefit program has fraud and math issues

Two weeks ago, soon after advertising an apartment for rent in the Bay Area, Barbara Lamb received five envelopes from the state’s unemployment office in the building’s communal mail slot. They kept coming day by day, until more than 30 piled up, emerged with notice of approval of benefits, questionnaires about job status – and debit cards with money.

“They could barely get them through the mail slot, they were so fat,” she said.

But Ms. Lamb did not apply for benefits, and the people to whom the envelopes were sent had never heard of them. Fearing the address of the vacant entity as part of a fraudulent scheme to collect funds, he contacted the F.B.I.

California is at the center of growing concerns about widespread fraud in an independent program that lacks a safety net in the coronovirus epidemic to advance unemployment benefits to freelancers, the unemployed, and others.

At the same time, evidence of problems is increasing, keeping an eye on how many people are being paid through the program. The Department of Labor reported about 15 million claims for benefits nationwide. A comparison of state and federal records by The New York Times suggests that the total number of recipients may be five million or more.

If the number of people receiving unemployment benefits is less than what was officially stated, it may affect thinking about the scale of the economic impact of the epidemic. In addition, fraud stains can weaken support for the program, and efforts to combat misconduct may make it difficult for legitimate applicants to collect benefits, which are distributed by states.

The program, Pandemic Unemployment Assistance, is part of a hastily implemented $ 2.2 trillion relief package in March. In the latest Labor Department tally, about half of the recipients in the program were held responsible for collecting unemployed benefits of any kind.

Those figures mean that nearly seven million people are collecting epidemic unemployment aid benefits in California alone, far more than its population would suggest. The state’s own data suggests the number may be less than two million. Experts of the unemployment system say that such discrepancies reflect multiple counts as states have paid.

But a surge in new claims in California – where they have exceeded 400,000 a week, twice the level in August – is attributed not to accounting, but to fraud.

“We suspect that a large part of the recent unusual increase in PUA claims is linked to fraud,” said Lorre Levy, a spokesperson for California’s Department of Employment Development. He said the state was identifying “piracy and unnatural attacks” to exploit identity theft and vulnerabilities in the system.

Epidemic unemployment assistance is for the state’s unemployment insurance to provide benefits to the self-employed, independent contractors, gig workers, part-time and others. Set to last until the end of the year, it was a key element of the CARES Act, which economists widely agree is protecting the country from greater economic disaster. According to the Department of Labor, $ 47 billion in epidemic unemployment benefits has been paid so far.

Fraud is not uncommon in hastily assembled disaster programs, including a paycheck protection program, a component of the CARS Act that provides loans forgiving small businesses to help the epidemic without layoffs.

But signs of trouble with the pandemic unemployment assistance program have surfaced for months, as those who did not file claims – including the governor of Arkansas – found continued benefits in their names. A growing number of states have indicated that program problems are beyond routine.

California warns that when it detects irregularities, it detects irregularities like stalking at the given address. “These conditions are considered fraudulent, and scammers will often try to intercept, redirect, or collect mail associated with these claims,” ​​the state’s employment agency wrote.

Colorado said Thursday that in six weeks of this week, 77 percent of new claims under the program were not valid.

“Nationally, it’s just presented an opportunity for offenders to take advantage of a program that doesn’t have a lot of security measures in place,” said Colorado Department of Labor Deputy Executive Director Cher Havind.

Citing a significant increase in fraud, the Department of Labor recently earmarked $ 100 million to help states prevent, detect, and investigate misuse of pandemic unemployment aid and a small federal unemployed benefit program. But fraud is not simply an issue raising questions about the increase in recipients reflected in official figures.

Experts in the unemployment system discovered months ago that the height reported to the Department of Labor had expired in many states, most likely due to the processing of backlogs that were due to multiple counts of individual recipients. He expected the issue to fade as the backlog cleared and the job was missed. Instead, the overcounting issue may be even more serious in some states.

Stephen A., a former Department of Labor officer. “It’s a perfect storm,” said Vander. Now a senior fellow at the National Academy of Social Insurance. “You have a much smaller number of claims than the states are used to, and an insufficient number to process claims and for insufficient claims.”

Determining the scale of the problem at the national level has proved difficult. Overwhelmed state employment offices have struggled to provide timely data to the federal government, and there are numerous examples of outright errors making their way into official figures.

The Labor Department collects data on unemployment benefits to reflect at least some overcounting. The government does not track the number of individual people receiving benefits, but rather claims the total number of weeks of benefits. During normal times, when claims are processed on a weekly basis, the number of recipients and the number of weeks are essentially the same – each person files for a week of benefits each week. (In further complex cases, the department tracks claims for benefits, not all of which are approved.)

During the epidemic, however, a flood of claims overwhelmed the state’s employment offices. Because benefits are paid retrospectively, processing delays meant that by the time many people were approved for benefits, they were owed several weeks at a time – so they had several “in the same week” Counted as “continuous claims”.

In the absence of a reliable calculation from the Department of Labor, economists have tried to estimate the number of recipients using data from surveys, federal spending data from the Treasury Department, and other sources. Those approaches produce a wide range of estimates, but most suggest that the actual number of official total recipients exceeds millions.

“It is almost certainly under-reported,” said Daniel Zhao, senior economist at career site Glassdoor. He said it was difficult to come up with an accurate estimate, but it is true that the most likely was below 10 million, not the nearly 15 million counted by the Labor Department.

The Department of Labor did not immediately respond Friday about reporting discrepancies.

Mr. Zhao said that counting issues had not fundamentally changed the big picture: millions of Americans are still relying on unemployment benefits to pay rent and buy food, and that number fell slowly over time is.

The purpose of pandemic unemployment assistance is to catch those who lack traditional state benefits and account for particular disruptions of the pandemic. If she interviewed for a job in February and agreed to start work in college in March, but she never did so. So could people with limited incomes, and some who were unable to work due to childcare needs arising from school closures.

The minimum payment is typically half of the average weekly benefit paid under the state’s regular unemployment program. According to the job site ZipRecruiter, the maximum is $ 235 per week for a person in Mississippi, up to $ 823 in Mississippi.

Michelle Evermore, senior researcher and policy analyst at the National Employment Law Project, said the claims process has been streamlined compared to traditional unemployment insurance, making it more vulnerable to fraud.

Before collecting state unemployment insurance, applicants should usually provide proof of previous work or contact employers of state agencies. With pandemic unemployment assistance, many people can start collecting minimums with minimal documentation. They then typically have 21 days to provide evidence of lost work, such as a pay stub or 1099 forms from the Internal Revenue Service.

In an emergency program like Pandemic Unemployment Assistance, Ms. Evermore said, there is a natural tension between the need to receive payment and the risk that some people will take advantage and apply for benefits by deception.

“There is a choice between denying benefits or making people pay more by mistake,” she said. “With epidemic unemployment assistance, scammers can get money that is for the unemployed.”

Mika Department of Labor and Economic Opportunity Director of Communications Erica Quailly said the program had become a victim of “big fraud rings”. The Attorney General of Michigan has conducted hundreds of investigations, and the state has hired a special fraud advisor and brought in consulting firm Deloitte to help.

Some schemes include using false social security cards and fake driver’s licenses. According to the state’s attorney general, a man was accused of applying under false names in Pennsylvania, and then profited $ 150,000 in a debit card mailed to a Michigan address. Prosecutors said they used the money to buy a $ 45,000 Rolex watch.

The rate of fraud claims in Colorado has been striking. After adding more screening measures to catch fraud, Colorado found that more than three of the four claims filed for unemployed benefits under the federal Pandemic Unemployment Assistance Program were fake.

On Thursday, the state said it had reduced its number of new claims filed from July 12 to August 22 to 48,000 due to efforts to detect new frauds. However, before the discovery was made, those responsible for the fraud were able to collect $ 40 million during that period, said Jeff FitzGerald, head of the state’s unemployment insurance program.

Officials estimated that the state’s screening tools saved the federal government $ 750 million to $ 1 billion over eight weeks by withholding wrong payments or flagging them before making them.

“What we’re seeing is quite sophisticated,” Mr. FitzGerald said. “This is something a normal person would not be able to do, and in fact it pointed to orchestrated, very sophisticated, big fraud schemes. They are not included and couplets. “

Efforts to detect fraud are placing a heavy burden on the states. Mr. FitzGerald said Colorado assigned 60 people to investigate unemployment fraud, compared to five in normal times.

Meanwhile, the mail keeps on coming. Ms. Mem, whose East Bay rental unit was stuffed with envelopes, dumped them cleanly on Thursday to be sent back to the state’s unemployment office. He gave the FBI the names of the five Advisers

On Friday, two more envelopes arrived from the state, which is a new name.

Tara Saigel Bernard contributed reporting, and Shelagh McNeill contributed research.