2020-09-14 17:09:29 UTC
A Lifeline to the Jobless Has Problems With Fraud, and With Math
By Casselman, Cohen, et.al, 9/11/20, NY Times
Two weeks ago, shortly after she advertised an apartment for
rent in the Bay Area, Barbara Lamb found 5 envelopes from
the state’s unemployment office in the building’s communal
mail slot. They kept coming, day after day, until a stack of
more than 30 piled up, bulging with notices of benefit approvals,
questionnaires about job status — & debit cards with money.
“They could barely get them thru the mail slot, they were
so thick,” she said.
But Ms. Lamb had not applied for benefits, & had never heard
of the people to whom the envelopes were sent. Fearing the
address of the vacant unit was being used as part of a fraud
scheme to collect the money, she contacted the F.B.I.
California is at the center of increasing concerns about
extensive fraud in a federal program to push unemployment
benefits to freelancers, part-timers & others lacking a
safety net in the pandemic.
At the same time, there is growing evidence of problems
keeping track of how many people are being paid through
the program. The Labor Dept reports about 15 million claims
for benefits nationwide. A comparison of state & federal
records by The NY Times suggests that total may
overstate the number of recipients by 5 million or more.
If the number of people getting unemployment benefits is
lower than officially reported, it could affect thinking about
the scale of the pandemic’s economic impact. In addition, the
taint of fraud could undermine support for the program, &
efforts to combat abuses may make it harder for legitimate
applicants to collect benefits, which are distributed by the states.
The program, Pandemic Unemployment Assistance, is part
of a $2.2 trillion relief package hurriedly enacted in March.
In the latest Labor Dept tally, the program accounted for
nearly half the total recipients collecting jobless benefits
of any kind.
Those figures imply that nearly 7 million people are collecting
Pandemic Unemployment Assistance benefits in California
alone, far more than its population would suggest. The state’s
own data suggests the number may be less than 2 million.
Experts on the unemployment system say such discrepancies
seem to reflect multiple counting as states rushed out payments.
But a surge in new claims in California — where they have
risen to more than 400,000 a week, twice the level in August
— is attributed not to accounting, but to fraud.
“We do suspect that a big part of the unusual recent rise in
PUA claims is linked to fraud,” said Loree Levy, a spokes-
woman for the California Employment Development Dept.
She said the state was investigating “unscrupulous attacks”
exploiting identity theft & vulnerabilities in the system.
Pandemic Unemployment Assistance is meant to provide
benefits to the self-employed, independent contractors, gig
workers, part-timers & others ordinarily ineligible for state
unemployment insurance. Set up to last through the end of
the year, it was a major element of the CARES Act, which
economists widely agree has kept the country from a far
greater economic calamity. According to the Labor Dept,
$47 billion in pandemic unemployment benefits have been
paid so far.
Fraud is not uncommon in hastily assembled disaster
programs, including the Paycheck Protection Program, the
component of the CARES Act that provided forgivable loans to
small businesses to help weather the pandemic without layoffs.
But signs of trouble with the PUA program have surfaced for
months as people who did not file claims — including the
governor of Arkansas — found benefits issued in their names.
A growing number of states have signaled that the problems
with the program go beyond the routine.
California has warned that it is cutting off recipients when it
detects irregularities, like mailings stacking up at a given
address. “These situations are believed to be fraud, & scammers
will often try to intercept, redirect, or gather mail associated
with these claims,” the state’s employment agency wrote.
Colorado said Thurs that in a 6-week stretch this summer,
77% of new claims under the program were not legit.
“Nationally, it’s just presented an opportunity for criminals to
take advantage of a program that doesn’t have a lot of safety
measures in place,” said Cher Haavind, deputy executive
director of the Colorado Dept of Labor.
Citing a significant increase in fraud, the Labor Dept set aside
$100 million recently to help states prevent, detect & investigate
misuse of PUA & a smaller federal jobless benefits program.
But fraud is not the only issue raising questions about the
surge in recipients reflected in official data.
Questions About Counting
Experts on the unemployment system figured out months ago that
the tallies being reported to the Labor Dept were overstated
in many states, most likely because of processing backlogs
that led to multiple counting of individual recipients. They
expected the issue to fade as backlogs cleared & job losses
slowed. Instead, the overcounting issue may even have become
more serious in some states.
“It’s a perfect storm,” said Stephen A. Wandner, a former top
Labor Dept official who is now a senior fellow at the National
Academy of Social Insurance. “You’ve got insane numbers of
applications compared to what the states are used to &
inadequate numbers of staff to process & adjudicate claims.”
Determining the scale of the problem on a national level has
proved difficult, however. Overwhelmed state employment offices
have struggled to provide timely data to the federal govt, & there
have been several examples of outright errors making their way
into the official data.
At least some of the overcounting appears
to reflect the way the Labor Dept collects stats on unemployment
benefits. The govt does not track the number of individual
people receiving benefits, but rather the total number of weeks
of benefits claimed. During normal times, when claims are
processed on a weekly basis, the number of recipients & the
number of weeks are essentially the same — each person files
for one week of benefits each week. (Further complicating
matters, the dept tracks claims for benefits, not all of
which are approved.)
During the pandemic, however, the flood of claims overwhelmed
state employment offices. Because benefits are paid retro-
actively, processing delays meant that by the time many people
were approved for benefits, they were owed several weeks at
once — so they counted as multiple “continuing claims” in a
In the absence of a reliable count from the Labor Dept,
economists have tried to estimate the number of recipients
using data from surveys, federal spending data from the
Treasury Dept & other sources. Those approaches yield a wide
range of estimates, but most suggest that the official total
overstates the true number of recipients by millions.
“It’s almost certainly lower than is being reported,” said
Daniel Zhao, senior economist for the career site Glassdoor.
He said it was hard to come up with a precise estimate, but
that the true number was most likely below 10 million, not the
nearly 15 million counted by the Labor Dept.
The Labor Dept did not immediately respond Friday to a query
about the reporting discrepancies.
Mr. Zhao said that the counting issues did not fundamentally
alter the bigger picture: Millions of Americans are still
relying on unemployment benefits to pay rent & buy food, &
that number has fallen only slowly over time.
The Downside of Streamlining
Pandemic Unemployment Assistance aims to capture those lacking
a path into traditional state benefits & accounts for the
pandemic’s particular disruptions. A college student could
qualify if she interviewed for a job in Feb & was set to start
working in March but never did. So could people with limited
earnings histories, & some of those unable to work because of
child-care needs arising from school shutdowns.
The minimum payment is usually half the average weekly benefit
paid under a state’s regular unemployment program. The max for
an individual ranges from $235 a week in Mississippi to $823
in Massachusetts, according to the job site ZipRecruiter.
And the claims process is streamlined compared w/conventional
unemployment insurance, making it more vulnerable to fraud,
said Michele Evermore, senior researcher & policy analyst at
the Nat'l Employment Law Project.
Before collecting state unemployment insurance, applicants
usually must provide proof of past work or have state agencies
contact employers. With PUA, many people can start collecting
the minimum with far less documentation. Then they generally
have 21 days to provide evidence of lost work, like a pay stub
or a 1099 form from the IRS.
In an emergency program like PUA, Ms. Evermore said, there is
a natural tension between the need to get payments flowing &
the risk that some people will take advantage & fraudulently
apply for benefits.
“There is a choice between denying benefits or accidentally
overpaying people,” she said. “With PUA, scammers may be
getting money that is meant for the unemployed.”
Erica Quealy, communications director of the Michigan Dept
of Labor and Economic Opportunity, said the program had become
the prey of “large fraud rings.” Michigan’s attorney general
has conducted hundreds of investigations, & the state has
appointed a special fraud adviser & brought in the consulting
firm Deloitte to help.
Some schemes involve using false Social Security cards & fake
driver’s licenses to apply. One man was charged with filing
applications in Pennsylvania under false names, & then having
benefits worth $150,000 in debit cards mailed to addresses in
Michigan, according to the state attorney general. Prosecutors
said he used the money to buy a $45,000 Rolex watch.
The rate of fraudulent claims in Colorado has been striking.
After adding more screening measures to catch fraud, Colorado
found that more than 3 out of 4 claims filed over a 6-week
period for jobless benefits under the federal PUA program
On Thurs, the state said it had reduced its count of new claims
filed from July 12 to Aug. 22 by 48,000 because of new fraud-
detection efforts. Before being discovered, though, 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 had saved
the federal govt $750 mil to $1 bil over 8 weeks by halting
wrongful payments or by flagging them before they were made.
“What we’re looking at is quite sophisticated,” Mr. Fitzgerald
said. “It is something that a common individual would not be
able to do, & really it points to orchestrated, very sophisti-
cated, large fraud schemes. These aren’t onesies & twosies.”
The fraud detection efforts are putting an enormous burden on
the states. Mr. Fitzgerald said that Colorado had assigned
60 people to investigate unemployment fraud, compared with
5 in normal times.
In the meantime, the mail keeps coming. Ms. Lamb, whose East
Bay rental unit had been inundated with envelopes, rubber-
banded them into neat stacks Thurs to send back to the state
unemployment office. She had given the 5 addressees’ names
to the F.B.I.
On Friday, two more envelopes arrived from the state,
bearing a new name.